Sober in the world, addicted to money
What is tulip bubble?
Tulip bubble, also known as the tulip effect, originated from the historical events in Holland in the17th century, and was the earliest recorded speculation and financial bubble in human history.
/kloc-in the 0/7th century, the demand for tulips in Holland was in short supply, which caused the flower trading market to be crazy and the price to soar. The Dutch tulip market has become a disorderly gambling pool for speculators, and finally the bubble burst, leading to the bankruptcy of a large number of speculators.
Event process
1593, a Dutch businessman introduced the first tulip from Turkey and planted it. Because it was the first time that tulips were infected with a virus, which made the petals of tulips bloom more brightly, tulips were sought after by rich and powerful nobles, and because of their rarity, they became a symbol of their wealth.
Because people are generally optimistic about the tulip market, the price of tulips began to rise. At this time, speculators began to enter the market. They firmly believe that the price of tulips will skyrocket. Buying today and selling tomorrow will definitely make money.
As a result, the whole tulip trading market is becoming more and more lively, and everyone wants to run into the market and make a fortune. By 1634, it has developed into a national movement. The price of tulips has also soared.
Because tulips have a flowering period, they will wither after the flowering period. In order to facilitate trading, people directly carry out futures delivery, resulting in tulips only becoming trading symbols, and the transactions in the market have been completed, which deviates from the essence of tulips.
By 1637, the price of tulips had reached its peak, and the government realized the crisis, so it took braking action, voluntarily terminated the transaction and banned tulip trading.
In an instant, the tulip trade plummeted, with a maximum of $76,000 and a minimum of 1 dollar, which also led to thousands of bankruptcies.
The reason of tulip bubble and the economic principle behind it.
1. Commodity price deviates from commodity value.
It is precisely because the price of tulip deviates from its actual value that the bubble is produced. When the foam is large enough, it will burst at the slightest touch of external force.
2. Why are people willing to pay for goods that deviate from the value?
This is mainly people's expected judgment. Tulip itself is just a symbol, which carries speculators' confidence in the market (greedy expectation). It is expected that the next trader will take over such a high price. Most traders have lost the ability to objectively judge value in the "skyrocketing environment" and are willing to be fools!
This is a typical "bigger fool theory". They always believe what they buy at a high price, and there will definitely be more stupid people who will buy things from him at a higher price.
Therefore, the terrible thing is not to be a fool, but to be the last one!
Tulip bubble case:
1. Ponzi scheme
2.MLM
Enlightenment from tulip bubble
In daily financial management, whether buying stocks or investing in other industries, the principle you must follow is value investment. Don't play some speculative tricks, or you will definitely lose money. Because in the speculative market, there will never be a winner forever.