Tulips and AR-15s: so what on earth does the Dutch Flower Market of 1637 has to do with modern prepping? Read on and I will explain…
Tulips in time – a strange but true story
It’s winter in what is now Holland, late in 1636. A Dutch man of considerable means has just signed a contract agreeing to take possession of a single bulb of the Semper Augustus tulip. For this single root from a flower, he has agreed to pay about what a skilled craftsman would make from a decade of labor. It’s got to be a Great investment.
Since tulips were introduced to the Low Countries in 1634, their prices have done nothing but rise. There are dedicated flower markets with hordes of buyers, ranging from the richest men and their Semper Augustus to common workers putting all their savings into less fanciful varieties. Everybody knows it’s the best way to get rich; a no-risk investment.
Except… of course…
Over the next six months, prices for tulip bulbs decreased by more than 99.9%. Apparently, it finally occurred to people that it was madness to pay that much for a flower root.
The Tulip Mania bubble popped.
The tulip market of 1637 Holland was the first of many known investment bubbles. In modern America, we’ve seen bubbles pop on investments of stocks (1929, starting the Great Depression) and real estate (2008).
The roller coaster rides on semi-automatic rifles (after every high-publicity shooting in the U.S.) and 0.22 ammunition (especially in 2014) would be stretching the definition of ‘investment bubble’ … but not too much.
There are a lot of similarities:
Prices shoot up when demand spikes. In the tulips of Holland, there was a viral infection that both made the flowers especially pretty and decreased their ability to reproduce, so the prettiest flowers remained rare. ‘Scarcity’ is re-interpreted as ‘value’.
Once people see the trend, they start buying without regard to the intrinsic value of what they’re purchasing. All that matters is that they believe someone else will pay more for it later.
The rare good comes to be seen as a status symbol, further inflating perceived value and price. Too bad this perceived value is extraordinarily fragile, as people are notoriously fickle in what goods they use as status markers. (What, my Blackberry is no longer cool?!?)
Sooner or later…
Eventually, it dawns on people that they’re paying way too much, and the prices quit going up. As soon as that happens, the good is no longer a valued investment, and everyone tries to get out of the market without losing too much money. With so many sellers and so few buyers, prices tank very quickly.
The evaporation of investment capital has domino effects, ruining people’s finances and therefore influencing their buying and therefore the value of other goods. This has the potential to trash whole economies, as the Great Depression and the financial problems of 2008 and on can demonstrate.
Hey wait … why are we talking about tulips on a prepping site?
One reason is that preppers are not immune to the psychology that leads to investment bubbles. Certain items become rare (such as the AR-15s whenever people have reason to suspect new gun control legislation has a chance), so having them is seen as desirable and cool, so people pay up for them and may buy much more than they need as investments or because they fear they might not be able to get them in the future. No one has endlessly deep pockets with which to prep; so over-paying for one type of item inevitably restricts your ability to buy things you need more.
There is STILL a shortage of .22LR ammunition (at the time of this writing) left over from the “Sandy Hook Panic” 4 1/2 years after that tragic event happened.
Another is that these bubbles do occur from time to time, and can have considerably negative effects on our economy. You’ve probably noticed that our economy isn’t in general on the best footing: Spending more money than one has year after year is about as good a foundation for a national economy as wet mud on a California hillside is as a good foundation for a house. When you think you see this sort of bubble forming, that’s a good time to make sure your preps are lined up for financial unrest.
People jumping out windows on Wall Street? It’s happened…
Keep in mind too that financial unrest doesn’t have to mean some giant drama that brings down the government or collapses the currency. It could just be enough disruption to cause a drop in the family’s income such as a job loss. It’s been said that all wars are the same size because death comes one to the customer; in that sense emergencies are sized in a sense by the impact on your family rather than the whole world.