The term tulipomania (alternatively tulip mainia) is used metaphorically to refer to any large economic bubble. The term originally came from the period in the history of the Netherlands during which demand for tulip bulbs reached such a peak that enormous prices were charged for a single bulb. It took place in the first part of the 17th century.
The tulip, introduced to Europe in the middle of the 16th century, experienced a strong growth in popularity in Holland, boosted by competition between members of the middle classes to outcompete each other in possession of the rarest tulips. Competition escalated until prices reached unsustainable levels.
Tulip cultivation in the Netherlands is thought to have started in 1593. The flower rapidly became a coveted luxury item and a status symbol. Special breeds were given exotic names or named after Dutch naval admirals. In 1623, a single bulb of a famous tulip breed could cost as much as a thousand Dutch florins (the average yearly income at the time was 150 florins). Tulips were also exchanged for land, valuable livestock, and houses. Allegedly, a good trader could earn sixty-thousand florins a month.
By 1636, tulips were traded on the stock exchanges of numerous Dutch towns and cities. This encouraged trading in tulips by all members of society, with many people selling or trading their other possessions in order to speculate in the tulip market. Some speculators made large profits as a result.
Some traders sold tulip bulbs that had only just been planted or those they intended to plant (in effect, tulip futures). That was dubbed as "wind trade". State edict in 1610 made that trade illegal by refusing to enforce the contracts, but the legislation failed to curtail the activity.
In February 1637 tulip traders could no longer get inflated prices for their bulbs, and they began to sell. The bubble burst. People began to suspect that the demand for tulips could not last, and as this spread a panic developed. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid. Thousands of Dutch, including businessmen and dignitaries, were financially ruined.
Attempts were made to resolve the situation to the satisfaction of all parties, but these were unsuccessful. Ultimately, individuals were left in the situation they found themselves in at the end of the crash - no court would enforce payment of a contract, since judges regarded the debts as contracted through gambling, and thus not enforceable in law.
Lesser versions of the tulipomania also occurred in other parts of Europe, although matters never reached the state they had in the Netherlands. In England in 1800, it was common to pay fifteen guineas for a single tulip bulb. This sum would have kept a labourer and his family in food, clothes and lodging for six months.