Macroeconomics
Tulip Mania
In The Netherlands in the 17th century, an interesting occurrence took place, in form of an extraordinary economic speculation bubble: The Tulip Mania. The Netherlands were a very calvinistic country, where hard work was seen very favorably and showing your riches outwardly was looked down upon. Flowers were an exception, because they are part of God's nature and you could "show off" a bit with beautiful flowers in your garden. In those days, tulips were somewhat of a rage. Originally from Turkey, these flowers had come into fashion and new varieties were being developed and discovered. Bulbs from special varieties were sold for immense sums. In January and February 1637 the tulip mania reached its peak and tulip bulbs were sold for tens of thousands of guilders. An example is. At the same time a skilled craftsman would earn about 300 guilders for a year of work.
The tulips bloom in spring and could be traded from June to September during their dormant phase. During the rest of the year, traders would sign forward contracts to buy tulips at the end of the season. This parallels many of the modern trading techniques that are still in use today. Almost all layers of society were involved in the tulip mania. As ever more money flowed into the market, prices became increasingly inflated. Painters would paint famous tulips as if they were famous people.
The market collapsed quite suddenly, when one of the most famous tulips was auctioned and failed to make a single bid, which led to a panic, where people wanted to sell their tulips before it was too late. When the market collapsed in February of 1637, many people were still bound to contracts to buy tulips for a price that was now ten times the market price. In the end, the government ordered a 10% payment clause, where people would still get 10% of their money. This was implemented because no court would enforce payment of the inflated contracts, since judges regarded the debts as contracted through gambling, and consequently not enforceable by law.
In modern times, tulips remain very popular in The Netherlands and worldwide and The Netherlands are the single most tulip producing nation worldwide. On an economic level, some people regard the Bitcoin "craze" as a new kind of tulip mania and it remains to be seen what the future will bring in this respect.
The Great Depression
In a combination with my history projects, I have concerned myself with The Great Depression. My family history shows how great the influence of this economic downturn was in all of Europe:
My great-great-grandfather
My great-great-grandfather was a horse trader and he was the richest man in his village Suddendorf in the northwest of Germany. He had eleven children with 3 twins among them. After The Great Depression with the galloping inflation started, he lost all of his wealth by and by. It was so bad, that people would run to the stores after they would get paid to buy something, anything, for their money, because hours later, the money was not worth half of it. Everyone was a millionaire, but nobody could buy anything with the money.
My great-grandmotherMy great-great-grandfather's daughters, my grandmother among them had to go to work. Just imagine, the daughters of the village's richest man had to work! My grandmother worked in a bakery in the Netherlands when she was 16 years old and a 14-year-old boy always cycled along this bakery and saw a girl with beautiful red hair, until one day, she was gone. She worked in The Netherlands, because there was no hyperinflation there, as they had retained the gold standard.
My great-grandfather
My great-grandfather, a Dutch boy on the Dutch side of the border, remembered, that he would take a quarter (25 cents) and go over to Germany and buy two entire cakes at the bakery. After he left the store, the woman who was behind the counter still came running after him, wanting to give him his change. People were extremely happy to have at least some money that was worth anything.
My grandfather was the one who used to see the beautiful girl with long red hair behind the counter of a bakery where he lived. He was only 14 and never dared talking to her, until one day she was gone.
My great-grandfather was best of his class in ground school and as it happened, the son of the "headmaster" of the school was second best. Only one boy in the class would be going to the "Ambachtsschool" to learn a skilled trade, which was the only aspiration if you were not born into money. The headmaster was the one who had to make the decision who would get this one valued place at the trade school.
Do you know who he chose? This man of integrity chose my great-grandfather instead of his own son.
While working as a building contractor after finishing his schooling, great-grandfather looked into a neighbouring garden and saw....
A beautiful young woman with red hair. His building business with 6 man who worked for him, only earned enough to feed him and his elderly mother after paying the workers, but it would not have been enough to feed a family. For this reason he decided to apply for a position as a policeman in Amsterdam. 400 (!) applicants were tested and only about 20 got a job. Two of those were my great-grandfather and his dear friend Piet Elias. This proved to be an important occurrence as you can read in the history section.
During the Second World War, because of his role as a policeman, entrusted with assisting the Nazi effort to deport the Jews from Amsterdam,
he and his friend Elias designed and operated an intricate system of falsifying the administration of the people who came in, which enabled the escape of hundreds of jewish people from the
Dutch Theatre in Amsterdam, by having people warned of impending razzias, where whole streets where rounded up, by "arresting" people being put on the deportation trains, or taking them out as "ill" and by hiding them in his own home and bringing them to other hiding places, often in the wood-fueled car of his police superintendent. He founded and was head of the Dutch Resistance counterintelligence group in Amsterdam and questioned the top of Nazi war criminals after the war.
Because of his intelligence work, he had to go into hiding after being found out, in the winter of 1944. His house was raided and his - German - wife, who was at home was mock executed, beaten down with the buts of the soldiers' guns and worse. After the soldiers had left, she fled the house with her 3 children just half an hour before the Gestapo arrived to take them all into custody. My grandfather who never slept at home as a precaution was not found and the entire family made it through the war in hiding.
Internet Sources
https://www.euro-area-statistics.org/digital-publication/statistics-insights-inflation/vis/chapter4_1/?lang=de
https://en.wikipedia.org/wiki/Austrian_school_of_economics
https://en.wikipedia.org/wiki/Ludwig_von_Mises
https://en.wikipedia.org/wiki/Milton_Friedman
https://en.wikipedia.org/wiki/Keynesian_economics
https://mises.org/
https://www.worldbank.org
https://data.worldbank.org/topic/economy-and-growth?end=2023&start=2000
https://www.youtube.com/watch?v=2MLfrYCLRqM
