What is a Tulip Craze?
The tulip craze was a historical event in the Netherlands that is often held up as a prime example of the dangers of market speculation. The term tulip craze is often used to refer to a market bubble. Although there is some contention in modern thought about whether the historical tulip craze was actually as drastically influenced by speculation as was previously thought, the event still serves as a good allegorical example of the pitfalls of rampant market speculation. A tulip craze basically occurs when there is an increase in the value of something, and a number of speculators invest heavily to take advantage of that increase — this speculation then causes a further, often more rapid, increase, which encourages further speculation. This sort of speculative increase cannot, of course, continue forever, and once the value levels out or begins to drop, a massive drop typically results. This phenomenon is also often discussed in terms of a bubble inflating and eventually popping. The hi
