Tulipomania - Mike Dash [52]
A trading season that ran only from June until September made perfect sense to the connoisseurs, who preferred to see a plant in flower before they considered buying it and wanted to complete all their purchases for the year in time for the bulbs to be returned to the flower bed. But it was highly limiting for the new breed of tulip dealers. Because they generally had no interest in cultivating their bulbs, the old distinctions between the growing season and the lifting season meant little to the florists, who took less pleasure than their predecessors in the physical beauty of the tulip and more in its potential to earn them money. The newcomers wanted to wring as much profit from their flowers as they could, and while a handful may have appreciated the benefits of planting the bulbs and making money from their offsets, most were far more interested in buying tulips simply to resell them.
From the autumn of 1635, then, the bulb trade changed fundamentally and forever. Ignoring the customs of the connoisseurs, increasing numbers of florists progressed from trading only tulips that they had in their possession to buying and selling flowers that were still in the ground. Bulbs then ceased to be the unit of exchange; now the only thing that changed hands was a promissory note—a scrap of paper giving details of the flower being sold and noting the date on which the bulb would be lifted and available for collection.
There were advantages to the new system. It certainly permitted trading to take place throughout the months of autumn, winter, and spring; and because the bulbs stayed where they were until lifting time no matter who their new owner was, it was very appealing to florists who had neither the skill nor the desire to cultivate bulbs themselves. But it was potentially very dangerous too. Buyers had no opportunity to inspect the bulbs they were buying or to see them in flower. There was no guarantee of quality. And a florist could not be sure that the bulbs he was purchasing really belonged to the seller, or even if they actually existed.
The Dutch called this phase of the tulip craze the windhandel, which can be translated as “trading in the wind.” It was a phrase rich in meaning. To a seaman it meant the difficulties of navigating a ship steering close to the breeze. To a stockbroker it was a reminder that both the tulip traders’ stock and their profits were so much paper in the wind. To the florists, however, the windhandel meant trading pure and simple, unregulated and unconfined.
It was this innovation that made the greatest excesses of the mania possible. The introduction of promissory notes did much more than make the tulip trade a business that could flourish all the year round; it turned dealing into an exercise in speculation, and—because delivery was usually months away—it encouraged the sale and resale not so much of bulbs but of the notes themselves.
Flowers that had once been valued for their beauty now became nothing but abstractions for dealers who cared only for their profits, and the repeated transfer of a dubious claim to ownership from one dealer to another became the chief characteristic of the bulb trade. Before long, to the scandal of straight-laced contemporaries, it became perfectly normal for florists to sell tulips they could not deliver to buyers who did not have the cash to pay for them and who had no desire ever to plant them.
By agreeing to purchase bulbs that would not be ready for delivery for several months, the tulip traders had created what would today be called a futures market—simply defined, a form of speculation in which a dealer gambles on the future price of some commodity, whether it be flower bulbs or oil, by promising to pay a specified price for the goods on a fixed date sometime in the future. This was an event of some historical significance.