The tulip, introduced to Europe in the…

The tulip, introduced to Europe in the mid-sixteenth century from the Ottoman Empire, had soon become very popular in the United Provinces, where cultivation is generally thought to have started in earnest around 1593 after the Flemish botanist Charles de l'Écluse had taken up a post at the University of Leiden and established the hortus academicus.

There, he had planted his collection of tulip bulbs—sent to him from Turkey by the Emperor's (Ferdinand I, Holy Roman Emperor) ambassador to the Sultan, Ogier de Busbecq—which were able to tolerate the harsher conditions of the Low Countries, and it was shortly thereafter they began to grow in popularity.

The flower had rapidly become a coveted luxury item and a status symbol, and a profusion of varieties have followed.

The Dutch, who have developed many of the techniques of modern finance, have created a market for durable tulip bulbs.

Short selling had been banned by an edict of 1610, which was reiterated or strengthened in 1621 and 1630, and again in 1636.

Short sellers have not been prosecuted under these edicts, but their contracts had been deemed unenforceable.

As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus.

Speculators began to enter the market by 1634, in part as a result of demand from the French.

A sale of forty bulbs for one hundred thousand florins (also known as Dutch guilders) had been recorded by 1635.

By way of comparison, a ton of butter costs around one hundred florins, a skilled laborer might earn one hundred and fifty  florins a year, and "eight fat swine" cost two hundred and forty florins. (According to the International Institute of Social History, one florin had the purchasing power of €10.28 in 2002.)

The Dutch in 1636 had created a type of formal futures markets where contracts to buy bulbs at the end of the season were bought and sold.

Traders meet in "colleges" at taverns and buyers are required to pay a two and half percent "wine money" fee, up to a maximum of three florins, per trade.

Neither party pays an initial margin nor a mark-to-market margin, and all contracts are with the individual counterparties rather than with the exchange.

This trade is centered in Haarlem during the height of a bubonic plague epidemic, which may have contributed to a culture of fatalistic risk taking.

The contract price of rare bulbs had continued to rise throughout 1636.

That November, the contract price of common bulbs without the valuable mosaic virus also began to rise in value.

The Dutch derogatorily describe tulip contract trading as windhandel (literally "wind trade"), because no bulbs are actually changing hands.

Tulip bulb contract prices collapse abruptly in February 1637 and the trade of tulips grinds to a halt.

Any economic fallout from the bubble is very limited, however.