The funny thing about history, is that, as was said in “A Handbook of English Proverbs,” in 1855, “He that would know what shall be, must consider what hath been.” Or maybe from Thucydides in 410 B.C., “History repeats itself.” Between 1600 and 1700, Holland, and especially Amsterdam, was one of the richest nations and cities in all the world. Several trading companies, such as the Dutch East India Trading Company, carried on extensive trading of goods with other nations around the world, making huge profits, and making the Netherlands wealthy. Trading with other nations brought exotic arts and architecture into the port city of Amsterdam, much of which still exists. Among the exotic goods, were tulip bulbs from Turkey. It was discovered that tulip bulbs could withstand the harsh winters of Europe, and their popularity increased rather quickly.
Between April and May, tulips blossom for about a week, and their leaves stay green for the rest of summer. I have many beautiful tulips in my garden, decades old, and they blossom beautifully each year. In Holland, tulips began to be bred into different colors, with non-solid colors bringing the most Dutch Guilders. So popular did tulips become, that “tulip time” became a virtual national holiday, and rudimentary ‘tulip futures contracts’ were born. In America, go to Holland, Michigan for their tulip festival each year. I’ve been there during that time, and it is marvelous! Tulips became so popular, that their prices went skyward. Between 1634 and 1637, tulip bulbs went from one guilder to 60 guilders each. At the peak in February of 1637, one fancy bulb’s price equaled the price of two tons of butter, or 1,000 pounds of cheese. Like all ‘bubbles,’ it burst quickly when there were far more sellers than buyers. The tulip bulb price went quickly to less than one guilder, and millions suffered huge losses and bankruptcies. The Netherlands went into an economic depression which lasted for several years.
In the early 2000’s U.S. housing prices began to escalate rapidly, reaching their peak in early 2006, when prices began to decline. People were buying and ‘flipping’ houses with little to no money down, and making big profits, until, as with the tulip mania, there were more sellers than buyers. The bursting of the U.S. housing bubble, threw America into the depression, which it still has not totally recovered from, even though real estate prices bottomed out in 2012, and have been gradually rising since. Millions of builders, speculators, loan companies, and even individuals, went bankrupt. Millions of Americans owed more on their homes than they were worth, and that condition still exists in some places today. All bubbles eventually burst, be they soap bubbles or other types; the soap ones being the least costly, when they go.
On August 18, 2008 the name “Bitcoin” was registered. As I have said in a past article, (8/19/2017. Get it by clicking on Don’s Column on web site coloradogold.com), they were and are, backed by nothing, and have no precious or even semi-precious metals in them. One of the first transactions of bitcoins was when 10,000 of them were used to purchase two Papa John’s pizzas. Worth a few cents, if that much. Why should bitcoins have any value? Like pennies struck by the US Mint, bitcoins are worth less than their cost to strike. From a couple of cents, bitcoins now fetch over $17,000. That’s for a single coin. It’s ‘Tulipmania’ multiplied many times, all over again. It took less than a month for tulips to go from 60 guilders to less than one guilder. How long can it take Bitcoins to go from $17,000 to 10,000 of them needed to buy a Papa John’s pizza? Anyone who has them, for god’s sake sell them NOW, and hope you don’t lose your shirt. See people, gold and silver require capital, machinery, exploration, chemicals, centrifuges, etc. to mine, mill, smelt, manufacture and distribute, and those processes aren’t cheap, but the product happens to be real honest money for thousands of years, in all nations on earth, and they will continue to be real money, increasing in price, as paper, un-backed currencies and bitcoins go to their cost to produce, and that is virtually zero.
In post WWI Germany, the Mark went from a quarter U.S., to a wheelbarrow full to purchase a loaf of bread. I have a $20 trillion Zimbabwe note in front of me on my desk. It purchased virtually nothing. Don Stott- 1-888-786-8822