Section B: Specific Episode Questions

Question 1

What was the age of discoveries?

Answer 1

Spain/Portugal exploration. Dutch later joined by only wanted trade of Gold and Silver. 
Gold Coast (Ghana): 2000 pounds a year extracted by the Dutch in early 17th Centur

Question 2

How did metal arrive from exploration ships?

Answer 2

Unprocessed metal or as foreign currency coins.

Question 3

Why was the Bank of Amsterdam established in 1609?

Answer 3

Allowed a deposit of the foreign currency and they would give deposit certificates (paper money), banks took a fee (agio) every 6 months.

Question 4

What features did Amsterdam’s banking have in the 17th Century?

Answer 4

• Most developed system of financial securities
• Exploration fuelled the growth in larger companies. –Invented new financial instruments, particularly the tradeable joint stock share (dividends, not capital, could sell shares
• Established a stock exchange.

Question 5

What did Neal (1990) say caused Tulipmania? Problem with the argument?

Answer 5

• New financial instruments which many don’t understand e.g. shares.
• This is a good argument but doesn’t quite explain the timing (explains the wider setting).

Question 6

What did Dash (1999) say caused Tulipmania?

Answer 6

Trade boom, mass speculation from 1631/32 and gathered pace toward the end of the decade.

Question 7

What did Homer and Sylla (1996) say caused Tulipmania?

Answer 7

Credit expansion, Dutch interest rates declined sharply in the 17th Century. First country to drop below 4% as an interest rate.

Question 8

What did Goldgar (2007) say caused Tulipmania?

Answer 8

Plague killed 14% of Haarlem population this led people to gamble more.

Question 9

What did Thompson (2002) say caused Tulipmania?

Answer 9

Institutional analysis, guild of florists decided all future contracts should be considered options, on payment of a small sum. This gives the buyer the option to withdraw from the sale.

Question 10

What did French (2006) say caused Tulipmania?

Answer 10

Monetary Expansion, total output very high in 1630, lots of minting due to the trade

Question 11

What is the issue surrounding the Tulipmania story?

Answer 11

Mackay (1841): Scottish Journalist, published the story - certainly exaggerated. Perhaps religious propaganda/ moral tale against gambling. Other modern booms for stocks, not the typical item to attract a boom

Question 12

Garber challenge to the Tulipmania story?

Answer 12

Tulips follow fundamentals but rise in price of common bulbs was irrational.

Question 13

Garber quote on Tulipmania?

Answer 13

“no more than a meaningless winter drinking game, played by a plague-ridden population that made use of the vibrant tulip market”.

Question 14

Circumstances surrounding Tulipmania?

Answer 14

• Exogenous event providing profitable opportunities
• Commodity turned into an investment object.
• Heightened optimism
• Largely rational response to market fundamentals.