Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

U.S. Dollar is the new 'Tulip'

In 1593, a botanist named Carolus Clusius introduced the tulip plant to Holland, after bringing it back from a trip to (what is now) Turkey. The Dutch people first became enamored, and then obsessed with tulips – and the value of tulips soared in that society to absurd levels.

An article on this episode in history provided examples of how high the value of a tulip had risen. A rare “Viceroy” bulb could sell for the equivalent of $1200 USD today, while in a more-detailed, barter transaction, a bulb was traded for a bed, a complete suit of clothes, and a thousand pounds of cheese. While a very amusing anecdote; from an historical perspective, “Tulipmania” (as it was dubbed) is seen as an example of the first “asset bubble”.

The value of tulips in Holland soared for over 40 years. Then, in 1637, a single publicized transaction failed to take place, when the buyer didn't show up to conclude the deal. Like they had suddenly removed a veil from their eyes, a “panic” ensued among the Dutch – as tulip-holders suddenly all wanted to exchange their tulips for assets with real value. Within a matter of days, the value of a tulip had shrunk to only 1% of its previous worth. Today, we can't help but ask the question: “what kind of fools could have believed that a tulip was an item of value?”

While this episode is illustrative with respect to asset-bubbles, it is an equally useful example of the life (and death) of a form of money. What is important to note about “Tulipmania” is that soon after this fad started, tulips were deemed to be “too valuable” to simply be stuck in the ground and allowed to bloom – because someone could steal them. Thus, “trade” in tulips was quickly replaced by simply trading tulip bulbs. In other words, the tulip bulbs became currency...

Read the rest: