As American historian Ira Berlin observed in the first of three Nathan I. Huggins Lectures at Harvard University, “History is not about the past; it is about arguments we have about the past”. What is true of his reflections on the fierce debates about slavery in North America also applies to the use of historical metaphors for financial bubbles, including the recent spectacular rise of bitcoin and other crypto-currencies.
Commentators at no less than The Financial Times and The Economist have rushed to compare this recent development with the 17th century Dutch Tulipmania, replete with warnings that people have begun to mortgage their houses to buy into the craze, just as they reputedly did in the 1630s. In fact, the actual historical reality of Tulipmania bears little resemblance to the legends about it, which first appeared in Dutch Calvinist dialogues used by the authorities against the Mennonite tulip growers and were later promoted by the Whig journalist Charles MacKay as his first example in Extraordinary Popular Delusions and the Madness of Crowds. The tulip analogy is simply a cautionary tale about fantastic objects imbued with magical powers to defy the laws of market gravity. There is little to be learned from this sort of ranting, beyond the maxim that shrewd speculators know when to get out, leaving the “devil to take the hindmost”. (By far the most entertaining modern account can be found in Edward Chancellor’s eponymous 1998 book by the same name.)
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