Those who do not know history…

But wait, surely these people do know history.  Marco, a loyal MR reader, writes to me:

Over here in the Netherlands, court proceedings are starting this week on the "biggest speculation fraud ever in the Netherlands", according to a national newspaper that ran a big story about it today. Investors have lost tens of millions of euros in what turned out to be a big pyramid scheme.

Now for the ultimate irony. Any idea what these people were investing in? Tulip bulbs. Really.

Here is one link in Dutch, here is another.  I can’t find anything in English but these articles do seem to reflect Marco’s summary.  I can understand sentences like: "Ook volgens De Greve was er sprake van een piramidefonds," and "November 2006 ging Novacap falliet," if not: "De Greve: „Er is geen spatje bewijs voor dat de groep die Novacap heeft gedaagd, de boel heeft opgelicht. Dat is flauwekul.”


Well, that last sentence says: "There is no shred of evidence that the group that sued Novacap, has been cheating. That is nonsense", which doesn't really help, I'm afraid. Bottom line is that everything is still extremely murky, that lots of people have lost lots of money, but that it is very hard to disentangle all financial interests and to determine who has actually done the cheating. In other words, the cheaters did a good job.

My Dutch colleague confirms the story. Dealers apparently created an escalating series of false trades, then in the last round, sold to the public, promising both appreciation ("see how they've gone up") and liquidity ("see how many trades there are?") and then vanished with the loot.

Yikes, has anyone checked to see lately whether Ireland has developed a heavy dependence on potatoes? Cuz, you know, first as tragedy, second as farce and all that ...

The story is confusing, and the article is not well written, even if you can read Dutch. There are a lot of players involved, and their accounts of the events differ. There is also a mention of unsigned contracts.

As far as I can tell, the story is not a joke. But whether the situation was a pyramid scheme set up on purpose, or a speculative bubble that burst is not exactly clear. The critical sentence would be this:

"Kort tevoren heeft SBC aan bevriende bollenhandelaren 112 miljoen euro uitgekeerd."

Or: "Shortly before [its bankruptcy], SBC payed 112 million euros to bulb traders who were friends".

A funny part is later on, when the trade practices between bulb farmers are described. Apparently, they engaged in ‘kasrondjes’, ‘tussenstationnetjes’ en ‘heen-en-teruggies’, or 'little greenhouse rounds', 'little stations in between' and 'there-and-back-agains'. Which sounds a lot like farmer's speak for financial derivatives.

Can this affect farms here in the US that purchase bulbs from Holland?

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