– December 27, 2017

We’ve seen it all before: the maniacal look in television commentators’ eyes, the nonstop blogging and tweeting. All signs point to mass hysteria that can only mean one thing: a bubble is inflating to gigantic proportions and could burst any day. “This time is different,” everyone says. Level-headed commentators try to preach caution but get left in the dust. Then it all comes crashing down.

I’m talking, of course, about the bubble in comparing Bitcoin and other cryptocurrencies to the Dutch tulip bubble. This “meta–tulip bubble,” or “tulip-mania mania” has gotten out of hand. There was J.P. Morgan CEO Jamie Dimon in September saying Bitcoin was “worse than tulip bulbs.“ By early December, all the major media outlets were making the comparison. But I really knew this wouldn’t end well when my shoeshine boy’s barber’s brother-in-law’s cellmate bet his life savings that cryptocurrencies would turn out just like those flowers. Now, a Google search of “bitcoin tulip” yields about 467,000 results.

As the story goes, in 1637, the price of tulip bulbs… You know what, it doesn’t matter. The price of something went up by a lot and then went down. That’s all most of the commentators making the comparison know. You see, one person makes a reference that’s pertinent to economic history, and they sound smart. Their stock rises, so the next person does it. Soon, there’s nothing of real value behind the reference at all. People are comparing Bitcoin to tulips just because the last person did it—Ponzi commentating at its worst.

So why do these bubbles happen, again and again? Some blame Wall Street–commentator greed: the purely speculative value of wanting everyone to think you’re smart. They want the government to step in with regulations that will stop comparisons like the tulip-mania mania from becoming “too trite to fail.” But the real culprit is the government itself. Its inflationary monetary policy has caused entrepreneurs to overestimate the demand for economic commentators, enabling the existence of too many commentators with too little to say. When the tulip-bubble bubble bursts, we risk the resulting correction spilling over into the economic-commentating sector as a whole, forcing even those of us with no culpability in the bubble to go out and get real jobs. Terrifying, I know.

We don’t know when the tulip-bubble bubble will burst. We only know it inevitably will. When it does, the damage could be even greater than the Japanese real estate bubble of the 1990s, dotcom stocks, or even the Dutch tulip… Oh my God, it’s worse than I thought.


Max Gulker

Max Gulker is an economist and writer who joined AIER in 2015. His research focuses on two main areas: policy and technology. On the policy side, Gulker looks at how issues like poverty and access to education can be addressed with voluntary, decentralized approaches that don’t interfere with free markets. On technology, Gulker is interested in emerging fields like blockchain and cryptocurrencies, competitive issues raised by tech giants such as Facebook and Google, and the sharing economy. Gulker frequently appears at conferences, on podcasts, and on television. Gulker holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.
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