The dot com bubble.

[coloradodem2005]

I know back in the late 90's and into 2000 there were many dot com companies in existance. They started to go belly-up in 2000-2001. Now, many attribute the market of the late 1990's to the dot com bubble. THe reason we lost so many jobs is because that bubble burst, so they say. What are talking points against this? Also what are talking points against the argument that Bush's policies work but it takes 5 or 10 years for them to come to fruition?

[papau]

1. Studies have shown Dot Coms at 0 value equal 1/3 of market drop

And economic studies for the last 50 years have shown that the economy is not driven up by an up market, or down by a down market - indeed market up and downs have a very weak positive correlation with the direction of the economy - current or near future direction.

"Bush's policies work but it takes 5 or 10 years for them to come to fruition?" - so it was not Reagan in the 80's? (actually there was not a Reagan growth - Reagan destruction of growth via tax cuts was barely offset by Reagan stimulus via deficts - after removal of the effect of inflation Carter matched Reagan as to rate of growth in US GDP - Carter had 3.3%, and Reagan had 3.4%, annualized, over their terms)

[Gman]

2. Nevertheless, there were many .com stocks that made it into the indexes

and as they rose, so did the market e.g. Yahoo @ $450/share. The index was bound to drop as prices for index stocks collapsed. Wouldn't you agree?

[papau]

3. I don't recall if it was 1/3 of the change in index - or 1/3 0f change in

value of market.

The point was that 2/3 of the market correction had nothing to do with dot.coms.

[Gman]

4. The in Dow topped out at, I believe, over 12K or so...

then dropped back to (if memory serves) something around or just below 7K. (I'm thinking it was actually about 6700. THat would be a 40 - 45% drop.

I believe you may be thinking of the value because when the bust got going then especially after 9/11, there was a big torrent of foreign money out of the market. I can't give you figures but I remember the news reports.

Fortunately before then I had gotten out of the market and, in effect, stuffed it into a mattress!

[Jose Diablo]

5. I would suggest looking into

Greenspans timing in raising the interest rates to 'cool' inflationary tendancies in the market in 2000.

Investment money for the dot coms dried-up shortly there after starting the downward spiral.

When the economy started downward, then the interest rates were dropped point by point moving investment money from equities/bonds into tangibles like real estate.

All this time while this was going on the market was held a float by investment in equities through 401's.

The money supply can be expanded or contracted by the fed reserve by raising and lowering the short term interest rates, By controlling the supply of money, they control the boom and bust cycles in capitalism.

Its not Friedmans 'invisable hand' at work. Its manipulation by top layer bankers to extract wealth from pensions and other long term investments thats behind these economic cycles they create.

[Brian_Expat]

6. Dot-coms employed nowhere near 3.5 million people. . .

. . . who have lost their jobs since Bush took office.