Allow me to vent for a while. I hear people reminisce longingly for the days of the Clinton presidency when the economy was booming and we had a federal surplus rather than a deficit. This usually accompanies a scathing review of the current presidency's merits and/or marital status of his mother.
I shake my head in disbelief. What was the economy like during the 90's when that federal surplus had everyone's eyes popping and imaginations rolling on how to spend said surplus (which rarely included paying off the trillion-dollar debt)? I have one word for you. Well, make that one word and an internet suffix. Pets.com. And I'm not talking about the current website, run by PetSmart. I'm talking about the original sock-puppet-based one-hit wonder. That's right folks. You want to return to those years? To the days when people with a web address and an understanding of HTML had money thrown at them, with the expectation that advertising revenue (oddly enough, much of which would come from other dot-com flashes-in-the-pan with the same business model) would somehow translate into a huge return on their investment? Exciting days, to be sure, but read carefully. IT WAS A MARKET BUBBLE. Just like the housing bubble today. The downturn wasn't quite as dramatic as the latest housing bubble, but it was a bubble nonetheless. Bubbles cannot be sustained.
I had a job at one of those dot-commers during those glorious days when money fell out of the sky. The company is actually still around, although their employee list has been substantially whittled down. I'm not going to say who. I will say that the planning for employees wasn't the best. I spent much of my time sending e-mails saying "OK I'm done with that, what should I work on next?" and reading online news websites to kill time while waiting for a response. I was hired without a real plan as to what they wanted to hire me to do. I could tell the bubble was going to burst pretty early on. (And yes I do feel rather proud of myself for being able to say that.)
The moral of the story, sir or madam, is that the economy boom of the 90's was an illusion. An economy in which people tighten their belts and avoid going into debt beyond their abilities to repay is much preferable.
Subscribe to:
Post Comments (Atom)
Business Week had an interview with President Clinton in which they asked him about the economy of the 90s, and his decision to roll-back that banking regulations from 1933. One of the questions asked was about the Treasury Secretary during his term. President Clinton actually claims that it was because of HIS administration that the economy did so well. And he makes no reference at all to the dot-com bubble.
ReplyDeleteWhat really surprises me is that nobody at Business Week has brought this up! I may send an email just to see if they'll publish it...
I'm no economist. I'm not even good with money. But aren't downturns, corrections in the market just as healthy and part of the process as bubbles?
ReplyDeleteAs I understand it, it's "healthy" when there's an incorrect allocation of resources. It's not absolutely necessary in a market economy, but typical and perhaps unavoidable since there's bound to be misallocations sooner or later.
ReplyDeleteIn the case of the dot-commers, a lot of resources (mainly, venture capital, and programmers like me) were being used for something that wasn't that useful to society to demand that many resources. Not that I'm saying it wasn't useful at all, just that its usefulness was being overestimated.
Likewise, for the housing bubble, a lot of resources (home loans in this case) were being invested in something that wasn't that useful. Now don't get me wrong, home ownership would be extremely useful, and I'm not trying to place blame, but perhaps some of these people should have gotten smaller houses, older existing houses instead of newly-built houses, or even rented instead of owned.
I'm not an economist either, but I've read enough about this latest downturn that I feel like I'm getting the hang of the basic concepts. Which perhaps makes me a dangerous person to lean on for advice: I think I know what I'm talking about, but in reality I'm missing some very important concept...