I want to say right off the bat that I generally believe in capitalism; however, I believe that capitalism has been manipulated and we are now digesting what we have sown. During the internet boom of the ’90’s we saw companies that sold virtually no tangible products increase in stock value to unprecedented levels. Suddenly companies were discontinuing pensions in favor of 401k plans, and the public was eating them up. Unions continued to extol the virtues of pensions while many American workers bought into the 401k mystique. No longer were young men checking out the ball scores, instead they were reading the Wall Street Journal and business sections of their local papers. President Bush and many conservatives were working on plans to privatize Social Security. Can you imagine the anguish if this concept had been accepted and placed into our hands.
As the stock market continued to climb to previously unthought of heights, people bathed in the euphoria of economic bliss. Along with this windfall, credit limits and the debt that followed also climbed. Folks did not increase their savings rate much at all, they continued to live high on the hog even if it meant borrowing to do it. The stock market climbed on speculation and easy credit. CEOs smiled and our 401ks made us all feel like we could retire tomorrow.
Then in the early 2000’s the internet bubble and its unsustainable company values burst. The stock market began to correct and purge itself of companies selling concepts and not products. However some of these companies with well thought out ideas did make it through the correction. Google, Yahoo, Microsoft, and many others did make it to profitability and emerged as economic powers while others fell by the wayside along with the Dow and our beloved 401k plans.
Things were looking mighty grim, but then a new bubble began to appear and with it a credit crisis of epic proportions. The housing and real estate boom was about to save us temporarily from our economic comeupence. Again the stock market rose on real estate values previously unseen. Houses in Bakersfield doubled and tripled in value for reasons most of us did not understand; however, many of us started cashing in our equity values and barrowing on them for everything from vacations, cars, and other niceties. Stay tuned for part 2 soon.
