Quote:
Originally posted by Sidd Finch
As predicted, the response doesn't account for the fact that there wasn't even a one-year decline -- let alone a two-year decline -- after the '87 crash.
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Sure, Reagan had the economy in better shape in 1987 than Clinton in 2000.
Remember that the markets came back to their pre-crash levels in less than 2 years. We're still well short of Nasdaq 5000 and Dow 12000.
But really comparing the two is pretty simplictic, because you ought to look at the underlying economic and psychological factors that created the two crashes.
The 1987 crash really is without good explanation--there was no triggering event or particular realization of overvaluation. It was only a one-day event, with prices going steadily up the day after the crash.
In contrast, 2000 was strongly rooted in a recognition that the IT/IP boom was overblown and that the valuations of these companies were not rooted in any sound financial basis. The paper wealth created (and actual wealth for those precient enough to sell) disappeared not overnight but over a period of months, as the bubble deflated much more slowly (perhaps in part a result of learning from earlier crashes).
What's more, you really need to look at the figures in forming a coherent response, rather than unsupported analogy. As this
article explains, wage and salary income actually rose (albeit slightly) during the 2000-2002 period. The entire decline (actually more than the entire decline) is a result of reduced capital gains. If it's solely capital gains, of what direct relevance does it have to the health of the economy, other than that people aren't taking K-gains as rapidly now than before for two simple reasons: they already took them or they have losses to offset them.
