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Dot-Com Bubble v2.0?
eldavojohn wonders: "With the recent acquisition of YouTube by Google, there has been a lot of speculation (on both Slashdot & The Toronto Star) that we are nearing the second economic bubble created largely in part by growth in the digital sector. While one may be able to debate that the revenue from advertising and sales can indeed back this growth, are we headed towards the second bubble and, if so, how hard is it going to pop? Keep in mind that popular voodoo economic theory has attributed the first bubble phenomenon to 'a combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital.' I think we're experiencing all those, although it is not as flagrant as it was during the first bubble. What do you think?"
Rises and falls in every sector happen all the time. We don't need to over analyze every rise in the market like it's the second coming. Things will inflate and deflate over time in all areas. The fact is the first dot com bubble burst wasn't that big of a deal. It's not like we had soup lines. Some *speculators* lost money. Enterpreneurs in *speculative* businesses lost their jobs. Really, it had not delitirious effect other than to correct the market and kick out some losers that needed to be kicked out anyway.
WARNING: This post sounds remarkably like something written in about 1998. It's still true.
The "digital marketplace" is fundamentally different than the standard "meatspace" environment. In cyberspace, product carries no mass. In many cases, intellectual property is "production grade" the moment it's written. EG: PHP code. There's no duplication cost, virtually non-existent distribution cost, and the result can be seen/used by millions overnight, if you have some servers to handle it.
Note: the servers to handle "millions" can be surprisingly cheap, and getting cheaper every day
So, while it takes an auto company years, and eleventy billion dollars to come out with a new line of cars, it takes maybe 2-5 guys consisting of a decent programmer, a few salespeople, and a book-keeper armed with a few thousand bux to develop a product usable by millions, even if they are working day jobs to pay rent.
So this means that the boom/bust cycle can happen in 2-3 years rather than 2-3 decades.
Get used to it - it's only going to accelerate from here. Ever heard of the technology singularity?
It's coming.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
Baby Boomers all the way. The boomer demographic is the real bubble underlying stock prices, housing prices, etc. Those folks are in their peak earning years, and there are a lot of them. They are pumping HUGE amounts of money into 401Ks, pension funds, you name it. When they start dying, getting sick, retiring, the flow of money will reverse. They will be selling houses and moving into assisted living and nursing homes. They will be taking money out of their 401k instead of putting it in.
Just because the dot-com bubble popped didn't cause these people to stop trying to squirrel money away for retirement. And since they never really saved the way they should, they're trying to make up for lost time by speculating in stocks. So the irrational exhuberance continues. Eventually, though, it will stop. And when it stops, the bubble will collapse in a very very big way.
The fallout will involve all these folks whining about how the next generation should pump more money into SS so they can afford the affluent lifestyle to which they've grown accustomed. Screw 'em. The most irresponsible generation decided to give their life savings to the pinstriped crooks on Wall Street. That's their problem, not mine.
Baby boomers are the big white elephant in the room that everyone pretends they can't see. Instead we have to endure all manner of ridiculous handwaving BS about new economies yada yada yada. Phghght. What a bunch of crap.
The fact is the first dot com bubble burst wasn't that big of a deal. It's not like we had soup lines.
Wow, talk about revisionism. The first bubble burst was HUGE deal; dozens of major banks grossly violated their 'chinese wall' policies while underwriting the IPOs of clients and looked the other way when internet companies were engaging the shadiest accounting practices known to man. Companies swapped "shares" and both counted it as revenue based on projected stock prices, for example. Tens if not hundreds of thousands of people lost their jobs in "layoffs", and it had a massive ripple effect in places like SF. The crash and delisting of hundreds of "internet" companies destroyed "investor confidence" on the stock market, and affected all manner of investors, from individuals to massive retirement accounts.
Christ, man! It was enough to destroy Arthur Anderson Consulting. Why do you think they're known as Accenture now? Having your top officers lambasted by Congressional investigators for conspiracy, fraud, etc on national TV doesn't exactly bolster confidence in a business where clients are trusting you...
Please help metamoderate.
First off, the economy is not on the upswing. While we don't seem to have another dot.com bubble, we absolutely have a housing bubble and that is worse! If your stock tanks, you still aren't making monthly payments on it and it's a lot more liquid. The record low savings rates and record high debt rates are not symptoms of a healthy economy. Neither is the account deficit over 6%. So far the US is the only country in history to have that high of an account deficit and not have a currency collapse. The fact that it is increasing rapidly is not good. (BTW, I know it's political season, so let me just say it's not Bush's fault, but structural - for people who think I'm bashing Bush)
Not in the US, not since 1911, the year of the federal reserve act. You can't keep printing up money and loaning it into the economy and expect nothing bad to happen. In fact, the efficiency of the information age means that when the money passes thru, that adjustment will be far more extreme, not less extreme. The worst part is that the Fed thinks they have lernt the lesson of the great depression - that the solution is more liquidity. No it's not! It will just change it from a great depression to a hyperinflationary great depression. I don't think people have any idea what they're in for.
Why is everyone so sureal. Any look at the numbers is just terrible, do people understand that the dollar can't make it as a global reserve currency for more than a few more years and likely can't make it as a currency at all within the next decade? Can your family afford a debt of about 480K that is increasing at the rate of about 30K per year? Well, between all the obligations and systemic debt it already must.
In a hyperinflationary depression the economy reaches a point where investors won't invest in businesses, so they then put all their money into commodities. This causes commodities to skyrocket, unemployment to go up, and pay to be pressured down. So everything goes up in price except for pay and profit. That makes the defaults on debt worse, makes the drive to commodities even more, causing a vicious circle. This happened in the late 70's in the US and we were able to break out of it by offering 21% interest on bonds to get investors to stop dumping cash. But this time a 21% prime will rip the US economy to shreds. BTW, over the last 5 years commodities have trippled while pay has done nearly nothing.