The dot-com bubble of the late 1990s resulted from two primary factors: a frenzy to grow market share (in anticipation of cashing out at a huge profit) and investments by wealthy venture capitalists (in anticipation of cashing out at a huge profit). The enthusiasm of the dreamers and the funders got the better of them and they overlooked the basics, such as the amount of red ink Internet startups' books were bleeding.

Caution was dismissed because it wasn't possible to know which ventures would succeed or fail. It was any one's guess. To keep the dream alive with investors, companies resorted to creative accounting. Amongst the bankruptcies, WorldCom gained the distinction of being the largest collapse in U. S. history.

That bubble built and burst during 1995-2000, drifting a bit into 2001. Was it rebound romance that caused investors to turn from what became known to be unpredictable–Internet startup companies and telecommunications networks–to that old standby that had never failed them, real estate? The timing would suggest so.

In F. William Engdahl's analysis, "Sub-Prime Mortgage Debt is but the Tip of the Iceberg," besides claiming the real estate bubble hasn't finished bursting, Engdahl points the finger directly in the face of the architect of the bubble:

The peak period of the US real estate bubble which began in about 2002 when Alan Greenspan began the most aggressive series of rate cuts in Federal Reserve history was 2005-2006. Greenspan’s intent, as he admitted at the time, was to replace the Dot.com Internet stock bubble with a real estate home investment and lending bubble. He argued that was the only way to keep the US economy from deep recession. In retrospect a recession in 2002 would have been far milder and less damaging than what we now face.

Of course, Greenspan has since safely retired, written his memoirs and handed the control (and blame) of the mess over to a young ex-Princeton professor, Ben Bernanke. (emphasis supplied)

Senate Banking Committee Chair Senator Christopher Dodd accused lenders of "what he called a 'chronology of regulatory neglect.'" What I found shocking in watching part of the hearings online was listening to Sen. Dodd apparently accusing–almost bashing–one person for single-handedly setting up the disaster. The camera then panned left to Alan Greenspan.

Do you ever feel like American citizens are yo-yo's in the hands of politicians who would sacrifice the people any day to save an ideology, to keep the masses ignorant of their choices, to cause an earthquake to boost construction and housing starts…? Who knows how far it could go?

Meanwhile, my advice is "Stay off bubbles. They always burst."

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