Under the reign of Greenspan, the major but avoidable catastrophe of the stock bubble burst occurred in 2001. This led to the evaporation of wealth for many. However, as history always repeats, it is imperative that we learn as much as possible from the mistakes of people in order to exploit them to our advantage should similar situations occur again. Let us now explore the lessons derived from this painful incident.
In 2001, when the stock bubble burst, 911 coincidentally occurred, precipitating a greater crash in the market. Despite this, the root cause of this crash is nevertheless still because the bubble developed overcapacity for the economy, causing the fall in demand that led to a recession. With a further strike by 911, demand simply just fell further because of more fear elements in the market. However, because of the perfect timing of 911, Greenspan conveniently pushed his responsibility for causing the crash to it. Personally, I think this is very irresponsible and cowardly.
As many of you would have noticed by now, Greenspan likes to extol virtues of ideas he doesn't fully understand and because of this ignorance, he leads people to destruction. For example, during the 1990s, despite strong evidence proving the existence of a bubble, he refused to heed advice due to his infatuation with technology. What he failed to realize is that history always repeats.
Looking back, many would see that nothing is really new even if headlines constantly announce the innovative, radical and groundbreaking. When something is presented as novel or different, there is always a precedent. For example, the Internet can be compared to the railroad, clipper ship. airplanes, electricity, radio telephone, television, PC, etc where investments in all these "new" arenas all ended up very badly.
In fact, the claim of something being unprecedented should warn you of whether the market is overheated and in a state of mass hysteria. Always remember that nothing emerges as so entirely different and because of this, be doubtful when you see them!
With this, investors ought to study history very carefully to learn precisely what happened and what didn't. This will help you understand what is about to happen, allowing you to bring the situation to your advantage. Here, it is clearly seen that humans are after all driven by emotions and the reason why Greenspan didn't see the bubble was because he was taken over by it.
In conclusion, after covering the importance of understanding and knowing history, I believe readers now see the light behind the burst of the dot-com bubble. Now, share this piece of knowledge with others and seek to learn with them!
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