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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: michael97123 who wrote (42369)	2/20/2001 12:46:19 PM
From: Katherine Derbyshire	Read Replies (2) \| Respond to of 70976

There's more to it than self-fulfilling prophecy. I'm surprised no one's mentioned the inverse wealth effect. Before the Internet bubble burst, 10-20 point up days were routine for those stocks. That's $1000-$2000/day/100 shares, which very quickly doubles or triples household income. Makes it real easy to plan for the nicer car, the nicer vacation, the extra Christmas goodies for all the kids. People acted rich, even if they personally didn't own much Internet stock, and even knowing that the gains were all on paper. That attitude helped spark the inflation that AG was worried about in the first place. Now, people have to go back to living on their salaries, minus whatever they lost when the bubble burst. No matter how good your salary or how secure your job, a 50%+ effective pay cut will have an impact on spending. Considering the amount of "wealth" that has literally vanished in the last year, I'm surprised the economy is holding up as well as it is. Katherine