ABSTRACT
We have explored the causes of the extended stock market boom of the 1990s and also the driving forces of the bust from 2000-3. The US economy floundered for more than two years and the stock market with it. This is an unusual and prolonged downturn as the US economy normally rebounds quickly from a recession-and the stock market even more rapidly. As this book has explained, the post-bubble era is no ‘ordinary’ recession as asset markets, capital spending and balance sheets have been severely dented-despite the liquidity-driven refloating of asset prices in 2003/4. It may be argued that the excesses of the 1990s are still to be worked off. The excesses of the 1990s are still to be worked off. Such excesses represent a serious obstacle to an investment revival, as fresh additions to the capital stock are essential for the next phase of the recoverywithout it there will continue to be excess reliance on the consumer, and to a lesser extent, government spending. Perhaps the sluggish revival in private sector investment and a worn out consumer has prompted the US administration to favour a weaker US dollar in the hope that increased exports will assist in the recovery process? A shrinking current account deficit would also be a welcome by-product of a lower dollar.
