The Rise and Fall of the Dot.Com Bubble Essay

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Pages: 14

What was to ultimately turned out to be known as ‘The Internet' was developed in the 1960s through funding by the US military so as to discover a means of making possible communication in the event of nuclear conflict . Until the beginning of 1990s, though, the Internet was the sphere of influence of academics as well as researchers as commercial use was proscribed. A process of commercialization began in the late 1980s and the wider use this encouraged was to be given an additional heightening with the emergence of the World Wide Web in the beginning of 1990s. The progress of browsers in the early 1990s which facilitated web pages to be viewed in a graphical format in color after that brought the benefits of the Internet to a wider …show more content…
As we know there were always strong business ground rules that would show the way to the ultimate downfall of many of the dot coms. From a crest of 5000 reached in the beginning of 2000 the NASDAQ, where the majority of the dot coms were listed, drop down as pointed up in Figure 2. (Journal of Accountancy, 1998)
The most evident cause for that turn of fortune was a slowing US economy, cooled off by six consecutive interest-rate hikes from the Fed. Why did Greenspan squeeze us so hard? What prompted the Chairman of the Fed to hit the brakes was the prospect of an overheating economy triggering a bout of renewed inflation. He was particularly concerned with increases in spending brought about by large capital gains in the stock market. As this source of income grew amidst one of history's greatest bull markets, consumers began to feel richer and spend correspondingly more while saving less. The steady decline of America's savings rate, becoming negative in 1998 among the richest 20 percent of Americans typically holding a lot of equity shares in their portfolios, illustrated the force of this wealth effect. As this boost to aggregate demand accelerated in 1999 and early 2000, Greenspan came to view the booming stock market with rising apprehension. He worried that the spectacular capital gains in the wake of NASDAQ's meteoric rise would prompt further spending increases before supply capacity had a chance