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#56, Thomas,
Without the dot com boom, the 90’s would have been at best mundane economic growth.
Bull shit is the only bull you can attribute to that statement. The “dot com” boom lasted less than two years and was more of a frenzied jump on the wagon. There was no wealth created. All that money merely changed hands.
The “value” of the “dot com” stock was all hypothetical in that it was (and is) worth only what someone thinks it is worth. Unless it is backed by tangible assets, there is no true worth in any “dot com” stock. Companies like Google, MicroSoft, Yahoo, and Adobe all have contracts with their customers which are tangible assets.
If anything, the “dot com” boom hindered the economy. It redirected money, energy, and impetus from projects that would expand the economy into a hole.
#64
You are going way off on a tree-hugging tangent on this tree analogy. Given the way you phrased your original question, it was clear that you were attempting to determine a monetary value of an 800 year old tree. If that is the case, then it is worth whatever the market will bear. However, if I have a tree that is holding up my house for example, then clearly it is worth more than what I can sell it to a lumber yard and is completely irrelevant for the purpose of discussing monetary evaluation in a generalized scenario.
#65
The dotcom boom lasted a *lot* longer than two years. It stretched from about 1994 (or 1992 depending on who you talk to) until 2000. That is six years.
> There was no wealth created.
Really. So, the guys that started Yahoo and Amazon are not wealthy? Who knew? ;->
> Unless it is backed by tangible
> assets, there is no true worth
> in any “dot com” stock.
The moment you sell stock it *becomes* a tangible asset. Because of that, it is logical to evaluate your “worth” based on the going price of the stock. By your logic, Yahoo, Amazon, and Google are not worth anything. Yet, the founders of Google are multi-millionaires pulling in millions of fairly tangible assets each year. I don’t know about you, but I’d love to be that “unwealthy”.
#66 – Thomas,
I was NOT using the tree as an analogy. This is a literal case of where GDP and our current accounting practices completely and utterly fail us.
The tree really genuinely provides the services listed above. It also really is genuinely sold by our government for one dollar. And, the government really will come and cut the roads for you so that you can get your tree out easily.
There are many such examples, mountaintop removal, mineral rights, oil drilling, etc. But, trees are easily understood. Most people still recognize a tree when they see one.
#28 So, mxpwr03, what do these actions have to do with real American security? If I remember correctly, almost all of the 9/11 terrorists were from Saudi Arabia, so why haven’t we invaded them yet? By the way, the evidence that Bin Laden and the Taliban were truly involved in 9/11 is kinda sketchy. To quote the FBI, the FBI has “no hard evidence connecting Bin Laden to 9/11”. The only thing we do know for sure is that our giving money to the Taliban during our proxy fight with the Soviets made them what they were, and are.
#66, Thomas,
I don’t know how old you are but I get the impression you aren’t finished grade school yet. The internet didn’t start taking off until 1995. The commercial part didn’t start taking off until 1998, and got crazy in 1998. By 2000 the boom was over.
Yes there was an internet before 1995 and there were commercial applications before 1998.
The wealth created is all fictitious. And, as Scott has pointed out, the stock markets have little resemblance to the actual state of the economy. It is someone saying “This piece of paper is worth X dollars. There is nothing to back up the value except the statement that that is what it is worth.
A tangible asset though has something behind it that can back up its worth. Google, MicroSoft, Adobe, and Yahoo all have software and advertising contracts they can hold up as something of value. The same as General Electric has all its plants, warehouses, products, patents, and contracts as tangible assets.
The jokers that started dot com companies with an idea to sell (for example) pet food via the US Postal Service only have an idea. They don’t have a plant, a truck, a warehouse, or any contracts to back up the value of what they claim their stock is worth. Their stock is only worth the paper it is written on.
As far as the original men becoming millionaires, so what? The guys that came out with Pet Rocks also got quite rich. Or Mood Rings, Hoola Hoops, Frizbees, or any other number of things. Most lost money on their ideas.
#69 Ralphie ol’ boy I couldn’t agree more.
“The wealth created is all fictitious. And, as Scott has pointed out, the stock markets have little resemblance to the actual state of the economy. It is someone saying “This piece of paper is worth X dollars. There is nothing to back up the value except the statement that that is what it is worth.”
Which is why there are stock market crashes. Remember when the US came off the gold reserve? The US needed a new VISA card. There was a time when all money was exchangeable, by demand for silver or gold in reserves held by the treasury. Money was , if you will, a cheque written by the government to the bearer for the value of gold in the bank. Not no more! Money was becoming rubber cheques… Yea!! Are we having fun yet?
So now the value of the USD is determined by what? How many jars of jam in the warehouse or how much they could sell for? Selling a jar of jam is different than thinking about selling a jar of jam. Its a complex subject…
I think the war in Iraq was contrived to dump a shit load of money the US doesn’t really have on something totally meaningless to drive down a strong dollar to eventually offset the unbalance of trade. Yes the war in Iraq is meaningless – like it really stopped the terrorists ok? Stop it, my sides are hurting!
Where did these BILLIONS flowing on TAP for Iraq come from? A money tree? Wasn’t very hard to find…or did the US get a new Visa card or what? 😉
Cheers
Ralph,
Just to add to your clearly correct point about most ideas losing money, I would add that venture capitalists know this quite well. What they do is invest in small companies, many small companies. Most fail. The few that become Yahoo and Amazon make so much money that the losses on the rest pale by comparison.
For verification of your timeline of the internet, I got in a bit late around 1994 or 1995 or so, late for a programmer that is. However, even with my internet access, I still planned a trip to Alaska in 1996 by buying books and sending to the state tourism board for information. Then there were phone calls and snail mails to each of the places we wanted to go. There was no significant content on the internet at that time that would have helped with travel to remote areas.
#67
The GDP algorithm does not account for a host of items that might have production value: the trees in my front yard, the biomatter sitting in my garbage can, the methane from porta-potties. GDP was not meant to account for these items nor for items like “the carbon output”, bug food, bug housing, moral considerations or any other nonsense you mentioned. It would be equivalent of arguing that measuring speed in miles per hour should be abandoned because it does not account for “moral” considerations.
GDP was not meant to evaluate every possible item for its “full” potential in every area in the universe. Attempting such a calculation would be veritably impossible and not answer the question as to the *general* health of the economy. There is no question that there are holes in the GDP calculation that do not tell the whole story. Ok. It wasn’t meant to be the end all answer nor has anyone ever suggested otherwise. *Every* economic indicator has holes and is merely one piece of information in the overall answer as to health of the economy.
Every nation on the planet uses GDP as part of its evaluation of economic health. No nation, finance person, policy maker or economist uses GDP and nothing else. There are numerous economic indicators and the basket of indicators that are considered relevant differs depending on the economist.
#73 – Thomas,
You are missing my point. The fact that all transactions, even those that are hugely negative to the economy, the environment, people’s health, etc all count as positive if they generate transactions. This is the reason that the GDP is completely useless. It looks better when things get worse.
#73
Almost all economic indicators are going to include things that are negative. Net income indicators do not account for strip mining and black markets. Unemployment indicators do not account for demoting people to janitors. Shipment indicators do not account for returns. It is easy to find fault in any type of statistical value and most economists would agree that they all have faults which is precisely why you cannot make any sort of logical conclusion from any one value and which is why I provided more than one.
Doah. That was obviously supposed to be a response to #74.
#75 – Thomas,
Yes, that is true. However, using your miles per hour analogy, the GDP is like saying you drove an average of 60 MPH for 5 hours. Of course, it doesn’t count the fact that you randomly got off the interstate every so often and turned around. So, at the end of the 5 hours, you were only 5 miles from your starting point, at the very next exit.
The GDP is like that. We could have trillions of dollars worth of GDP, and have done absolutely nothing, net, or be worse off than when we started.
It is literally meaningless.
Other economic indicators miss some details, but may provide some useful information. Because of the way the GDP works, however, it literally is completely and totally meaningless. It adds precisely zero to any conversation about the economy.