Book: The Roaring Nineties: A New History of the World's Most Prosperous Decade
Quotes of Book: The Roaring Nineties: A New
The Securities and Exchange Commission was created in 1934, and, together with other checks and balances {including class-action suits}, it helped build a sense of professional ethics among managers, auditors, and other market participants, leading to the creation of a securities market of unprecedented size, with unprecedented participation. At the peak of the market in March 2000, the market capitalization of U.S. stocks {as measured by the Wilshire index} was $17 trillion, or 1.7 times the value of American GDP. Half of all U.S. households owned equities. The world has changed a great deal, however, over the past sixty years. New forms of deception have been developed. In the go-go environment of the nineties while market values soared, human values eroded, and the playing field became terribly unlevel once again, contributing to the bubble that burst soon after the beginning of the new millennium. The book-quoteThe NASDAQ Composite Index, containing mostly technology shares, soared from 500 in April 1991 to 1,000 in July 1995, surpassing 2,000 in July 1998, and finally peaking at 5,132 in March 2000. The stock market boom reinforced consumer confidence, which also reached new highs, and provided a strong impetus for investment, especially in the booming telecom and high-tech sectors. The next few years confirmed suspicions that the numbers were unreal, as the stock market set new records for declines. In the next two years, $8.5 trillion were wiped off the value of the firms on America's stock exchange alone-an amount exceeding the annual income of every country in the world, other than the United States. One book-quoteThe abolition occurred just as it became clear that much of the wealth that had been seemingly created in the Roaring Nineties was nothing more than a phantasm, that much of the wealth was "stolen" property, acquired through misleading accounting and tax scams, in an economy where corporate governance had failed, and failed badly. But for the lucky few who had cashed in, there was the basis to found a new set of dynasties. At least the railroad barons of the nineteenth century, who used political influence to attain their riches, left behind a legacy of railroads, of hard capital, which bound the country together and energized its growth. What was the legacy of so many of the dot-com millionaires and billionaires, the executives of Enron, Global Crossing, WorldCom, and Adelphi, other than the horror stories which would regale future generations? book-quoteThe magnitude of the underfunding was astronomical. One study of just the 348 companies in the S&P 500 with defined benefit pension programs concluded that this underfunding amounted to between $184 and $323 billion {if non-pension benefits, such as health benefits, are included, the deficit is in the range of $458 to $638 billion}. A Merrill Lynch study showed that companies with off-balance-sheet pension liabilities that exceed their total equity value include Campbell Soup, Maytag, Lucent, General Motors, Ford, Goodyear, Boeing, U.S. Steel, and Colgate Palmolive. While the accounting standards may have disguised the true size of the pension liabilities, they were in fact real liabilities, obligations of the corporations to their workers. They represented a potential source of bankruptcy for many of America's most important companies. book-quote
