In the United States, economic growth and talk of a new economy sparked a frenzied boom in the stock market that was reminiscent of the 1920s. Investors, large and small, poured funds into stocks, spurred by the rise of discount and online firms that advertised aggressively and charged lower fees than traditional brokers. By 2000, a majority of American households owned stocks directly or through investment in mutual funds and pension and retirement accounts.

Technicians at the offices of FHP Wireless in Belmont, California, one of numerous technology companies launched with great fanfare in the late 1990s. Unlike many, FHP survived. In 2002, Fortune magazine listed it as one of the country’s “cool companies.”It is now called Tropos Networks.

Investors were especially attracted to the new “dot corns”—companies that conducted business via the Internet and seemed to symbolize the promise of the new economy. Standard & Poor’s index of 500 stocks (S&P 500) increased 20 percent or more each year from 1996 to 1999, a remarkable performance. But the NASDAQ, a stock exchange dominated by new technology companies, rose more than 500 percent from 1998 to 1999. Many of these “high-tech” companies never turned a profit. But economic journalists and stock brokers explained that the new economy had so revolutionized business that traditional methods of assessing a company’s value no longer applied

Inevitably, the bubble burst. On April 14, 2000, stocks suffered their largest one-day point drop in history. For the first time since the Depression, stock prices declined for three successive years (2000-2002), wiping out billions of dollars in Americans’ net worth and pension funds. The value of NASDAQ stocks fell by nearly 80 percent between 2000 and 2002. Not until 2006 would the general stock index again reach the level of early 2000, while the NASDAQ still remains far below its record high. By 2001, the American economy had fallen into a recession. Talk of a new economy, it appeared, had been premature.

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