The Money Compass: Where Your Money Went and How to Get It Back

Chapter 2

Greenspan and the Growing Bubble

The height of the bubble was reached in the winter of 1636–1637. Tulip traders were making (and losing) fortunes regularly. A good trader could earn up to 60,000 florins in a month—approximately $61,710 adjusted to current U.S. dollars. With profits like those to be had, nothing local governments could do stopped the frenzy of trading. Then one day in Haarlem a buyer failed to show up and pay for his bulb purchase. The ensuing panic spread across Holland, and within days tulip bulbs were worth only a hundredth of their former prices. The tulip bubble had burst.

—Cynthia Wood1

If you ask Americans what they consider the most important date for the U.S. economy in their generation, many will say September 11, 2001. I disagree. The most important date, in my opinion, was actually a series of dates, starting on November 7, 2000, when the presidential election was contested, and ending on December 12, 2000, when the U.S. Supreme Court ruled in favor of George Bush. Before I explain why, however, let me tell a story.

“Daddy, did you have a bad day?” I asked my father.

I could see that he did, but I wanted to ask anyway.

“Yes, Mark, I did,” he replied grimly.

I was sorry to hear that, and asked if there was anything I could do to cheer him up. He suggested a drive to the corner drugstore, so we hopped in the car. The ride was short, and we didn’t speak—but when we pulled into the store parking lot, my father looked at me with a piercing gaze. ...