And we'll assume that you plowed those IPO or bond proceeds into additional plant and equipment to supply other tech or telecom businesses with key parts to meet expected strong demand. But with the economy slowing, much of your new plant and equipment is sitting idle. You've already laid off workers and cut costs to the bone. Of course not. Which is why combating the latent effects of over-investment is, in economic lingo, like pushing on a string.
Time is the only remedy for working off productive slack.
The same is true for consumer spending, the other major driver of the '90s boom. In recent years, retail sales have closely tracked the parabolic path of the Nasdaq. Yet as the nation's savings rate plunged into negative territory last summer for the first time since the 1930s, it became obvious that many consumers were using their paper profits to justify taking on unprecedented levels of debt. Now, with the Nasdaq in virtual free-fall and job layoffs proliferating, all that borrowing is coming back to haunt the economy. Eventually, aggressive monetary easings by the Federal Reserve will bear fruit.