Possible Causes of the Great Depression (cont.)

Republican lawmakers in the 1980s and 1990s were much more pro-business

Republican lawmakers in the 1980s and 1990s were much more pro-business than their Democratic predecessors. In 1997, the top capital gains tax rate was cut from 28% to 20%.

Baby Boom in the United States

The Baby Boom in the United States was marked by very high birth rates during the years 1946-66, and so there are in the year 2000 (and will be for some time) an unusually large number of people between the ages of 35 and 55. One theory justifies high price-earnings ratios as the result of these Boomers’ buying stocks to save for their eventual retirement and bidding share prices up relative to the earnings they generate. According to the other theory, it is their spending on current goods and services that boosts stocks, through a generalized positive effect on the economy: high expenditures mean high profits for companies.

An uninterrupted stream of financial news

CNBC, CNNfn, and Bloomberg Television have produced an uninterrupted stream of financial news, much of it devoted to the stock market.

Analysts now appear to be reluctant to recommend that investors sell anything.

Analysts now appear to be reluctant to recommend that investors sell anything. One reason often given for this reluctance is that a sell recommendation might incur the wrath of the company involved.

next