Debt was the reason, and the rules to "prevent" redlining.

 

People were spending money they didn't have, borrowing against equity they didn't have.

 

And unfortunately for some, buying homes they never could afford.

 

It was all falsely inflated.

 

I believe not much has changed.  At the turn of the 90s, economic conditions began to slow their pace.  New markets emerged in services, particularly the IT sector, but the American GDP had begun to turn down permanently.

 

Bulletproof companies who offered pensions could no longer afford to do so, as the number of paid non-workers started to get out of control.  Something that never was a problem when more were putting in than taking out.  (Reflective of the welfare system, which carries on unsustainably as well.)  So, the smart companies went to matching retirement plans rather than fully funded ones.

 

Those companies who survived, did so because they made smart fiscal decisions.  Now, nearly everyone's retirement is tied, at least partly, to the stock market where their retirement accounts are invested.

 

Coupled with the anti-corporate goons who attacked CEOs and executives, forcing companies to cap salaries... their interests are also in keeping stocks and dividends high, since a large portion of their compensation packages were forced to be placed in non-salary devices.

 

Given all this meddling, it's really no surprise there was Enron and that there's irrational behavior in the stock market.

 

The most basic tenet of Economic theory is that all models are based on rational behavior in the market.

 

Not only is now the market unrealistically loaded with non-typical investors, there's ridiculous pressure to keep values and dividends high (perhaps even in artificial ways.)  There's so much bot trading now that there's no such thing anymore as "rational" behavior in the stock market.  Downturns are amplified as auto-trades panic and rock the market.  Upturns cause a simlar stir.  And there's still pressure on stocks to perform, even when the GDP is not.

 

Be cautious.  Deal only in funds that could weather volatility.  Seek those who are not too far leveraged, earn strong, and still have growth potential in their market.

 

I don't see things as much different at all than the overstated 90s.  Only, there are those who have weathered the storm once that are likely to do it again, and there are always those who are up and coming in new markets.

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