Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble

Economic Losses Caused by the Bubbles

Henry Kaufmann concluded, even before the bubble burst, that “…the tilt toward unbridled…financial entrepreneurship has exacted economic costs that often far outweigh their economic benefits.”^[99] He is speaking of entrepreneurship in the financial value chain—that is, abandoning old rules of thumb and bringing new types of financial products to retail investors—and pointing to its serious economic consequences.

What was the real economic impact of the bubble? The bursting of the bubble was a contributor to the sharp drop in consumer confidence that took place in late 2000, and 2001. In addition, the actual decrease in wealth dampened consumer spending. Business investment was set back directly by the collapse ...