History is no stranger to bubbles. The earliest report of such phenomena, for instance, occurred in the early seventeenth century, at the height of the Dutch Tulip Mania. The popularity of tulips grew so much that people began abandoning their jobs and squandering their life savings to grow them. Eventually, they became such a marketable product that they were traded publicly, as investments, in what was known as the Dutch Tulip Bulb Exchange (Tarses). One Dutchman was even reported to have paid "two wagon loads of wheat, four loads of rye, four fat oxen, eight fat swine, twelve fat sheep, two hogsheads of wine, four barrels of beer, two barrels of butter, 1,000 pounds of cheese, a marriage bed with linens, and a sizable wagon to haul it away," for one tulip -- a transaction not unlike many others at the time (Tarses).

Warnings ignored, the value of tulips began to inflate at a remarkable rate. Concerned, the Dutch government issued a decree on April 27, 1637, that declared tulips

Although we might find the Tulip Mania humorous, recent history has seen similar devastation. In an alarming course of events in 1907, the entire New York Banking Institution collapsed. At that time, and in many cases today, banks did not maintain as much cash as their account holder's had deposited (Moen). Solvency refers to the relationship between assets and liabilities. If an institution has more liabilities than assets, it is referred to as insolvent. In 1907, there was widespread fear that banks were insolvent, leading to massive, simultaneous withdrawals, eventually causing New York banks to run out of money (Moen). Getting one's money literally became a first-come first-serve situation.

Today we are amidst the so-called dot-com bubble. The proverbial roller coaster has soared to never before imagined heights. With no end in sight, and the wheels supposedly firmly planted on the track, an influx of innumerable sums of money is continually dumped into the market. Determined to maintain growth, corporate executives take questionable accounting measures, and analysts stare blindly at an economy unequal to that of its market value. History none the wiser, the market continues to grow beyond its equitable value. Emerging from market "pipe dreams," scandal and market reality send the economy spiraling into recession. The once "un-endable" track had ended. But as with all bubbles, the scandalous are brought to justice, further legislation is enacted, and the market once again regains it strength - only a little wiser.

The dot-com crash has seen one of the most aggressive market declines since the Great Depression. The market cap has seen a more than $7.7 trillion decline since March 2000 ("Eyes on the Market"). Ninety percent of stock funds have lost money ("Eyes on the Market"). Two hundred and seventy earnings were restated in 2001, compared to 120 in 1997 ("Eyes on the Market"). "In March 2000, 500 shares...would've bought a Porsche 911 Carrera. Today, they'll buy a 1990 Dodge Omni Hatchback with 100,000 miles [and no air-conditioning]," CNN once compared of JDS Uniphase, a dot-com fiber optic component company now valued around a dollar ("Eyes on the Market").

The effects of the New York banking panic were widespread. Call money on the New York Stock Exchange (NYSE) was nearly unobtainable (Moen). Call money was money lent for the purchase of stock equity, with the stock itself serving as collateral for the loan. The lack of Call Money later led to the New York Clearing House issuing loan certificates as an artificial way to increase the supply of currency available to the public. This later lead to the Federal Reserve System we employ today (Moen).

A large part of the moral dilemma was the need to drive up stock prices as more and more executives depended on stock options as part of their salary. The Revenue Reconciliation Act of 1993, signed into law by President Clinton on August 10, enacted perhaps the greatest tax increase that century. Flying in the face of the 1986 Regan Tax Reform Act, the 1993 act returned to higher marginal tax brackets, some as high as 40.79% ("History of the Income Tax"). The new law created two new tax brackets: (1) a 36% bracket for taxable incomes of $140,000 for joint, and $115,000 for individual filings, and (2) a 39.6% bracket for both individuals and joint filers through a 10% surcharge on taxable incomes over $250,000 ("Tax Publications"). The capitol gains tax, however, remained at 28%. By expanding taxes on larger incomes, companies began seeking alternatives to compensate their higher-salaried employees. Stock options, which give an employee the right to buy shares at a fixed price today (usually at the current market price, but sometimes lower) for a defined number of years into the future, became the option most often selected ("Employee Ownership"). By making salaries dependent upon a stock's growth, executives often fudged earnings to ensu

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