For Todd and any others who might need any further clarification on my little discourse on our current economic snapshot:

Basically, with the dot-com explosion, the demand started with all these startups needing equipment and personnel, as well as old-school companies taking advantage of the quickly-exploding Internet to expand their businesses too. The startups got seed money from venture capitalists, because the VCs thought that these companies would make them money (either through profits or stock options). Companies that made high-tech equipment (like servers, desktops, routers, etc.) were hiring more people due to increased demand for their products by startups and other companies who were modernizing to compete with the startups. The startups employed people who they paid, and in turn all these employed people went out and bought whatever they wanted -- cars, trips, DVD players, etc. -- which created consumer demand. The consumer demand created more jobs at companies that made these consumers products that people were buying, so now a lot of companies were doing well and unemployment was low and people were swimming in money and stock options. And there was much rejoicing.

However, all was not well in the land of Booming Economy. The warning signs started to come when stock prices on these startups and dot-coms began going through the roof, and there was no way that these companies would either be able to produce the earnings needed to keep up with their stock prices or make a profit in the first place. A stable company's price/earnings ratio (P/E) is usually 100 or less (meaning that the price of their stock times how many shares available is 100 times the amount they earned in a fiscal year) but some of these dot-coms were posting P/E ratios of over 2000, but they could never achieve the kind of earnings that could serve as a solid foundation for a stock price that high. So these stocks crashed and people lost a lot of money that existed only on paper, but they had already spent this "non-existent" money anyways on big houses and luxury cars so they were now in debt. People started to take a closer look at some of these dot-coms' business models and found that there was no way that they would be able to make any real profit -- take Kozmo, for example, a delivery company that maintained a massive distribution network and offered to deliver products to you at home or work either at cost or below cost in some cases, but there was no way that they could sustain themselves when they weren't taking in enough money per transaction to pay for the costs of purchasing the product and its transit through their system and eventually having the delivery guy bring it to you.

So three things happened:
1. All those companies that had bad business models or weren't making a profit began to go bankrupt -- they weren't taking in any money to sustain themselves. This dumped people out of companies and onto the street, so they no longer had disposible income to spend on all these consumer items. Additionally, they had all this equipment they'd bought that they had to get rid of.
2. With more and more companies going under and more people becoming unemployed and therefore not spending money anymore on these personal luxury/consumer items (cars, DVD players, computers, etc.), there was no longer a need for companies making these personal items to mass-produce them on the scale they were anymore. In order to cut production costs and reduce their production so they wouldn't flood the market, these companies reduced the number of items they were making. Also because they were taking in less money because less people were buying their stuff, they had to lay off people in order to keep themselves profitable -- which dumped more people into unemployment and reduced the number of people willing to buy frivolous personal items. It's a self-perpetuating cycle.
3. The companies that were able to maintain profitability and keep producing had already upgraded their hardware (servers, mainframes, routers, etc.) and everything they needed to stay current, and, in a time when they were trying to cut costs, weren't willing to go through another round of infrastructure purchasing, so the companies that made that high-level equipment also slowed down and laid off people.

So basically what we've got now is a lot of laid-off people who don't want to buy stuff because they have no money, and companies who need those people to buy stuff before they can hire people back. Here's where we get into the big mess regarding that economic stimulus package.

The Republicans and the Democrats want to stimulate the economy from opposite ends. The Republicans want to give money to the big companies so they'll be able to jump-start things by hiring on more people, which gives them disposible income so they'll be able to buy consumer products again, stimulating demand for even more people to be hired by consumer-item-producing companies. The Democrats want to give money to the people so they'll buy the products, increasing demand for them and causing companies to hire people to produce them, creating more disposible income so more people will be able buy personal items again. But they couldn't decide on which was better, so the package was scuttled, Congress got a pay raise and they went on vacation.

Next class: how to cut down the largest tree in the forest with a herring.