For example, the issues that precipitated these two banking failures are not as systemic as those facing technology companies in 2001. Substantial losses ended up hampering innovation and forcing companies to pursue entirely new business models.īut there is no direct evidence that this drop-off will be anywhere near as bad as the dot-com bust. The NASDAQ dropped by more than fifty percent in a nine-month period. At that time, a substantial number of tech companies collapsed and either went out of business or lost much of their value. The omens of a tech recession have led to uncomfortable parallels with the 2001 dot-com collapse. Fears of a widespread banking crisis have dimmed somewhat ever since, but it is clear that the greater technology sector is on shaky economic ground. On Monday, the federal government announced that it would help make depositors whole past the limits established by law at the FDIC. Panicked investors pushed the federal government to intervene. The failure of SVB led to another bank closure, this time at Signature Bank. The last signal for a sector-wide recession appeared last Friday when Silicon Valley Bank (SVB), a mid-sized bank that dominated the business for start-up tech companies for forty years, collapsed and was taken over by the federal government. Like Victor Lustig in the 1930s or Bernie Madoff in 2008 for the wider economy, there are fraudsters whose greed and duplicity helped inflate assets throughout the tech sector. Trends have shifted against some of the leading fads of the industry, resulting in catastrophic losses for crypto and its related companies. There have been months of missed earnings reports and mass layoffs. All of the signs from classical recessions are now evident. The United States is clearly in the midst of a tech recession. Leighklotz, CC BY 2.0, via Wikimedia Commons
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