Last winter, America's central bank - the Federal Reserve - was busy patting itself on the back. The Fed's cut in its basic interest rate to 1.75% per year seemed to have worked: the recession was ending. Despite sobered expectations about the high-tech revolution's impact on productivity and profits, as well as the jitters inspired by the terror attack on the World Trade Center, American businesses, it was believed, would soon start investing again big-time because borrowing money at 1.75% was too good a deal to pass up.
By late spring, those expectations had disintegrated alongside the collapse of Enron, WorldCom, and Arthur Andersen. Suddenly, everyone doubted the integrity of the financial accounts of American companies. Suddenly, everyone saw just how much America's system of corporate surveillance and control had deteriorated during the bubble of the 1990s.
The American stock market fell 15-20% below its winter levels. Spreads between the interest rate at which America's government could borrow and the interest rates at which America's corporations could borrow widened. Suddenly, the Fed stopped congratulating itself: a 1.75% interest rate might be the right interest rate to fuel a recovery when the Dow-Jones stock market index stands at 10,000, but not when the Dow-Jones index stands at 8,500.
Throughout the summer, corporate investment news remained disappointing. More and more analysts began to speak about the possibility of a "double dip" recession.