Prior to the fall of the Berlin Wall, we had two competing economic systems - central planning and market economies - and they would vie with each other. It was not clear which had the winning side. When the Berlin Wall came down, and we really looked at what amounted to an economic experiment in Germany, where two countries [had] an identical history, the same culture, it was remarkable. East Germany, which had been expected to have the average standard of living of about 75% of West Germany, indeed had half that.
And the shock was so great in the Third World, which had been playing with central planning, that without any fanfare, the shift toward market economy, especially in China, created a huge change in the world economy. It went into a seriously impressive disinflation, which brought all interest rates down, made a huge boom in the economy, a huge increase in assets.
We realized that bubbles will not run out until they essentially come to an end - you can't stop them prematurely. But what we can do, and did do, is make sure that the economy was sufficiently flexible and that the decline was absorbed in a sufficiently liquid environment.
And the recession that occurred subsequent to the dot-com boom is now very difficult to find in the revised data. In other words, we had a terrible decline in stock prices, lots of people lost huge amounts of money, but not many people lost their jobs.