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A Scam of Historical Proportions
The biggest scam of all time involves Worldcom (the now infamous telecom bust) inflating the numbers of Internet users to such an extent that it caused the Internet Boom. When those numbers didn't pan out the bubble burst and almost $2 Trillion was lost.
Here's what happened...
In an eight month period between 1995 and 1996 the Internet did double in growth not once, but twice. However; growth began to settle down after that, growing at an average of 100% a year. This isn't bad but it isn't 100% every 4 months which translates to an 800% growth rate.
Worldcom; however, kept telling everyone that it was still doubling every 4 months. They did this for nearly 4 years with fancy accounting. They were signing up line carriers like crazy and these telecom companies were adding cable at an 800% growth rate. Worldcom/MCI then claimed the growth of cable capacity as "Internet Growth." Unfortunately, the actual growth of Internet users was just 100% or 7 times less than what was claimed. By 2000 there was way more cable capacity than was actually needed. The telecom companies, which borrowed heavily to finance the laying of this cable, now had the debt but not enough customers to ever pay off that debt.
Throughout these years Worldcom kept up the sherade. The funny thing is that guys at AT&T were scratching their heads trying to figure out how their competitor was growing at 800% while they were just inching upwards. AT&T was measuring users while Worldcom was counting hypothetical users.
For a number of reasons everyone wanted to believe Worldcom and invested in this so called booming industry. In truth, if they'd actually thought much about the numbers they would have realized that it was just pie in the sky. But they didn't and nearly $4 trillion was invested in Internet businesses (dotcoms, fiberoptic companies, telecom companies, and ISPs). There was never enough growth to sustain a $4 trillion investment and consequently nearly half the investment has evaporated away, along with a hundred thousand jobs, life savings, and a lot of little companies that got trampled by big spending Internet startups that stayed around only long enough to kill off the little guys.
The $2 trillion loss represents the biggest scam perpetrated on the world economy and it is unlikely anyone will be held accountable for this fraud.
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