1990s were a bubble the bubble burst bubbles cause real damage you seem to think it's all just in people's heads it's not
I watched a long time ago so I wouldnt be able to sumarize it here and now but imo it's a nice (though slightly controversialdue to its Austrian origin) analysis on that breaking point between good times and bad times. If you have the time you should watch it. Better yet start here. http://video.google.com/videoplay?docid=2786446863132957274# Economic cycles an introduction. It's really very understandable to all.
http://www.vanityfair.com/politics/features/2009/04/iceland200904 A good article of an extreme case of melt-down in Iceland by Michael Lewis (Liars Poker, etc) This article was written last year and Iceland has not improved its lot very much.
In the late 1990's all the consultants were telling business that the would soon run out of employees (baby boomers retiring). So business got the government to flood the labor market with visas, illegal workers and off shoring of production. I guess they over did it.
"BLS issued projections four years ago for the year 2010 -- for a labor force number (supply) of about 157 million and an employment number (demand) of 167 million -- many individuals simply subtracted the two numbers, came up with a shortfall of 10 million and shouted "labor shortage"" http://www.businessknowhow.com/manage/labor-shortage.htm
There is not some mystery to be solved: we don't make anything anymore. The 90s bubble was caused because the progress was confined in the economy to the IT sector instead of being spread out acress the economy. We lost manufacturing innovations because that was moved offshore. As long as we have limited verticals of innovation we will continue to have violent bubbles.
The "catastrophic event" as far as the USA is concerned is globalization and outsourcing bringing 500 million workers in off their peasant farms to compete for our middle-class wage jobs.