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Financial Times Deutschland, Germany

America's Economic Crash Had Little to do with September 11


"At most, the attacks may have delayed the end of the recession by a month or two. Ö Americaís future is more severely shaken when the employees of a crashing investment bank cross Wall Street than when aircraft zoom into skyscrapers and kill 3,000 people. Itís an absurd world."


By Thomas Fricke

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Translated By Stephanie Martin


September 9, 2011


Germany - Financial Times Deutschland - Original Article (German)

President Obama addresses a joint session of the U.S. Congress to talk about putting Americans back to work. Few believe he'll get his program passed intact.


NEW MEDIA ANIMATION [TAIWAN]: Reaction to Obama's big jobs speech, Sept. 9, 00:01:10RealVideo

The conjecture has persisted since the initial hours after the terror attack: Terror plunged the American economy into recession. And by the way: The whole mess over massive government debt essentially began after September 11th. Because the Federal Reserve panicked and lowered interest rates, thus encouraging people go into debt. So they say.


It almost sounds reasonable. But it cannot be properly demonstrated. On the contrary. Rather, ten years later, the suspicion imposes itself that September 11th left neither a direct nor indirect mark on the U.S. or world economy. If anything, George W. Bush, who was president at the time, made sure of that with his wars of retribution - although even that wasnít nearly as expensive as the financial crisis of 2007.


Sure, there were more or less legitimate concerns after September 11th. The price of oil shot up only once. U.S. stock markets remained closed, and in Europe, stock prices plummeted. There were fears that banks and insurance companies would collapse; or that supply shortages would be exacerbated with companies halting production because of terrorism, with no planes flying and airlines going broke; or that U.S. consumers would panic and stop buying. Estimates on the high cost of increased security measures were soon circulating - and how this would put the brakes on globalization.


In the first few weeks after September 11th, key indicators like the Purchasing Managers Index did in fact slump. Unemployment claims shot up by almost 100,000, and U.S. industries received significantly fewer orders. But the shock was brief. In December, unemployment claims were already at pre-crisis levels. The cost of direct damage was later estimated at $20 billion, which was huge for New York, but in terms of U.S. economic performance, accounted for only 0.2 percent of total GDP - not nearly enough to bring down the whole economy.


In reality, the U.S. economy was already in recession before the attacks - a recession that resulted from the collapse of the New Economy. At most, the attacks may have delayed the end of the recession by a month or two. According to official assessments, the recovery had already begun in November 2001.


Norwegians would have come away better


What didnít occur were more failures of large banks, as the government - by committing funds - had prepared for that possibility. In the meantime, oil prices fell because of recession fears, which in turn shored up the economy. And U.S. consumers quickly regained confidence because additional terrorist attacks failed to materialize. In the long term, it seems that not even globalization suffered as a result of stricter security controls. In the six years after 2001, global trade rose at the same rate as it did six years previously - by just over 50 percent. There is no visible fracture.


In addition, according to analyses by Stanford economist Nick Bloom, there was no careless overreaction on the part of the U.S. Federal Reserve: ďThe FED provided moderate assistance, which in the face of temporary shocks proved to be absolutely appropriate.Ē The fact that interest rates were unusually low went unnoticed until long after the terrorist attacks - because of global inflation fears circulating at the time, not because of the 9/11 attacks. That can hardly serve as an explanation for the subsequent housing bubble. The housing boom began before 9/11.


Was Osama bin Laden responsible for the recession and housing bubbles? That is rather a legend. But itís no myth how the U.S. government reacted to the terror attacks: With two wars, which according to the administration at the time were supposed to finance themselves, but which so far have cost between $1 and 5 trillion, according to Nobel Prize laureate Joseph Stiglitz.


Since the wars began, Americaís defense spending has gone up from roughly $300 billion to almost $800 billion; if the U.S. had remained at 1999 levels, from 2001 to 2011 it would have spent a total of approximately $5.8 trillion less. Since 2007, the additional defense expenditures also reduced the governmentís margin for responding to the financial crisis.



Sydsvenskan, Sweden: After September 11, We 'Lost What We Wanted to Defend'    

Yomiuri Shimbun, Japan: Japan and World Need U.S. to Recover from 9-11    

Die Welt, Germany: To be Ashamed of One's Identity is also Terrorism    

Huanqiu, China: Anniversary of 9-11 Shows Lack of American Solidarity    

RTBF, Belgium: September 11 and the Value of Having Defined Enemies    

Folha, Brazil: 'Two Septembers' that Changed the World  

Global Times, China: In Post-9/11 America, Anger Overwhelmed Self-Reflection    

Iraq of Tomorrow: After 9-11, Iraq was Punished for America's Mistakes  
Estadao, Brazil: To Shorten Crisis, U.S., E.U. Should Look to Latin America
Frankfurter Rundschau: Obama's Middle Road is Fatal
La Jornada, Mexico: The 'Grand Debt' of U.S. Families
Jornal Do Brasil, Brazil: American Default and the End of 'Zero Risk'
The Telegraph, U.K.: World Needs America to Come to its Senses
El Pais, Spain: Playing Chicken is the World's Newest Sport
Mainichi Shimbun, Japan: U.S. Must Prevent Another 'Made in U.S.' Disaster
Yomiori Shimbun, Japan: U.S. Lawmakers Should 'Stop Playing Political Games'
Yezhednevniy Zhurnal, Russia: The U.S. and Soviets: Pyramid Builders to Raiders
Frankfurter Rundschau, Germany: 'Radical' Republicans Threaten U.S. with Ruin
Tiscali Notizie, Italy: The Fiscal Decline of the 'Apocalypse'
News, Switzerland: Notion: 'Pay Politicians Based on Performance'
Salzburger Nachrichten, Austria: Debt Ceiling Attack By Republicans 'Backfires'
Gazeta, Russia: America's Astonishing 'Battle for the Ceiling'
People's Daily, China: U.S. Game of Chicken Threatens Creditors and Economy
Die Zeit, Germany: U.S. Risks 'Plunging World' Into New Financial Crisis
O Globo, Brazil: Global Economy Hangs on 'Mood' of U.S. Voters
The Telegraph, U.K.: Down on the Fourth of July: The United States of Gloom
Financial Times Deutschland, Germany: For Americans, a Dour Independence Day
Financial Times Deutschland, Germany: Who Cares about the U.S. Economy?
Folha, Brazil: U.S. Conservatives Threaten to Plunge U.S. into 'Lost Decade'


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Another possible side-effect of this campaign of retaliation: Prior to 2001, oil prices always fluctuated between $10 and $30 a barrel. Since then, prices have increased many fold to previously unthinkable levels. Perhaps this is no coincidence: Because of the wars, much of the Middle Eastís production capacity was reduced. This results in higher prices. All this was less a consequence of the attacks themselves as it was a consequence of the unnecessary reaction to them. One could also express it this way: It is likely that the Norwegians would have chosen not to avenge the terrorists, which not only would have done a lot less harm than Bushís U.S. military, it would have cost them a lot less and left them much better off economically than the Americans.††


A disturbing difference


But for a supposedly obvious conclusion, even this finding is insufficient: That America's current debt problems are in some way connected to what happened on September 11th.


In the six years from 2001 to 2007, U.S. government debt rose by nearly $3.2 trillion, so in the four years since the financial crisis alone - it more than doubled. Which means: Compared to what the bank crash has cost since 2007, even Bushís military campaigns were (one could almost say) cheap. If the Americans had lowered government debt annually by 2.5 percent of GDP, the debt to GDP ratio would have been at 50 percent instead of 62 percent when the financial crisis broke. Today, in the fifth year of the crisis, the ratio would have been at 90 percent rather than 100 percent. Beautiful. Measured against the damage done by the banking disaster, it doesnít make such a huge difference.


Which is disturbingly creepy. Americaís future is more severely shaken when the employees of a crashing investment bank cross Wall Street than when aircraft zoom into skyscrapers and kill 3000 people. Itís an absurd world.



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