Beyond the Economy

Fear

The fear of economic repercussions from 9/11 were far higher than a natural disaster. What scared people most about 9/11, was that it was an act of man, not a natural disaster, that caused 9/11. After Effects (Air lines losing hundreds of millions of dollars per day Empty airports, hotels, and theaters, Concerts and conventions were canceled, Wall Street spiraling downward) On 9/11 terrorists struck the heart of global capitalism. We were in economic trouble before the terrorist attacks on 9/11. That’s what makes them so scary. The economy was already fragile. The Fed has already cut rates seven times as of September 10, and business investment was still falling.

The reason to be concerned about the economic impacts of 9/11 is not because of the physical damage done to NYC, but the emotional. The possibility that investors and consumers will be nervous, and out of fear stop spending. “The only thing we have to fear is fear itself” - Paul Krugman

Immediately after 9/11 vacations were canceled because initially there no planes were flying and later out of fear. Consumers also were shy to purchase luxury goods, and businesses scaled back on their investment plans.

9/11 was directly effected a small part of one city, how could destroying a few buildings possibly threaten an economy as large as the US economy?

- 1% of the office space in the nation was destroyed (15 million sq ft)

- Rebuilding costs, in the tens of billions of dollars will be less than 0.1% of our national wealth

- While airlines were grounded for a short time, and did suffer financial setbacks, they are back in the air now

International

9/11 resulted in some positive changes internationally. The European Central Bank had previously refused to cut interest rates. The terrorist attack changed that, shortly after the Federal Reserve acted and lowered rates, the European Central Bank matched the changes.

Economic Impact of 9/11