Last week marked 18 years since the terror attacks of September 11, 2001. September 11th was the largest terror attack of all time in the United States, killing 2,977 people.
One of the goals of terror is to disrupt everyday life. This includes the economy. The economic effects of the attack were both immediate and long-lasting. Some of the effects are still felt today, 18 years later.
The Stock Market
Immediately after the attacks, the New York Stock Exchange closed for four trading days. This was the third time in history that the stock market closed for an extended period. The first was at the beginning of World War I and the second in 1933, during the Great Depression.
The shutdown had immediate effects all over the world. Gold and oil prices went up significantly. The US Dollar fell against foreign currency such as the Pound, Euro, and the Yen.
In September 2001, the United States was already at the beginning of an economic recession that had begun in March 2001, because of the Y2K scare. An economic recession is when the economy declines substantially for at least six months. Most recessions are short (like that of 2001), lasting approximately 9-18 months total. The biggest indicator of a recession is a negative GDP growth rate for two quarters or more. There are also other indicators such as unemployment rate, retail sales, manufacturing and more.
After September 11th, the recession got worse, although it officially ended in November 2001. Nonetheless, the American economy continued to feel the effects. The Dow continued to go down for another year until October 2002 and unemployment kept rising until June 2003.
The most significant impact of September 11th on the U.S. economy was the debt crisis. A debt crisis is when a country cannot pay off its government debt.
This is the situation that the U.S. encountered after September 11th due to the increase in defense spending. President Bush launched the War on Terror in Afghanistan and in 2003, the war in Iraq. The costs of the war were significant. When Bush left office in January 2009, the War on Terror had already cost $1.164 trillion. Besides the military presence overseas, there were other costs involved in the war, such as funding Defense Department operations, Homeland Security, and more. President Obama and President Trump also continued spending money on the war, bringing the total to $2.126 trillion.
As a result of the debt crisis, the US government had to cut other services to find money to fund the war. In 2011 and again in 2013, government leadership fought over whether or not to raise the debt ceiling. This led to a government shutdown and the threat that the US might default on its debt, a situation that no country wants to be in. Defaulting on debt means raising interest rates, the dollar dropping and the U.S. government not being able to pay salaries.
The Financial Effects of Terror
The financial impact of September 11th, 2001, was wide. Many industries were affected, including the insurance industry, aviation and airlines, and tourism. In fact, the entire city of New York suffered economically. Jobs were lost, tourism went down, and the city had to be rebuilt almost completely in certain areas near the World Trade Center.
September 11th shook the United States unlike anything it had experienced before. The effects were long-lasting and we’re still seeing some of them today. We will certainly never forget those who perished in the attacks and who fought to keep our country safe afterward.