The Tycoon Report

How terrorist attack brought turmoil in the wall street in September 2001

Ossama Bin Laden announced in a video taped sometime late in 2001 that the September 11 attack"Struck deep at the heart of America's economy".Fortunately he was wrong.The United State Economy was scraped and bruised on that terrible day,but it is clear that the heart of the America economy is still beating strongly.

The United State economy has proven to be highly resilient.Despite an estimated $120 billion of damage and a great deal of anxiety,one year after the attack,the United State(U.S)is in the midst of an economy recovery.

Any examination of the impact of the September 11 attacks on the U.S economy is complicated by many simultaneous event.According to the National Bureau of Economic Research,the U.S economy entered into recession in March 2001 posted negative growth.By the time of the attacks,Industrial Production had fallen for eleven consecutive months and U.S stock prices were already declining,especially in the high-tech sector.

More recently,accounting scandals have created doubts about the veracity of corporate financial statements.These scandals have undermined confidence and created aq great deal of concern among investors.The reaction of policy-makers could have makde matters worse by over-regulating business,but the corporate fraud legislation signed into law by Former president BUSH does not excessive damage and will help calm market fears.

Ultimately,Corporate irresponsibility is a transient issue.Law enforcement and the punishment of dishonest companies by market forces will force Chief Executive Officers(C.E.O)to clean up their books.Ninety nine(99%)percent of American business people are law-abiding and the recent scandals are likely to create an environment of significantly less fraud.

Despite these negative developments,within 45days of the September 11 attacks,aggregate demand had recovered to its previous trend,and real Gross Domestic Product(G.D.P)fell by less(-0.3percent)in the third quarter of 2001,which included the impact of the attacks than it did in the second quarter(-1.6percent),just before the attacks.While the airline and hotel industries are still experiencing a depressed level of activity,other spending has not only recovered,but more than offset travel-related losses.

While some recent economy data seem to suggest a new set of potential weaknesses in the economy,not all of the data point in a negative direction.Initial unemployment claims continue to fall,retail sales remain robust,housing activity is strong and invention levels remain low.Desite fears,the U.S economy appears remaining on solid footing

There are three reasons for the resilience of the U.S economy.First,the federal Reserve cut interest rates three time in the wake of the attacks,after cutting rates eight time in the eight months preceding them.Second,in May 2001,President BUSH Signed into law the first tax cut since 1986 and the congress passed a stimulus bill,which including business tax cuts,in early 2002 when compared to the losses sustained in past wars,the costs of the September 11 attacks and the resulting counter attacks in Afghanistan are small.The U.S has prospered dispute world war 1 and 2,the Korean war,the Vietnam war,and desert storm.American Resilience in the face of these conflict's the result of a commitment to a democratic free-market system.Despite the fact that alQaeda attacked a beacon of Capitalism in the center of world finance,the entrepreneurial spirit remains alive and well in America.