9/11 and the Current State of Our Economy

On September 11, 2001, when those two planes struck and destroyed The Twin Towers of The World Trade Center in New York, who would have predicted the culmination of that event in terms of what we see happening on the world scene today, economically speaking? 

Some would obviously jump on the point and scream out about conspiracy theories. Others would ask to see the trails of evidence. Many would tend to believe in a connection without evidence. We can't be certain regarding close specifics because we are not privileged to have any real information, but it is difficult to imagine these suicide bombers and their handlers having enough predictive savvy or influence foresee the long term ramifications of their insanity. Looking back is always more productive than trying to foretell the future however.

Al-Qaida most likely did not predict that the US Federal Government would sanction the lowering of interest rates after the terrorists attacks in 9/11. This was clearly an attempt to stimulate the economy by making more money available to US homeowners so that they would go out and spend that money. The terrorists probably did foresee a slow down in the economy relative to the attack, but the lowering of interest rates was likely not predicted. 

The result of these historically low rates resulted in the stimulation of a housing market that was probably already topping an appreciative cycle in the early part of the decade. This extra stimulation and its destructiveness was likely not predicted by the attackers or their handlers.

The escalation of lending led to an obvious escalation of buying, and this in turn drove house values to amazing levels, attracting foreign investment money into the <?xml:namespace prefix = st1 />US mortgage arena. Banks spend money that is not their own even more frivolously than normal, so they lent out stupid amounts of money to people who couldn't service the payments in a sustained way.

On housing units that were really only worth $200,000.00 the banks would loan out an extra $100,000.00, which the homeowner would promptly go out and spend on a new SUV, and Boat, and a few lavish gifts and vacations. Then, after that money was spent and when the market started correcting itself, the banks were left with no cash. Do you think Osama planned for that to happen?

Clearly events followed a course that the attackers did not foresee. But just as clearly, the attacks on September 11th had a larger impact on the global economy than anyone could have predicted.