The US Economy: Ten Years Past 9/11

By Kevin Price, Publisher and Editor in Chief of US Daily Review.

It seems like yesterday when all of our lives changed forever after 9/11.  This event did not only affect the United States, but most countries around the world.  When a nation with the muscle of the United States shows such vulnerability, every country in the world is going to feel very vulnerable indeed. 

For the first time Americans became very aware that the US was vulnerable in a way they thought was only the case for other countries.  This was not only in national security, but in the economy itself.  Immediately after September 11th, 2011, people began to look at simple economic activities — running to the mall, buying gas at a convenience store, and other things– in a different light.  Nothing seemed simple anymore. 

For weeks after September 11th, many people seemed to simply stay at home and it became easier to do so because so much of the economy was moving online.  Since 9/11, it seems that ecommerce driven sites moved from “possibility” but burdened by debt as they tried to garner traction, to very mature profit centers.

The effects can also be seen in investing, as MSN Money (Market Watch) notes “The events of Sept. 11, 2001, left the investing landscape in disarray. The markets eventually regained a sense of normalcy but, 10 years on, the disaster’s legacy has been to expose the vulnerability of the U.S. financial system to both internal and external shocks.”  We see those shock waves everyday in recent years and clearly motion sickness medications could be appropriate sponsors to most business programs.  There is no question that these events are directly related to public policy decisions in Washington, DC, but they also reflect changed attitudes about the economy.  A sense of angst that has been a continuous theme since 9/11.

John Miley of Kiplinger Personal Finance has attempted to explain the changes in US fiscal policy through the prism of 9/11, noting that the government was then at $128 billion budget surplus in 2001 and is now projected at $1.3 trillion budget deficit in 2011.  Clearly some of this is attributable to multiple military conflicts driven by September 11.  However, there has been a massive shift from private control to government control of industries (with health care being the most obvious example) and there are looming questions that such can be related to September 11th.  Maybe this historic and horrific event set the stage for such massive government control in so many areas, affirming Benjamin Franklin’s warning that “Those who desire to give up freedom in order to gain security will not have, nor do they deserve, either one.”  Maybe 9/11 became the birth mother of a truly paternal government in the United States.

Miley also notes that the stock market is today only approximately 2,000 points higher than it was when the market closed on Sept. 10, 2001 ( 9605.51 vs.11,493.57 on Sept. 1, 2011).  It is hard to say whether this is attributed as much to 9/11 or to harmful government policies that helped to shave the market in half in the Fall of 2008. 

This is also the case where it comes to unemployment, which was (before Sept. 11) at near “full employment” levels — below 5% unemployment.  Fast forward to 2011 and you have the highest long term rates of unemployment since the Great Depression, at just below 10%.  It is a stretch to relate our current situation to September 11th, since we maintained historically low unemployment numbers until the summer of 2008.  It seems to make more sense to attribute it to public policy decisions that have consistently placed barriers between people and jobs.  This includes a dramatic increases in minimum wage and among the high corporate tax rates in the world.

Two of the most profound areas of changes have been in commodities, particularly in precious metals and in energy.  Gold, for example, traded at a mere $271.50 an ounce (Sept. 10, 2001).  Today it is at historic highs of $1821.00 an ounce (Sept. 1, 2011).  Gold is a historic insurance against government using the production of money as a form of taxation.  For example, the massive printing of new money without an increase in production leads to inflation (or even hyperinflation). Investors use precious metals as a way to protect the value of their investments from such government manipulations.  Cowardly politicians have often enjoyed inflation as a way of taking (the value) of taxpayers’ dollars without actually taking the dollars themselves.  With the massive move to government in recent years, it is no wonder precious metals have exploded.  Meanwhile we have seen the following changes in oil and gas:  On Sept. 10, 2001 it was $1.53 per gallon gasoline/$27.66 per barrel oil (Sept. 10, 2001); Now it is an astonishing $3.65 per gallon gasoline/$88.93 per barrel oil (Sept. 1, 2011).  Certainly the geopolitics following 9/11 has attributed to problems with energy prices, but a much bigger issue has been the barriers Washington, DC has placed on the production of energy. At some point we can all hope it gets treated like a security issue and that we would unleash our economic machine in the arena of energy.

It is difficult to quantify the impact 9/11 has had on the economy, but the picture is certainly much different than a decade ago.  They say that, with this horrific event came a lost of innocence.  I think one can also argue there was a lost in confidence.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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