Reluctantly, the Economic Angle

Baldwin Louie — Wed, 12 Sep 2001 18:00:00 -0400

With New York’s financial market in ruins and the world economy in doubt, even an economist sounded sick at heart to cast the tragedy as financial news. It’s "primarily a humanitarian issue and a security issue for the U.S.," the Sydney Morning Herald quoted HSBC chief economist Dr. John Edwards as saying. "A terrorist attack is a … terrible human tragedy but not a sustained conflict. Accordingly the economic aspect is the least important."

But it's an aspect the media had to cover, however reluctantly. With dual headlines that the effect on financial markets would be "impossible to predict" and that a global recession was "highly likely," USA Today's Web-based coverage was emblematic of the media’s struggle to report the financial ramifications of Tuesday’s devastation. London’s Guardian cautioned restraint in using epithets such as "meltdown" and "collapse" to describe post-attack economic conditions. "We've just seen what the real thing looks like," Larry Elliott wrote.

Worries about equity values, industrial output and rising unemployment have become "utterly futile," shrugged BBC business editor Jeff Randall. Another BBC News Online filing quoted a stock historian who described trying to gauge the economic fallout of the attacks as impossible: "There never has been a shock like this for the financial markets."

Many international outlets, however, were quick to report expectations of a hard, fast downturn. Reuters reported that a global economic contraction was "almost certain," and the International Herald Tribune said the attacks heightened the prospect of a U.S. recession, which would be sure to cause already faltering Asian and European economies to slide more.

The London Times reported that central banks on both sides of the Atlantic were on alert last night to flood financial markets with emergency funds to counter the turbulence in worldwide financial markets. By early Wednesday morning, Bloomberg said, the money-pumping had begun, with the European Central Bank loaning $63 billion - about the same amount as it typically hands out over a two-week period at its weekly auctions - and the Bank of Japan kicking $17 billion into money markets. As for the U.S. Federal Reserve’s fixation on the tweaking of short-term interest rates as an anti-recession tool, the Financial Times’ Lex column warned that it’ll be no match for the now-rattled U.S. psyche: "A new element, beyond the Fed's control, has entered the confidence equation."

As of early Wednesday morning, the BBC was reporting that major stock indexes in London and Frankfurt had settled in positive territory, and Paris shares were trading well above early lows. Oil prices had stabilized. But as one senior equities trader told the London Times, "I have not got a brain big enough to contemplate the ramifications of this. But every way you look, it only gets worse."

Attacks Herald Global Recession
Sydney Morning Herald

Effect on financial markets impossible to predict
USA Today

Full Global Recession 'Highly Likely'
USA Today

A Direct Strike at the Very Heart of Global Capitalism
The Guardian

Why the Killers Threaten World Prosperity
BBC

European Markets Volatile After Asian Fall
Financial Times

Lex: Day of infamy
Financial Times

Dollar Drops Sharply
International Herald Tribune

Terrorist Attacks Send the World's Markets Plunging
International Herald Tribune

Attacks May Bring Global Recession (Reuters)
South China Morning Post
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Central Banks Stand By With Funding
London Times

Financial Markets Close after Attack
TheStreet.com