9/11/01 and Now: The Economy

May 2, 2011

Since September 2001, U.S. consumer prices have climbed 25.5% or 2.4% per annum.  Core inflation has risen 20.3% or 2.0% annualized.  These are marginally above what central bankers widely define as price stability and by U.S. standards of the three previous decades quite exemplary.  Monetary hawks would argue that price stability is a critical pre-condition for maximizing growth in jobs and real GDP but not the only requirement for success in those areas.  And so we find that the level of non-farm U.S. payroll jobs is 0.6% lower than it was in September 2001, a 0.1% per annum rate of decline, while real GDP showed a net advance of 18.5% or 1.8% per annum between 3Q01 and 1Q11.

The table below documents key financial market statistics at the time of the 9-11 attacks, their levels earlier today, and the intervening net movement.  The two changes that jump off the page are the advances of 475.4% in gold and 307.0% in crude oil prices, constituted annualized increases of 19.8% and 15.7% for almost a decade.  Elsewhere, the dollar is substantially weaker except against sterling where the drop is only moderate.  Interest rates have imploded except in Japan’s case, where they were already extremely low by 2011.  U.S. stocks are higher but not nearly as much as achieved in the previous two decades. 

From the ashes of the geopolitical struggle against fascism in the first half of the last century, the developed industrial nations enjoyed an economic renaissance even among the losers on the battlefield.  The European and Pacific theaters of the second world war had definitive and unconditional end-points.  Osama Bin Laden’s death does not similarly punctuate the last song of the present conflict.  Although it is an important milestone in the war on terrorism, 2011 is not 1945.  A top Jihadist goal from the beginning had been to impede the spread of western civilization by destabilizing the economic performances in the West.  A legacy of Bin Laden is that even in his annihilation, that objective has been considerably successful. 

  09/11/01 Now Change
Gold $271.40 $1561.60 +475.4%
Oil $27.95 $113.75 +307.0%
EUR/USD 0.8976 1.3867 -39.6%
USD/JPY 121.89 81.19 -33.4%
USD/CHF 1.6867 0.8640 -48.8%
USD/CAD 1.5604 0.9498 -39.1%
AUD/USD 0.5134 1.0962 -53.2%
GBP/USD 1.4576 1.6680 -12.6%
3mos U.S. 3.36% 0.27% -309 bps
3mos euribor 4.24% 1.40% -284 bps
3mos Japan 0.06% 0.20% +14 bps
3mos U.K. 4.88% 0.82% -406 bps
10Yr U.S. Try 4.77% 3.26% -151 bps
10Yr Bunds 4.80% 3.25% -155 bps
10Yr JGBs 1.42% 1.21% -21 bps
10Yr Gilts 4.91% 3.45% -146 bps
10Yr Canadian 5.28% 3.19% -209 bps
DJIA 9606 12831 +33.6%
Dax 4607 7528 +63.4%
Ftse 5034 6070 +20.6%
Canada TSE 7344 14010 +90.8%
Nikkei-225 10293 10004 -2.8%

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.


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