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Explosions Cripple American Economy
1940 GMT, 010911
The attacks in New York City and Washington, D.C., targeted obvious
symbols of American prestige and power: the World Trade Center and the
Pentagon. The attackers achieved a crippling blow against America's
economic infrastructure as well.
New York City is one of the richest cities on the globe, independently
raking in more annually than all but the world's most advanced states.
In 1998, the city's budget exceeded that of some major countries,
But New York is more than just a wealthy city of 8 million people. It is
the financial capital of the world's largest
economy. As the significance of what happened in New York sank in across
the country, America's smaller exchanges closed down one by one. But it
is the New York Stock Exchange that moves global financial events.
Minutes after the attacks, authorities shut down the entire island of
Manhattan, virtually sealing it off from the rest of
the world. The NYSE, located a mere half mile from the collapsed World
Trade Center, has suspended operations until further notice. That action
alone set off secondary tremors in stock exchanges the world over. By 11
a.m. CST, all active, major global exchanges were registering sharp
Even with the ongoing global slowdown, America's market capitalization
is larger than its massive $10 trillion GDP and more than all other
financial centers combined. A fair portion of the value of that
capitalization is sure to evaporate over the next few days.
The seemingly invincible dollar has lost its footing as well. After
regularly gaining against major currencies for the past few years, the
dollar dropped 1.8 percent against the euro and 1.5 percent against the
yen. Since most of the world's $1.1 trillion in daily foreign exchange
trades take place in New York - and those markets are closed - this drop
is a mere glimpse of what is to come.
Foreign financial markets are already trembling. The Paris exchange
immediately plummeted 7.4 percent, the London exchange 5.7 percent and
the Frankfurt exchange 7 percent. Oil traders are betting that the
United States will seek retribution against a Middle Eastern target;
that has pushed crude oil prices up to a nine-month high.
The infrastructure that supports high-powered business is also either
crippled or locked down. Officials at the Sears Tower in Chicago, keenly
aware the tower is the country's tallest building, have ordered an
evacuation. And the offices in the 110-story World Trade Center were the
backbone of many financial powerhouses such as Morgan Stanley Dean
Witter, China International Trust, Yamatane Securities America and
Farmers Union Control Exchange. New York City plays host to more
multinational corporation headquarters than any other city in the world.
As the financial disaster ripples outward, the insurance industry will
be in for a very rough time. For instance, Westfield America Inc. signed
a 99-year, $3.2 billion lease on the now nonexistent World Trade Center
Building only last month. This is merely one example of the size of the
insurance claims that will be filed in coming weeks. Staggering claims
could be filed by the companies that were tenants of the World Trade
Center. Meanwhile, liability
insurance for canceled airline flights will be paid out, and life
insurance policies for the uncounted dead also must be paid.
The direct impact on American companies cannot be estimated until the
exchanges reopen, but European insurers are already rattled. An index
that follows large European insurance companies fell more than 10
percent within an hour of the World Trade Center collapse. The carnage
to come in American markets will be harrowing.
Beyond New York, the Federal Aviation Administration has shut down the
country's entire commercial air network, canceling all civilian flights.
With an average daily capacity of 55,000 flights, the daily loss to the
industry ranks in the hundreds of millions.
Industry confidence is sure to plummet to historic lows. Preliminary
reports indicated that U.S. military fighters shot
down another suspected hijacked passenger plan outside of Pittsburgh.
Though the report remains unconfirmed, the chance -- however remote --
of the government shooting down civilian passengers would certainly put
a damper on an airline industry only recently recovered from a wave of
mergers and price wars.
Related industries, such as tourism and shipping, will suffer equally.
Again, European markets are leading the fall. British Airways and Hilton
Group both shed more than one-fifth of their stock value within hours of
Life will not return to "normal" soon for the airline industry. More
than 2 million passengers travel through U.S. airspace daily, but the
FAA is often accused of designing security regulations more to produce a
sense of security than actual safety. A complete security overhaul must
be conducted before the air routes can be safely reopened. Even a
partial fix will take days, if not weeks.
Back in New York, the cordon around the shattered remnants of the World
Trade Center -- until this morning the nexus of the financial world --
will remain for days as rescue workers set to the grim task of picking
through the rubble. The economic damage -- the full extent of which will
not be discerned for months -- will be equally grim.