Economic Instability Grows

The terrorist attack on the World Trade Center had a dramatic impact on world financial markets which were already on shaky ground.

Despite pleas to investors' patriotism, in the U.S. losses reached historic proportions. By September 21 the Dow Jones index on the New York Stock Exchange with a total value in excess of $1.2 trillion, had lost more than $180 billion, or 14 percent of its value since re-opening on September 17. The NASDAQ index of high-tech stocks lost more than $85 billion, or 16 percent of its value. The combined losses in all the U.S. markets wiped out more than $1 trillion in market value.

Over the past week hundreds of thousands of layoffs have been announced by the major American airlines, the hospitality industry and Boeing. More announcements are expected in the coming weeks.

The London FTSE 100 index has declined 12 percent since September 11 resulting in a total decline of 31 percent from its 52-week high. Most other major markets have registered similar losses. The Tokyo Nikkei index plunged to below 10,000, a 33 percent decline from its 52-week high. The Japanese economy has been in a 10-year slump, during which time the Nikkei index has lost over two-thirds of its previous value.

The dramatic drop in financial markets around the world has dispelled any talk about whether or not the world economy has entered a recessionary period. Now the only question being asked is how severe the recession will be and how long it will last.