Nonetheless, the 9/11 attacks exacted a heavy economic price. The war on terror, which President George W. Bush declared a day later and which Barack Obama had not withdrawn from, cost the American economy some $1,600 billion thus far. If we take into account additional and indirect costs that will be spread over many years, such as treating the wounded and compensating soldiers’ families, the price tag rises to some $3,000 billion.
The American military is fighting al-Qaeda in Afghanistan, in Pakistan and in America. The intelligence bodies set up there employ hundreds of thousands of people and make use of the most expensive technologies. The war against Saddam Hussein, which was also categorized as a “war on terror” did not stem from the attacks (Al-Qaeda hated Iraq’s secular regime) but from false information about weapons of mass destruction.
A sum of $3,000 billion or even “just” $1,600 billion is a huge amount of money. However, we must keep in mind that in the past decade America produced goods and services in a total sum of at least $100,000 billion. That is, the cost of the war on terror totaled some 1.5% to 2% of local production. Indeed, this war is not at fault for the miserable state of the American and global economy today.
So who is at fault? First of all, Bush. The previous president not only refused to do the obvious, that is, to fund the war via new taxes, he conducted himself with complete recklessness and lowered tax rates, especially on higher incomes. Hence, the war on terror was funded by loans. The federal government issued a huge amount of bonds and marketed them, among others, to the Chinese, the Saudis, the Russians and the Koreans. The loss of taxes during Bush’s term in office boosted America’s public debt by $1.5 trillion and he is the main culprit for the current, high rate between debt and production.
The next guilty party is Dr. Alan Greenspan, who served as Fed Chairman until 2006. Greenspan sinned twice: Because he feared an economic catastrophe in the wake of the attacks, he lowered the interest rate to a very low level and kept it there even when the recovery was underway, thereby inflating the real estate bubble. As result of the same false concern, Greenspan supported the annulment of supervision on the so-called “investment banks.” This shadow banking system became completely reckless, wreaked havoc, resorted to deception and pulled tens of millions of citizens into the abyss. Because of it, the crisis erupted in full force some three years ago.
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