Afghan war's impact on global economy

5x puncte

categorie: Economie

nota: 9.90

nivel: Facultate

Basically we believe that the incident of September 11, as a sudden event, resulted in a massive blow to financial markets and caused difficulties to the operation and functioning of the tourism, insurance and aviation industries. However, seeing the U.S. government urgently providing a bailout totaling U.S.$55 billion for the domestic aviation industry's financial capitalization and a post-disast[...]
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Basically we believe that the incident of September 11, as a sudden event, resulted in a massive blow to financial markets and caused difficulties to the operation and functioning of the tourism, insurance and aviation industries. However, seeing the U.S. government urgently providing a bailout totaling U.S.$55 billion for the domestic aviation industry's financial capitalization and a post-disaster reconstruction fund, while seeking a budget increase of U.S.$75 billion to invigorate the U.S. economy.

This comes in addition to the U.S. Federal Reserve's measure of lowering interest rates by an entire percentage point as well as central banks joining hands in adopting positive measures like the lowering of interest rates. These measures in addition to the rebound in stock markets around the world, several days after they dropped, are clear indications that the disturbance caused by the September attacks to the world financial markets have gradually abated. Accordingly, after the beginning of the war, although every country's stock markets plummeted once again they quickly recovered making it obvious that the U.S. war against Afghanistan is unlikely to have a very large impact on the global economy.

The critical factor in the influence the September 11 attacks will have on this year's global economic growth lies in the effect that they have on consumer and investor confidence. If the attacks reduce consumer spending and decrease the amount of investment it will cause the growth rate to fall. The latest publicly announced statistics regarding consumer confidence show that the consumer confidence index for September fell sharply compared to August. However, the U.S. National Association of Purchasing Managers announce that, in September, the manufacturer's confidence index was only down slightly from August, indicating that the September attacks had a much greater impact on consumer confidence than they did on confidence among manufacturers.

Owing to the critical importance of consumer spending in maintaining economic growth in the U.S. economy, this year, it is easy to understand why U.S. president George W. Bush, after the attacks, repeatedly proclaimed his faith and why the Federal Reserve held nothing back in lowering the interest rate by one percentage point. This was done to solidify consumer faith and prevent the U.S. economy from excessive deterioration.
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