The New York Stock Exchange, Wall Street and the surrounding area is one of the most concentrated areas of wealth and power in the world. In terms of the human cost alone, these attacks are a massive blow to that power.
But there is also a wider cost. I was in Brighton awaiting Tony Blair’s TUC conference address when we first heard the news from New York. It was to be a keynote speech on the economy, but he never delivered it.
Before these attacks there were already fears about a worldwide economic slowdown – now that fear is greater. To an amazing degree, the stability of financial markets is built on confidence, and that confidence has been undermined.
However, the major central banks have already indicated they will support the markets, and cuts in interest rates are now likely. The world’s markets have recovered from more sustained shocks than this before, and fortunately they are more widely spread than they used to be. There are back-up systems and emergency dealing rooms – the infrastructure of New York and the East Coast is flexible enough to survive this attack.
Despite this, it now seems likely there will be a flight to quality.
Those companies with heavy borrowings – the hedge funds, the risky investments and the companies which already had problems – will look more vulnerable now.
But the world’s economy is about much more than the world’s markets.
These attacks also impact on crucial factors that were keeping economies going – consumer confidence and High Street spending.
People act just like the markets in this respect. They are perfectly willing to borrow large amounts of money to keep on spending, so long as they are sure the future is clear and secure. That is why these attacks may have such wide-reaching economic consequences.
- Jonty Bloom is a business reporter at the BBC.
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