While much economic analysis tends to concentrate on the determinants of

output and employment, modern market economies depend to an important extent on a well-functioning financial system and financial institutions, such as insurance companies, commercial banks, pension funds, stock exchanges, etc. These institutions play a vital function in ensuring that resources represented by saving are transformed into new capital goods. As we know they were put in harm’s way by the terrorist attacks.

The attacks on the twin towers threatened the heart of the U.S. financial system. Their destruction devastated the leading dealer in U.S. Treasury securities, the loss of whose staff accounted for almost one quarter of those killed in New York City. The debris from the collapsing towers and the general chaos in the area brought about the closing of the New York Stock Exchange, the major stock exchange in the United States, as well as closing brokerage houses and banks in the Wall Street area. The grounding of all air planes severely hampered the clearing of checks and the distribution of paper currency, creating great uncertainty for financial institutions. 

The loss of lives and property on 9/11 was not large enough to have had

a measurable effect on the productive capacity of the United States even though it had a very significant localized effect on New York City and, to a lesser degree, on the greater Washington, D.C. area. Thus, for 9/11 to affect the economy it would have had to have affected the price of an important input, such as energy, or had an adverse effect on aggregate demand via such mechanisms as consumer and business confidence, a financial panic or liquidity crisis, or an international run on the dollar.

Given these facts do you think 9/11 ushered an economic holocaust on the United states or did the terrorist attacks push a weak economy over the edge into an outright recession?