9/11 Attack

As Nicholas Taleb points out, human beings always try to rationalize a Black Swan event after the fact. But if it was predictable, it wouldn’t happen.

“A vicious black swan has an additional elusive property: Its very unexpectedness helps create the conditions for it to occur. Had a terrorist attack been a conceivable risk on Sept. 10, 2001, it would likely not have happened. Jet fighters would have been on alert to intercept hijacked planes, airplanes would have had locks on their cockpit doors, airports would have carefully checked all passenger luggage. None of that happened, of course, until after 9/11.”

Following the 9/11 attacks, the Fed voted to reduce the federal funds rate from 3.5% to 3.0%. As the Enron and other corporate scandals developed, the Fed dropped the federal funds rate to 1.0%, where they remained for over a year. Greenspan said this drop in rates would cause a surge in home sales and refinancing. But Americans extracted $3 trillion in equity from their homes and spent it on BMWs, HDTVs, exotic vacations and whatever other hedonistic pursuits that appealed to them.

The national reaction to the 9/11 disaster was one of unity of purpose. We wanted to find and punish the terrorists that caused this tragedy. A call for national sacrifice would not have gone unanswered. Instead, George Bush and Alan Greenspan encouraged Americans to teach the terrorists a lesson by spending. In June of 2001, prior to the attacks, a $1.35 trillion tax cut was enacted, including $50 billion in rebate checks.

After the attacks, General Motors (GM) showed their patriotic spirit by offering 0% financing on all cars. Big-ticket retailers offered easy credit and extended terms, so that everyone could have a flatscreen HDTV - and worry about paying later. Consumers went into a buying frenzy that didn’t stop until credit evaporated in 2008.

George Bush did his part to stimulate the defense industry by starting an unprovoked war that has already cost the country $700 billion, 4,100 needless deaths, and 30,000 wounded. Estimates of the total cost have risen to $3 trillion.

The Bush administration estimated the cost at $50 billion before the war - but when the government provides an estimate, multiply it by 10 to get closer to the truth.