02:00 September 2001Ground Zero, NYC Last week, Wall Street suffered its worst weekly fall since the Great Depression losing almost three trillion Australian dollars. Just in America, one hundred thousand jobs have already been lost in the airline industry and that’s only the start of it. Europeans are expecting a million jobs in the tourism industry to disappear, and all over the world, consumers are anything but confident. A serious recession in the US seems inevitable, and it’ll be hard for the rest of the world to avoid the same fate. From New York, here’s Tim Lester.
02:07 Lester: Returning to Ground Zero.
02.28 Two weeks on, the survivors of New York's financial district are trickling back. What they're finding in the ruins is the wreckage of America's longest economic expansion on record.
Barthman's jewellers One block from the disaster site, Rene and Joel Kopel are rebuilding. The Kopels own Barthman's jewellers across from the World Trade Center.
02.50 Today, they're counting the costs of the disaster, and their blessings. They only narrowly escaped.
Rene: Somewhere around 8.45, the whole building shook and I right away screamed, oh my God, they bombed the World Trade Center. And Joel said, we're closing. While we were doing that, the second one hit. We all stopped -- we watched this on camera -- we all stopped for a second, saw what was going on and then continued and moved a little faster. We were doing it while we were cried and shook and we put everything away. We did the best we could and pretty much secured the place.
03:20 Joel: This is from this site, a picture looking across the street to troops getting ready to march into war.
03:29 Lester: The Barthman building was built just after the civil war, strong enough -- remarkably -- to survive the collapse of its 110 storey neighbours. But the financial cost to the Kopels will still be in the tens of thousands. 03:43 Rene: Well, glass wasn't broken by the implosion, the rest was broken by looters. We're putting the glass back in, we need to do a major cleaning. Inside there needs to be a lot of repairs done. So we're trying to find our papers, find our belongings, and put everything back together.
04:06 Ground Zero, NYC Lester: Here, in front of Barthman's, there's the acrid smell of a war zone, of pulverised buildings and smoking ruins. But the terrorists did more than tear down the steel and glass of the World Trade Center. There's the lives of those who were here. Then there's the terrible blow the terrorists landed on the U.S. financial system. Wall Street is just three blokes from here. As Barthman's tries to rise from the ashes, so to does the whole U.S. and world financial system.
04:47 NY Stock Exchange Since the disaster, one trillion dollars has been wiped off the value of the U.S. markets. A loss not seen since the Great Depression.
05:07 It's a cruel number that even hardened veterans like analyst Larry Wachtel can scarcely believe.
Wachtel Wachtel: One trillion dollars worth of value, one trillion dollars has been wiped away in one week. Unprecedented.
05:26 This decline might again give way to a rally back, and so it goes throughout the day. This'll be a volatile day, probably a record value day.
Lester: From his desk at Prudential Securities, one mile from the World Trade Center site, Wachtel focuses on the short term. As he sees it, it's a confidence game. The terrorists have made sure of that.
05:40 Wachtel: Well, when you look out now, and you head to the subway, you know, you kind of theoretically are looking over your shoulder. If there's a loud sound on the subway, you know, you look around. It's changed -- time will heal that -- but for the moment everybody is super cautious. And when you come down on Wall Street today, you see army uniforms. I know that's been the case in Europe, submachine guns is the way of life, but we're not used to it down here in New York, and it's a bit of a wrench, a psychological wrench.
06:17 Wall Street Office Lester: That wrench has had a devastating impact.
06:41 One hundred thousand jobs lost in the airline industry alone. The end of a record breaking decade of growth.
The United States was already on the brink of a recession; the terrorists pushed it over the precipice.
Wachtel Wachtel: Prior to this situation, industrial production had begun to turn upward, orders had begun to improve, inventories had begun to work down. But we were fringing, we were trying to escape a recession. This has ground the American economy to a halt. It will revive again, but it's too late to save the economy. The economy is in recession.
07:04 Yardeni Yardeni: My sense is that this is a big deal, this is a major event, and that we're looking at something a lot more protracted and difficult than we'd like to believe.
07:15 Lester: Deutschebank's chief strategist, Dr. Ed Yardeni, doubts the market realises how badly the terrorists have wounded the economy.
07:45 Yardeni: It may have found its bottom, but I think it could still be here in about six months. But my hunch is that industrialists haven't fully fathomed just how bad of a shock this was to the economy, to consumer spending, to corporate earnings. And we're going to learn that very quickly here.
New York Stock Exchange Lester: For traders here on the floor of the New York Stock Exchange, near Ground Zero, no amount of soothing forecasts from the Bush administration -- not even an airline bail out package -- can balance the weight of bad news and uncertainty. Company profits are under threat. There's the promise of a protracted war on terrorism. And a sense that the recession that the U.S. might have avoided is now with us. And with pessimism runs deep here, its effects are felt way beyond America.
08:19 Yardeni: There's no doubt in my mind that a recession in the United States will drag Europe, Australia, Asian countries down with it. I think the President in some ways is right when he says you're either with us or against us, especially when we're talking about the global economy. Those who've prospered from America's success and prosperity are going to also suffer if the American economy suffers.
09.05 Wachtel Wachtel: What worries us all is the global nature of this thing. When the Asian crisis hit in '98, when the Russian crisis hit, we were the local motor that lifted everybody up. Now we're in recession, Europe is in recession, Japan is in recession, Latin America is such. So that's a troubling item. 08:46
Morgan Stanley offices Lester: But many American companies are fighting back. Morgan Stanley has moved part of its operation here to a Manhattan warehouse.
09.09 The brokerage had 3,700 employees at the World Trade Center. Six are still missing. The rest went to company headquarters in midtown, 700 traders moved here.
Super:Steve Van Wyk Morgan Stanley Van Wyk: Given that we are in unusual circumstances and in temporary situation, there's no doubt it's been very rewarding to see the entire company come together out of such a tragedy. But yet allow it to be business as usual from our clients' perspective. 09:34
Lester: Morgan Stanley, like the rest of the companies in the financial district, are in uncharted waters. The age of certainty ended two weeks ago. Now they're faced with a new war that at every turn could reshape the market.
10:04 YardeniSuper:Dr. Edward Yardeni Deusche Bank
Yardeni: It doesn't take much imagination any more after what's happened in downtown Manhattan, to imagine some pretty nasty scenarios that for all the attempts to stop them, we're not going to be able to. In which case, consumer confidence will stay weak, consumers will stay at home. They won't spend. So prosecuting this war as successfully and as quickly as possible would be ideal, but let's face it, we don't live in an ideal world any more.
10.42 Lester: But down on the street, Larry Wachtel is still confident the damage can repaired.
Wachtel Wachtel: This was the worst tragedy in history, no doubt about it. But I can remember 25 years ago when New York was so close to going to bankruptcy, you know, and there was a headline, President Ford was around then, and it had in the New York Daily News, 'Ford to New York: Drop Dead,' you know, that kind of thing. We're not going to help you out. So we were in dire straits. The real estate business was terrible, Wall Street was floundering. And it came out of that, and you know, and rose to a very, very, very great height. So I think there's a resiliency factor there.
11:22
Rene: I see it all around us. All the store owners, they're all here. There's been hugs and kisses with people that were normally in a more formal relationship. Now it's all hugging and kissing and we're ecstatic to see each other. I hope the love and the strength that we're all feeling stays for a long time afterwards. And yeah, that's not going to stop us.