-Caveat Lector- Tuesday September 11 4:41 PM ET U.S. Attacks May Signal Global Recession By Mark Egan WASHINGTON (Reuters) - New York's World Trade Center, an icon of global capitalism, crumbled on Tuesday after a series of attacks, leaving Wall Street in clouds of smoke and rubble and raising the specter of a global recession. As global stock markets plunged and oil prices soared after terror attacks on landmarks in New York and Washington, economists said a global recession was almost certain. Analysts speculated the events could prove a death knell to U.S. confidence and could send already wary investors fleeing to gold and other assets which benefit in uncertain times. For years the United States has been seen by investors everywhere as a safe haven -- a place where trillions of dollars could be invested, offering returns typically better than those available in Europe and elsewhere. But terrorist attacks that caused both towers of the World Trade Center to collapse and left the U.S. Pentagon (news - web sites) in flames will have a devastating effect on confidence in the U.S. economy, which was already teetering on the precipice of recession, economists said. Markets were shut across the United States, which attracts almost two-thirds of all global capital flows, in the wake of the attacks. This added to the uncertainty about how American markets would react to the tragedy. ``A full-blown global recession is highly likely,' said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. ``Recently, the economy has been on a high wire act straddling between a recession and an anemic growth; (this) damage to confidence will push us into a recession,'' he said. The U.S. Federal Reserve (news - web sites) confirmed it was open and operating and that its discount window would provide liquidity as necessary. Federal Reserve Bank of New York President William McDonough, speaking in Switzerland, said the U.S. central bank would, ``provide that liquidity which is needed.'' Later, the European Central Bank said it also stood ready to provide liquidity to keep financial markets functioning. UNTOLD DAMAGE Economists said there could be untold damage to the U.S. financial system, noting many key stock market players in the World Trade Center building were likely killed. Sohn said he expects a ``stampede'' of sell orders once American stock markets reopen, and a run on insurance companies, possibly crippling the financial system and forcing the U.S. Fed to cut interest rates even further. The Fed has already cut rates seven times this year by total of three full percentage points to try to reignite sputtering economic growth. The unprecedented assault on key symbols of U.S. military and financial power came as growth around the globe slows to a crawl. The U.S. economy is barely growing, Europe's is slowing rapidly and Japan's actually contracted in the second quarter. ``This could really trigger a global recession,'' said Frank Holmes, chief executive of U.S. Global Investors Inc. Kevin Logan, an economist at Dresdner Kleinwort Wasserstein in New York summed up the feelings of many, saying Tuesday's events meant, ``it won't be business as usual'' anymore. ``People will begin to invest and spend less as they try to determine what the future will bring. I can only imagine the stock market is very vulnerable,'' he said. Before the attacks, the International Monetary Fund (news - web sites) had expected global growth of just 2.7 percent this year, down from almost 5 percent last year, with the risk of a global recession rising -- the top item on the agenda at the upcoming meeting of leading industrial nations in Washington later this month. Against that backdrop, economists said the worst-case scenario could be a massive capital flight out of U.S. assets -- something that could crush already weak U.S. stock prices and banish the American economy into its first recession in more than a decade. RISK OF PANIC ``The major risk is panic in the financial markets,'' said Kathryn Kobe, an economist at Joel Popkin & Co. in Washington. ''If for some reason the United States is no longer seen as a safe haven for capital...there could be some very large capital movements.'' Soaring oil prices in 1999 are widely blamed as a key reason the world economy began to slow late last year. Tuesday's spike of more than 10 percent in world crude prices to over $31 a barrel was eyed nervously by analysts, who said higher oil prices would also hamper economic growth. Parts of the U.S. economy, notably the manufacturing sector, are already in recession. But American consumers have remained confident, helping prop up the broader economy. Economists said that confidence will most likely be rocked by Tuesday's events. And the tumble in stock prices -- if sustained when the New York stock market eventually reopens -- could deal a hammer blow to consumer confidence and spending, which in the U.S. has proved remarkably resilient to the economic slowdown. The U.S. economy, the world's richest, grew only 0.2 percent in the second quarter and analysts feared that the attacks could finally turn that paltry growth rate negative. And given that the current attacks appear to be perpetrated by terrorists, uncertainty could linger. ``The fact that U.S. officials cannot rule out further attacks will keep consumers here and abroad in a deeply uncertain state,'' said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. 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