Navellier’s
by Louis Navellier
I want to focus on outlandish, unexpected surprises which Nassim Nicholas Taleb labeled “Black Swans” in a 2007 book by that name.
The ultimate Black Swan event happened 25 years ago next month, when four big fuel-drenched airliners were hijacked and steered toward America’s financial and political centers, New York City and Washington, DC. I would like to focus on the five surprising financial trends arising out of 9/11.
Surprise #1: From Balanced Budgets to Massive $2 Trillion Annual Deficits
For four straight years, 1998 to 2001, the federal government managed a budget surplus – the first such 4-year winning streak in a century. The national debt was on the order of $5 trillion then (vs. $40 trillion soon), and the Congressional Budget Office (CBO) confidently projected we would wipe out that $5 trillion debt within a decade, by 2011. Instead, during each of Barack Obama’s first term years – 2009 to 2012 – we suffered our first four trillion-dollar budget deficits. Now, we are encountering $2 trillion per year deficits, with no relief in sight. To cap off this sad story, in the single month of July 2026, the CBO tells us we ran up a larger monthly budget deficit than in any full year before the financial crisis of 2008.
Surprise #2: The Longest War in American History – and More Wars to Come?
One big part of the surging deficits came from the “War on Terror” shortly after 9/11. This was not called a “War on Afghanistan” (2001-2021) or a “War on Iraq” (2003-2011), but those two wars were long and costly. The direct cost of those wars, launched in Bush’s first term, totals at least $1.47 trillion, according to the U.S. Department of Defense, far more than the estimate of just $80 billion in direct cost (and $100 billion total) estimated by then-Vice President Dick Cheney on “Meet the Press” in mid-March 2003.
According to warcosts.org, the U.S. has spent over $8 trillion on wars and military operations in at least 85-countries since 2001, with total costs of $10–14 trillion, with veteran care and interest costs added.
The war in Afghanistan centered around a search for the perpetrator of the 9/11 attack, Osama bin Laden, but he wasn’t apprehended for another decade, after it turned out he was “hiding in plain sight” in nearby Pakistan. There was no national security justification for a 20-year war in Afghanistan, or the launching of the Iraq war, based on its alleged “weapons of mass destruction.” And now we are in Iran.
Surprise #3: Modern Monetary Theory Created a “Free Money” Decade
Another strange anomaly happened during President Obama’s first term. The Federal Reserve decided to put “training wheels” on a presumably crippled economy, nursing it slowly back to some form of health, with the Fed’s prescription of a Zero-Interest-Rate Policy (ZIRP) and 3+ rounds of (QE) on top of free money. All of a sudden, money had no time value (interest), nor penalty for higher debt service costs, since the Fed froze the at a microscopic 0.0% to 0.25% for seven years.
The Fed Chairman during most of these years (2006-14) was Ben Bernanke, who made a career out of studying the Fed’s mistakes during the Great Depression. In other words, he bent over backward to avoid deflation, setting a target of 2% , not flat prices. On top of zero interest rates, Bernanke launched a series of Quantitative Easing (QE) policies, gorging the economy with his form of “helicopter money.”
It’s as if the Fed and Treasury were telling America we were too fragile a nation and economy to charge normal market interest rates or live on the money we taxpayers sent to the Treasury. The net effect was an American version of the popular “Modern Monetary Theory” (MMT), creating nearly unlimited liquidity.
During Trump’s term, the Fed finally raised rates, but that caused a sharp market drop in late 2018, when Powell raised rates a step too far to a punitively high 2.5% (chart above), but then he retreated to ZIRP.
Surprise #4: Legislation Against Past Threats Created a New Regulatory Regime
The Attack on America on 9/11 delivered yet another blow to our economy in the form of the financial handcuffs of the Dodd-Frank bill following the Great Recession of 2008.
This onerous regulation gave birth to what we’ve seen recently in “private wealth funds,” not subject to Dodd-Frank, but delivering the same risky level of high-interest or leveraged vehicles to investors seeking a faster road to riches. This is a situation in which we can’t cure “stupid” or “greed.” Bad guys or gals generally find a way to work their mischief.
Surprise #5: Despite All These New Threats, the Stock Market Keeps Soaring
And now comes the happy ending. Despite these four negative surprises, a closing pleasant surprise is seeing the stock market continually rising anyway – although in somewhat inflated terms – since 9/11/01.
So, we can count our blessings: Adam Smith was accurate in 1778, when he said, “There is a lot of ruin in a nation,” after Britain feared their glory days were over after the Battle of Saratoga brought France onto the American side. Like Britain after that war and after Hitler’s bombs in the early 1940s, Americans took the many blows after 9/11 and what followed and kept on ticking, thanks to our free-market system rewarding American inventions and ingenuity with near-record earnings growth since 2001 and this year.
What a country!