The actual fear which leads to recession started from Mar 2000 to Nov 2001 NASDAQ fell from top 5087 to 1382
First, Let see what is recession ??
A recession is also said to be when businesses failed to expand, the GDP falls for two consecutive quarters, the rate of unemployment rises, and housing prices decline.
Less spending causes GDP to decline
Unemployment rises because company lay off workers to cut costs
Combined these factors cause an economy to fall into a recession
What's happened in 2001 ??
The 2001 recession was an eight-month economic downturn that began in March and lasted through November.While the economy recovered in the fourth quarter of that year, the impact lingered and the national unemployment continued to climb
Reasons for recession ??
Y2K Scare and 9/11 Attack
Y2K Scare
The Y2K bug was a computer flaw, or bug, that may have caused problems when dealing with dates beyond December 31, 1999. The flaw, faced by computer programmers and users all over the world on January 1, 2000, is also known as the "millennium bug." (The letter K, which stands for kilo (a unit of 1000), is commonly used to represent the number 1,000. So, Y2K stands for Year 2000.) Many skeptics believe it was barely a problem at all.
When complicated computer programs were being written during the 1960s through the 1980s, computer engineers used a two-digit code for the year. The "19" was left out. Instead of a date reading 1970, it read 70. Engineers shortened the date because data storage in computers was costly and took up a lot of space.
The problem with Y2K Scare
As the year 2000 approached, computer programmers realized that computers might not interpret 00 as 2000, but as 1900.Activities that were programmed on a daily or yearly basis would be damaged or flawed. As December 31, 1999, turned into January 1, 2000, computers might interpret December 31, 1999, turning into January 1, 1900.
Banks, which calculate interest rates on a daily basis, faced real problems. Interest rates are the amount of money a lender, such as a bank, charges a customer, such as an individual or business, for a loan. Instead of the rate of interest for one day, the computer would calculate a rate of interest for minus almost 100 years!
Centers of technology, such as power plants, were also threatened by the Y2K bug. Power plants depend on routine computer maintenance for safety checks, such as water pressure or radiation levels. Not having the correct date would throw off these calculations and possibly put nearby residents at risk.
Transportation also depends on the correct time and date. Airlines in particular were put at risk, as computers with records of all scheduled flights would be threatenedafter all, there were very few airline flights in 1900.
Y2K was both a software and hardware problem. Software refers to the electronic programs used to tell the computer what to do. Hardware is the machinery of the computer itself. Software and hardware companies raced to fix the bug and provided "Y2K compliant" programs to help. The simplest solution was the best: The date was simply expanded to a four-digit number. Governments, especially in the United States and the United Kingdom, worked to address the problem.
In the end, there were very few problems. A nuclear energy facility in Ishikawa, Japan, had some of its radiation equipment fail, but backup facilities ensured there was no threat to the public. The U.S. detected missile launches in Russia and attributed that to the Y2K bug. But the missile launches were planned ahead of time as part of Russias conflict in its republic of Chechnya. There was no computer malfunction.
Countries such as Italy, Russia, and South Korea had done little to prepare for Y2K. They had no more technological problems than those countries, like the U.S., that spent millions of dollars to combat the problem.
Due to the lack of results, many people dismissed the Y2K bug as a hoax or an end-of-the-world cult.
Note :Australia invested millions of dollars in preparing for the Y2K bug. Russia invested nearly none. Australia recalled almost its entire embassy staff from Russia prior to January 1, 2000, over fears of what might happen if communications or transportation networks broke down. Nothing happened.
9/11 Attack
On the morning of September 11, 2001, 19 terrorists hijacked four planes.
Two departed from Boston's Logan airport. One took off from Newark Liberty International Airport in New Jersey, and the fourth originated at Washington Dulles International Airport in Virginia.
The terrorists chose planes headed for the West Coast because they would be loaded with fuel
They planned to cripple the U.S. economy by destroying three centers of power: Wall Street, the Pentagon, and the White House.
The first two planes hit their targets. American Airlines Flight 11 crashed into Tower One of the World Trade Center at 8:46 a.m. United Airlines Flight 175 crashed into Tower Two at 9:03 a.m. Millions of viewers saw Tower Two collapse live on television. Tower One collapsed from the top down at 10:28 a.m. Tower Seven at the complex was damaged from debris and later collapsed at 5:20 p.m.
American Airlines Flight 77 crashed into the Pentagon at 9:37 a.m. Portions of the building collapsed at 10:10 a.m.
United Airlines Flight 93 never made it to its target, the White House. At 9:23 a.m., after the World Trade Tower crash, dispatcher Ed Ballinger texted all flights he was following, including Flight 93. He said, "Beware any cockpit intrusion two a/c hit World Trade Center." Five minutes later, the terrorists killed the pilots and took control of the plane.
By that time, at least 10 of the passengers had talked to loved ones via cell phone. They heard about the World Trade Tower attacks and figured out their likely fate. At 9:57 a.m., the brave passengers attacked the terrorists. Flight 93 crashed into a field in Shanksville, Pennsylvania at 10:03 a.m., killing all 40 passengers and crew members aboard, as well as the four hijackers.
The Federal Aviation Administration shut down all New York City area airports at 9:17 a.m.President Bush announced the terrorist attack at 9:30 a.m. Ten minutes later, the FAA shut down all U.S. airports for the first time in history.
Death Toll
The death toll included 2,606 people at the World Trade Center, 125 at the Pentagon, and 246 on the four planes.
Economic Impact
The stock market closed for four trading days after the attacks, the first time since the Great Depression
The Federal Reserve dropped the fed funds rate half a point to 3.0%.The stock market reopened on September 17, 2001. The Dow promptly fell 7.13%, closing at 8,920.70. The 684.81-point loss was the Dow's worst one-day drop at that time. Stock prices recovered that loss by October.
Oil prices fell from $23.77 a barrel in August 2001 to $15.95 in December
The airline industry lost $5 billion from the attacks.The four-day shutdown cost $1.4 billion alone.Passengers were afraid of flying for at least a year. As a result, 1,000 planes were parked during that time, and thousands of workers were furloughed. On September 22, Bush signed into law $15 billion in federal loans.
The 9/11 attacks worsened the 2001 recession, which had begun in March 2001.The economy had contracted 1.1% in the first quarter but bounced up 2.1% in the second be The attacks made the economy contract 1.7% in the third quarter, extending the recession. Growth returned to 1.1% in the fourth quarter.
Recession: Y2K Scare and 9/11 Attack
Based on the belief that their computers would stop working when the year 2000 arrived, many companies and individuals bought new ones with software that was supposed to be Y2K compliant.
The scare led to an economic boom that was short-lived. Computer and software sales declined, since they were all bought in advance of January 2000. Subsequently, the stock market dropped in March 2000, and as stock prices declined, dot-com companies went bankrupt.The circumstances were exacerbated when the Federal Reserve raised the fed funds rate numerous times in efforts to stop the economy from overheating.
The 9/11 attack worsened the downturn. The markets closed for several days after the attacks, and the New York Stock Exchange did not reopen until September 17, 2001.That day, the Dow Jones Industrial Average (DJIA) had its largest one-day drop, falling 684.81 points or -7.1%.
The 9/11 Recession & Y2K Scare lasts from March 2001 - November 2001