by Gary Alexander
August 18, 2026
In this fourth of a series of columns tied to recent market history, I want to focus on those 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. This 9/11 attack on America was the ultimate surprise event of recent decades. In this column, however, 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!
A Tale of Two Terms: From Strong Surpluses to Massive Deficits
July 2026 delivered a $431 billion monthly deficit, with the federal government taking in about $1,000 per person in tax revenues ($334 billion) but spending about $2,300 per person. Ouch! This reflects chronic runaway federal deficits, while neither political party seems seriously (or even slightly) concerned about the explosive rise in military and social spending, plus the higher costs of servicing our debt. (The 10-year bond yield was 3.95% the day before the U.S. bombed Iran. That rate was 4.74% on July 31).
The CBO projects the FY 2026 deficit will be $2.1 trillion. After the CBO projected we would wipe out all debt by 2011, that same CBO now sees a $2.1 trillion deficit (and $40 trillion debt) by next month.
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, total 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.” (For more details, see Peter Bergen’s book, “The Longest War,” written in 2011, when the war in Afghanistan was only half over, with the bulk of American deaths coming during President Obama’s first term, 2009 to 2012.) 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 Quantitative Easing (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 Fed Funds rate at a microscopic 0.0% to 0.25% for seven-years.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
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% inflation, 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.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
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 a massive new set of regulations, first in the American Patriot Act, then in the financial handcuffs of the Dodd-Frank bill following the Great Recession of 2008. Shortly after 9/11, a British traveler named Richard Reid placed a bomb in his high-top shoes and tried to detonate it high above the Atlantic, on board American Flight 63 from Paris to Miami, on December 22, 2001. Passengers smelled the smoke of his fuse and managed to subdue him. Ever since, billions of shoes have been surrendered and placed under X-rays, due to Reid.
I won’t get into all the obvious (and some hidden) flaws of the Patriot Act, but in a light-hearted moment, I nominated Richard Reid for Time Magazine’s “Person of the Year,” since he neatly fit the description Time gave us, as “the person (or people) who wielded the most influence in the previous 12 months.” Since 2002, just like the generals who fight “the last war,” Americans are now subject to full body scans and shoe inspections to prevent the recurrence of an act foiled by alert passengers nearly 25-years ago.
The same is true of the Dodd-Frank banking restrictions. Those onerous regulations 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, my 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! *
*“I’ll never forget walking down one of the aisles of the grocery store and seeing powdered milk; just add water and you get milk. Right next to it was powdered orange juice; just add water and you get orange juice. Then I saw baby powder, and I thought to myself, ‘What a country!’”–Yakov Smirnoff.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Inflation Remains Tame, for Now
Income Mail by Bryan Perry
Probing the Complexities of Domestic Energy Policy
Growth Mail by Gary Alexander
Five Big Financial Surprises in the Last 25-Years
Global Mail by Ivan Martchev
The Global Bond Boomerang Effect
Sector Spotlight by Jason Bodner
Seeing the Unseen – A Source of Superior Market Profits
View Full Archive
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20-years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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