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Saturday, August 27, 2011

The straw that breaks the camel’s back?



Hurricane Irene is working its way up the coast. The first concern is for people. After that, it’s worth considering all the economic damage that such a storm can do.

The storm is working its way though some high priced real estate. Crops that are just about ready for harvest are not going to make it to market. Many vehicles: cars, trucks, boats and planes will be lost. Infrastructure: roads, bridges, power, phone, Internet, water, and waste treatment will be damaged. Commerce will be disrupted -everything from tourism, to day to day business.

What will all this do to an already fragile economy? The insurance industry is pretty stretched. This storm might push one or more major companies over the edge. The insurance industry will be stressed -perhaps to the point of breaking? Food is already expensive and now supplies will tighten. Where will the money to effect repairs come from?

One branch of economics believes a storm like this is good for the economy in the long run. The economic activity involved in rebuilding provides a boost. Funds just sitting around not doing much are put to work. To me, that theory is only valid if there are big piles of wealth not doing anything.

I don’t think thinks those funds exist in any great amount. The government can come in and spread cash around, but only because they can get the Fed to print more. However, the government can’t create any real wealth that way. All they can do at that point is create inflation.
There is every chance that Irene could be the straw that breaks the back of the economy.

-Sixbears

7 comments:

  1. The Hell you say,why this could be almost as good as the alien invasion/war. Blasphemy Govt doesn't create wealth. Sixbears this could do it! God Bless everyone in the path of it!

    China
    III

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  2. A very good question indeed. Guess we'll just need to wait and see what comes out of the wash. BTW, have you linked over at my blog, hope you don't mind.

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  3. Should open some eyes in the NYC area, that's for sure!

    I wish good fortune for all in the path! It's gonna get ugly for some!

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  4. China: are you enjoying yourself? :)
    Stephan: You are linked.
    Hermit: NYC is the interesting test.

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  5. Two days ago I took inventory and made my September shopping list. Sorely wish I'd done it two weeks ago and shopped the next day. Any excuse to raise prices, either real or imagined, will soon find its way to the local stores.

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  6. Treesong: Yep, they'll use any excuse to raise prices. Did a small bit of shopping a couple days ago and the stores were already going nuts. People were buying a huge amount of fresh meat. Hope their freezers keep running.

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  7. Unlike some folks I don't subscribe to the "Broken Window" Theory of economics. Unfortunately those folks seem to be in power at the moment seem to believe that theory. I don't want to replace a broken window. I'd much rather instal a small solar set up. GREEN SHOOTs baby! Most of our politicians are economic idiots. Six bears is pretty green off the grid power wise. He adopted early and gives info for us to go off grid as well. It was about being independent and cheap. If I'm wrong, correct me SixBears.
    Now we are getting rain barrels, getting cheap on all utilities and the PTBs must charge us more for conserving and going green! How dare we serfs do what the Lords of the Manor demand we do, and cut into profits of the monopolies that utilities/cities have always had.
    The game is always the same.... Follow the money.

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