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Guest Post: Hurricanes Do Not Have A 'Silver Lining'

Tyler Durden's picture





 

Submitted by Pater Tenebrarum of Acting-Man blog,

It didn't take long for mainstream economists to provide us with some inane commentary regarding the latest natural catastrophe. Allegedly, the massive destruction of wealth hurricane 'Sandy' will leave behind has a 'silver lining'.

The WSJ for instance reports (under the heading 'Hurricane Sandy could boost GDP growth'):

It’s hard to assess the economic damage of a storm that hasn’t yet passed. But some economists predicted Monday that, barring a catastrophic event, Hurricane Sandy would slow growth in the short term but have a negligible impact on, and possibly even boost, fourth-quarter growth.

 

“While natural disasters take a large initial toll on the economy, they usually generate some extra activity afterward,Moody’s Analytics economist Ryan Sweet wrote on the firm’s website Monday. “We expect any lost output this week from Hurricane Sandy will be made up in subsequent weeks, minimizing the effect on fourth quarter GDP.”

 

Jason Schenker of Texas-based Prestige Economics said hurricanes like Sandy usually lead to a bump in economic growth, mainly through stronger retail sales. In a note to clients, he cited to “the last minute run to hardware stores and supermarkets, or after-the-storm replacement of furniture, windows, cars, and other damaged durable and non-durable goods.” He said that, barring major damage to infrastructure in the mid-Atlantic region, Sandy will likely help retail sales in November.

In an earlier version of this report, the WSJ at least still deigned to mention that:

„The hurricane will, of course, cause a loss of production and wages, the size depending on the magnitude of the damage and the length of the disruption. The region in Sandy’s path along the East Coast has a GDP of about $10 billion a day.“

(emphasis added)

They make it sound as if nothing especially pernicious had happened. Let us leave aside that it may perhaps have been appropriate to say a word or two about the loss of life the hurricane has caused. Even so, if anything, this would be yet another good opportunity to question the value of GDP statistics.

The loss of wealth the hurricane has inflicted is very real; the wealth destroyed by it is most definitely gone. GDP does however not measure the existing stock of wealth and the impact the hurricane has on it. It measures the annual flow of wealth creation (although we must stress that the statistic nonetheless remains deeply flawed and can definitely not be accepted at face value), but it tells us nothing about existing wealth or its destruction. Maybe they should at least have mentioned that?

Certainly companies will try to make up for lost production and the dwellings and infrastructure that have been damaged by the hurricane will be rebuilt. This rebuilding activity is then recorded as an 'addition to GDP'.

Suppose though there had been no hurricane. Then all the resources that must now be expended on rebuilding what it has destroyed would be available for other uses. In that event, it would indeed be possible to create additional wealth. The hurricane has rendered us poorer by precisely what it has destroyed – the rebuilding activity is merely undertaken to catch up to the status quo ante.

The statement about the 'bump in retail sales' that will 'boost GDP' is just as absurd. If people engage in panic buying ahead of the hurricane, then this represents demand for consumer goods that has been pulled forward; even in terms of GDP statistics this seems hardly relevant, as future consumer demand will be commensurately lower.

 

The Keynesian Fallacy at the Core

Why is it that modern-day economists always seem to insist that the destruction natural catastrophes and wars bring about is really a 'good thing' economically? We believe the main reason behind this stance is the unquestioned acceptance of one of Keynes' great fallacies: namely the idea that all economic activity – even unproductive activity – is somehow 'good'. Keynes for instance famously advised that governments could battle recessions by paying people to dig ditches and then fill them up again. He also published variants of this train of thought, as e.g. in his references to the joys and advantages of pyramid building. As Paul Cantor remarks on this:

„Lord Keynes's daffy paean to the power of pyramids has been something of an embarrassment to his followers, but, far from being uncharacteristic of his thought, this passage actually goes right to its heart. It is after all just another way of Keynes saying, "I never met a government expenditure I didn't like."

(emphasis added)

Naturally, if it were really true that we could create economic progress by breaking windows or digging ditches (we will admit that pyramids at least render what one might term 'monument services', even if the expense seems hardly justified by this), then the government should pay half the population for digging ditches and hire the other half to wreak wanton destruction. Some time later, everyone could be employed in rebuilding what has been destroyed. We'd have no unemployment and we'd have 'GDP growth', but would this make any sense?

It is the very same with the prosperity allegedly provided by war  (readers may recall that e.g. Paul Krugman was recently pining for a fake war with alien invaders, so as to spur deficit spending).

As Ludwig von Mises said about so-called 'war prosperity':

„War prosperity is like the prosperity that an earthquake or a plague brings. The earthquake means good business for construction workers, and cholera improves the business of physicians, pharmacists, and undertakers; but no one has for that reason yet sought to celebrate earthquakes and cholera as stimulators of the productive forces in the general interest.“

Evidently Mises didn't have the opportunity to encounter the mainstream economists infesting the world in the 21st century. As we have seen after the tsunami that devastated Japan, they do in fact celebrate earthquakes as 'stimulators of the productive forces in the general interest' – the financial press almost immediately reported on economists gushing about the 'boost to Japan's GDP' the tsunami would bring about.

They forgot to mention that 'GDP' is obviously not a useful measure of wealth and welfare (nonetheless, the usual suspects were happy; Paul Krugman seems to imply that Japan could really use another tsunami, given how nicely 'GDP' has grown shortly after the last one). One suspects that these economists would probably see the 'silver lining' in a cholera epidemic too.

 

Hurricane Trivia:

This week was the first time since 1888 that the New York Stock Exchange was closed two days in a row due to really bad weather.

 


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Wed, 10/31/2012 - 14:45 | Link to Comment lolmao500
lolmao500's picture

Too bad the hurricane didn't drown all those scumbag economists cheering for disaster. You fucking scumbags with no conscience! Real people died!! PEOPLE WITH FAMILIES AND FEELINGS. You don't know what that is eh you sick fucks? But eh, people dying is worth it if some imaginary number can be 0.1% higher right?? Sick bastards... no better than the Mayans high priests cutting heads off to their Gods.

Wed, 10/31/2012 - 14:52 | Link to Comment redpill
redpill's picture

Ixnay on the eheadingsbay, you'll just give them ideas.

Wed, 10/31/2012 - 14:53 | Link to Comment knukles
knukles's picture

The storms have silver iodine linings...

Wed, 10/31/2012 - 15:41 | Link to Comment Manthong
Manthong's picture

Hypothecation means never having to say it’s gone.

Wed, 10/31/2012 - 18:30 | Link to Comment max2205
max2205's picture

One day the stupid govt will realize that there is a whole lot more to governing than the fucking stock market. Fuck!

Wed, 10/31/2012 - 14:51 | Link to Comment Gully Foyle
Gully Foyle's picture

Fuck me, now we have to deal with various storm metaphors and analagies.

Jesus christ I fucking hope an asteroid hits this planet so we can get some new interesting comparisions going.

Wed, 10/31/2012 - 14:58 | Link to Comment Uncle Remus
Uncle Remus's picture

Some serious serf out there...

Wed, 10/31/2012 - 14:59 | Link to Comment knukles
knukles's picture

Ya know Uncle, if there's ever a revolution I'll betcha some crazy fuck runs around yelling "Serf's Up".

Wed, 10/31/2012 - 15:01 | Link to Comment Uncle Remus
Uncle Remus's picture

No doubt. I am looking forward to the potential in "hang ten" tho.

Wed, 10/31/2012 - 15:08 | Link to Comment redpill
redpill's picture

And hopefully lots of wipe outs.

Wed, 10/31/2012 - 15:27 | Link to Comment Uncle Remus
Wed, 10/31/2012 - 16:47 | Link to Comment Decay is Constant
Decay is Constant's picture

Better yet!  Snake Plisskin.

http://www.youtube.com/watch?v=2_E9ebt1a_s

Wed, 10/31/2012 - 15:33 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

I am looking forward to the potential in "hang ten" tho.

Hang ten......at a time. Cleaning up the planet with hemp rope - the reusable, renewable resource.

Wed, 10/31/2012 - 15:39 | Link to Comment Uncle Remus
Uncle Remus's picture

"Smoke that and it'll really get you out there!"

Wed, 10/31/2012 - 16:12 | Link to Comment Fíréan
Fíréan's picture

Wars are started for the so called economic benefits of both the war supply servicing ( destructiive element) and for the rebuilding there after ( reconstruction),  yet not on home soil ( for the most part). And for the financial benefits of loaning to all parties concerned etc., etc..

 

edit: didn't someone recently destroy the infra structure of Iraq so that their construction companies could financially benefit from over charging contracts to, so called, rebuild ? Somewhere along the same mentality, no ?

Wed, 10/31/2012 - 14:46 | Link to Comment WillyGroper
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Anyone care to wager whether or not the election will be held?

Wed, 10/31/2012 - 14:50 | Link to Comment malikai
malikai's picture

There's an election going on?

Wed, 10/31/2012 - 15:00 | Link to Comment Uncle Remus
Uncle Remus's picture

Why do you think gas prices were down before Sandy hit? Sheesh.

Wed, 10/31/2012 - 15:08 | Link to Comment The Gooch
The Gooch's picture

Did a vehicle come from somewhere out there?

Wed, 10/31/2012 - 15:32 | Link to Comment Uncle Remus
Uncle Remus's picture

Chester's thing...

Wed, 10/31/2012 - 14:51 | Link to Comment Gully Foyle
Gully Foyle's picture

WillyGroper

It has been, Romney won.

Everything else is theater for the unwashed masses.

Wed, 10/31/2012 - 15:10 | Link to Comment the grateful un...
the grateful unemployed's picture

Obama being in most ways the third term of Geo W Bush, I expect him to lose the popular vote, (circa 2000) but win through the electoral college. During their 4th term, I expect them to  start a war with a terrorist nation (Iran would do), which will help return them to power for a 5th term. Romney, like McCain, doesn't know who he's messing with. Sometime around the 6th term another Bush will run, perhaps as Democrat just to shove it up everyones ass.

Wed, 10/31/2012 - 16:09 | Link to Comment dark pools of soros
dark pools of soros's picture

Did you pick up Karl Rove's napkin notes while cleaning his table?

Wed, 10/31/2012 - 16:35 | Link to Comment dugorama
dugorama's picture

Jenna won't be 35 until the 2026 election

Wed, 10/31/2012 - 15:04 | Link to Comment mayhem_korner
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How many electoral votes are in the affected states?  Moreover, how many of those were contested?  I think it would be quite entertaining if Romney grabbed the election on the basis of pulling an upset in one of the Sandy states - say, Connecticut.  It'd be four more years before they sorted it all out.

Wed, 10/31/2012 - 15:35 | Link to Comment krispkritter
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The best of Michael Moore:

http://www.youtube.com/watch?v=f17fWth3YgA&feature=g-hist

"... Romney to oust Barack Obama, we will burn this motherfucker down..." 

 

Wed, 10/31/2012 - 16:10 | Link to Comment blunderdog
blunderdog's picture

I don't see why not.  It's not like they need the voters to show up.  Elections in this country take care of themselves.

Maybe they'll have provisional/absentee options set up for a few states. 

Big whoop.

Wed, 10/31/2012 - 14:47 | Link to Comment ejmoosa
ejmoosa's picture

...and divorces are also good for the economy.  It boosts housing and furniture sales. 

Wed, 10/31/2012 - 15:11 | Link to Comment Zero Govt
Zero Govt's picture

Every disaster is good for the economy

Keynes and all the other (Govt?) crones that trumpet this bullcrap are trying to pervert the truth because we all know Govt is the biggest disaster in society.

if they can make disaster look benefical, because Govt cannot achieve success, then Govt justifies its ever failing always disasterous existence (see New York a total shambles from its epic error on sea defences) 

Wed, 10/31/2012 - 15:20 | Link to Comment Rainman
Rainman's picture

" The minute you think you've got it made, disaster is just around the corner "

                                                    Joe Paterno

Wed, 10/31/2012 - 15:33 | Link to Comment El Viejo
El Viejo's picture

It's only good in a non competitive economic environment(without Europe, China, Japan, Korea etc) and when there is no govt disaster funding. Otherwise it is just an illusion like telling your wife you got a promotion with a slight raise, but you have to move to the highest cost of living area on the planet.

Or an increase in the GDP, but then finding out that the crime rate and healthcare costs have shot up dramatically.

Wed, 10/31/2012 - 16:10 | Link to Comment ejmoosa
ejmoosa's picture

That means that the disaster known as the Obama years will also one day be good for the economy.  I cannot wait. 

Should I lean forward even more now, or will someone give me a shove?

Wed, 10/31/2012 - 16:17 | Link to Comment blunderdog
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I realize this isn't exactly "news," but one major problem we have is the idea that things CAN BE "good" or "bad" for the economy.  I suspect most people know this, but the way everyone walks around talking nonsense to each other, it's hard to tell sometimes.

The economy isn't a thing.  It doesn't have an agenda or a set of values.  The idea that some things are "good" for the economy and some are "bad" for the economy is a category mistake.

It's like saying your checking account balance is "bad for" the number 1279.  Meaningless.

Wed, 10/31/2012 - 14:50 | Link to Comment ptoemmes
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The Broken Window Fallacy: http://www.youtube.com/watch?v=gG3AKoL0vEs

Wed, 10/31/2012 - 14:53 | Link to Comment Gully Foyle
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ptoemmes

One of Hitchcocks better films.

Wed, 10/31/2012 - 14:57 | Link to Comment knukles
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Talking about good films, The Taming of the Shrew (Burton & Taylor) is on tonight and The Bride of Frankenstein on Thursday.

Beats the shit outa Dancing with Insane Cripples

Wed, 10/31/2012 - 14:58 | Link to Comment the grateful un...
the grateful unemployed's picture

i can hear Cramer telling us to buy insurance companies, because they more than compensate their losses by raising rates. there's a point there that insurance is a necessity, and not an option when you buy on credit, (which is why insurance companies and banks are not strange bedfellows) however if you raise rates, that puts the hurt on the borrower as certainly as the adjustment in an ARM.  but like all good Socialists the insurance companies SPREAD the cost increases around to people are not at risk. (see Healthcare Insurance Fraud 101) there are no more "moral" decisions for the investor to make, including the problem of passive funds, unless you keep them in your mattress. the mattress was the best investment of the 1930s, but no investment advisor will ever say that. Cash is a lot better than it used to be, in terms of physical security, guards against counterfeiting. I can see through a dollar bill, a bar of gold is slightly more opaque.

Wed, 10/31/2012 - 15:14 | Link to Comment Being Free
Being Free's picture

Cash is a lot better than it used to be, in terms of physical security, guards against counterfeiting.

except of course the legalized counterfiting by the Fed and the gov. that're stealing from any cash savers at an alarming rate.

Wed, 10/31/2012 - 15:21 | Link to Comment disabledvet
disabledvet's picture

Actually you want to buy the banks not the insurers. I think Hudson city just got bought...but sure...smaller one's that don't do the "crazy shit." obviously State and Local Governments will have to issues billions in debt to cover the economic loss...ideally the Governors of New York, New Jersey and Connecticut will work together to negotiate some type of "understanding" with Big Insurance so us the hapless citizenry don't have to wait ten years for the checks to be cut. Of course we all know how that goes...

Wed, 10/31/2012 - 15:00 | Link to Comment mayhem_korner
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“We expect any lost output this week from Hurricane Sandy will be made up in subsequent weeks, minimizing the effect on fourth quarter GDP.”

 

Dood has had one-too-many servings of Fukishima earless rabbit, methinks.

Reparations come from one of two sources - savings or borrowings.  Either one of those is a wealth drain. Period.  To contort that reality to anything else is (yet another) indictment on the efficacy of the higher education system that produces these bozos.

Wed, 10/31/2012 - 15:01 | Link to Comment CunnyFunt
CunnyFunt's picture

"... Mises didn't have the opportunity to encounter the mainstream economists ..."

Mises didn't even dignify Keynesians with the appelation "economists".

Wed, 10/31/2012 - 15:02 | Link to Comment bnbdnb
bnbdnb's picture

Yes, it always good that many people suffer so that other people get new jobs.

Wed, 10/31/2012 - 15:03 | Link to Comment rosethorn
rosethorn's picture

So all the damaged assets need to be marked to reduced values; that should be recorded as a writeoff in the national accounts.  Perhaps a hit to GDP?

Wed, 10/31/2012 - 15:16 | Link to Comment knukles
knukles's picture

NOPE

Here's what happens.  All the broken windows do not get accounted for in any governmental or economic statistic.  There is no formal chart of accounts for National Net Worth, as it were.

What happens is that we as a people are poorer due to the losses. 
No question bout that.
But no negative entry in GDP which is the net change in production and value added in the economy relative to the preceding period.

Hence, if the broken window is replaced, it does count toward additional GDP that otherwise would not have been there had the window not been broken.  That's where the fallacy of the broken window comes from

The GDP figure does go higher but the nation is no richer (and indeed poorer) due to the loss of the property in the disaster.

It is what it is, that's how the accounting works, whether it makes any sense or not
Hey, I don't make the rules

Just sayin'

Wed, 10/31/2012 - 15:39 | Link to Comment rosethorn
rosethorn's picture

Thanks for the reminder.  

Wed, 10/31/2012 - 15:46 | Link to Comment csmith
csmith's picture

"...no negative entry in GDP which is the net change in production and value added in the economy relative to the preceding period."

 

The equivalent of not marking to market for a bank or investment firm.

How many businesses (particularly those without P&C coverage) in the northeast are now insolvent? Those that own the real property on which they operate are fine because they can borrow against it to rebuild. Others, not so much.

Wed, 10/31/2012 - 15:08 | Link to Comment Henry Chinaski
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I just saw a photo of Obama and Christie touring the damage.  They could do a great Laurel and Hardy. 

Wed, 10/31/2012 - 15:13 | Link to Comment Zero Govt
Zero Govt's picture

did he tour Solyndra as well after that disaster sunk?

Wed, 10/31/2012 - 15:06 | Link to Comment Jason T
Jason T's picture

NJ: 
"Tempers flared Wednesday morning outside City Hall as some residents complained the city was slow to get food and other supplies out to the stranded." 

there is something wrong with this 

Wed, 10/31/2012 - 15:10 | Link to Comment knukles
knukles's picture

Like the absence of people rioting, looting and torching shit?

Wed, 10/31/2012 - 15:30 | Link to Comment El Viejo
El Viejo's picture

What, didn't they get the memo about the fresh fish in the subway tunnels? Sheez

Wed, 10/31/2012 - 15:44 | Link to Comment Uncle Remus
Uncle Remus's picture

Apparently Katrina was not the object lesson it should have been...

Wed, 10/31/2012 - 16:08 | Link to Comment Flatchestynerdette
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I hate to be a debby downer but its only day 2. They start lighting fires  and looting day 3. The Hollywood left comes out and says let them have that 50 inch tv. They've never had one before. By day 4 everyone in the shelters are unhappy and screaming plus those who stayed and are without electricity or food start forming gangs to go after zombies to eat.

Yeah, like Katrina - everyone thinks it should be done overnight by FedEx.

Just wait until the weekend. Those that are below 38th St. will come up to the areas that have stuff and a big old fight will erupt. These people haven't been able to shower or have running water. They'll smell and those above 38th Street will treat them as lepers.

It should be quite a show.

Wed, 10/31/2012 - 15:11 | Link to Comment Common_Cents22
Common_Cents22's picture

Gee, why don't we just bulldoze a few thousand houses in every city!!!!   What kind of idiots say this stuff?    Let's start with bulldozing the home of every person who thinks destruction is stimulus, starting with Pelosi's homes.

Wed, 10/31/2012 - 15:15 | Link to Comment Frank N. Beans
Frank N. Beans's picture

these economists are grasping at straws, just as political henchmen spin a bad story about their candidate into something good. 

this way they stay employed

 

Wed, 10/31/2012 - 15:15 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Kitco says the silver lease rate has a silver linning.......for the banksters..

- 0.60 %

Fuck yous bankers.

Wed, 10/31/2012 - 15:21 | Link to Comment akak
akak's picture

Why does anyone (especially here at ZH) still solicit the shady and corrupt business of Kitco, who use a rabidly anti-gold, fiat-loving, pro-bankster shill as their official spokesman?  There are plenty of other websites at which to obtain the spot prices of the precious metals and other such data.

I categorically refuse to ever click on the website of that damned Kitco ever again.

Wed, 10/31/2012 - 15:33 | Link to Comment CunnyFunt
CunnyFunt's picture

If it weren't for Daniela Cambone, I'd never go to their site.

Wed, 10/31/2012 - 15:44 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

If Kitco the using of you now forever refusing, how then the wisdom and prescience of Jon Gonadler able are you to deriving thusly? Jon Gonadler being with much vigor a figure of lead.

Wed, 10/31/2012 - 15:58 | Link to Comment akak
akak's picture

Daily anti-gold blobbing-uppityness of Canadian US citizen Jon Nadler muchwise the analogous to the metaphorical excretory roadside leavings of US Canadian Kitcoism citizens, whose crapping-on-gold nature is eternal, the mattering thing, the very crustiest bit of a very important pro-establishment something.

Wed, 10/31/2012 - 16:14 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

US citizen Canadianism as personificated of Jon Gonadler do leading now fight muchly the globalistic problem of US 'american' Armageddizenism. Scourge spread judiciously by US 'american' Armageddizens in the muchly will happened. With incidentally spectacular consequences of the entwined veracity Jon Gonadler attempt to delay the inevitable results of it perish fate.

But the fairy taleness of US 'american' Armageddizenism when the panic rate as people, both US citizen 'americans' and US citizen Canadians, stunned and appalling prices sky-high price, crash, who also can not predict.

The eternal nature, although wordings did lacking in adequacy the description thereof, will be in this last scene was very impressive and categorized.

Wed, 10/31/2012 - 19:47 | Link to Comment Dr. Sandi
Dr. Sandi's picture

You crack me up, Shemp.

Wed, 10/31/2012 - 15:21 | Link to Comment Heyoka Bianco
Heyoka Bianco's picture

I'm sure building the Konzentrationslagers and their associated ovens gave a big boost to the German GDP, so why not advocate that? It's "infrastructure", is it not? They could value slave labor based on "wage substitution" and we'd be in a new golden age! Except the people in the camps, of course, but they won't legally exist, so problem solved!

All sports broadcasts will proceed as normal:

http://www.youtube.com/watch?v=2jB2qxsmkUk

Wed, 10/31/2012 - 15:30 | Link to Comment JMT
JMT's picture

This site has certainly milked the whole storm fiasco and made it seem like the world was ending.

The reality of the situation is:
A) As of 3:30pm over 60% of subway service in NYC is operating normally
B) Things are getting back to normal, people are going to work like any other normal day
C) EVERYONE WILL GET COMPENSATED for their losses and I am sure many will take advantage of the situation. The insurance companies are under intense pressure to at least make everyone (and businesses whole)
D) After 9/11 - the economy in the city was great from 2002-2008. Those 'evil Bush tax cuts' certainly helped many people

Wed, 10/31/2012 - 15:30 | Link to Comment JMT
JMT's picture

This site has certainly milked the whole storm fiasco and made it seem like the world was ending.

The reality of the situation is:
A) As of 3:30pm over 60% of subway service in NYC is operating normally
B) Things are getting back to normal, people are going to work like any other normal day
C) EVERYONE WILL GET COMPENSATED for their losses and I am sure many will take advantage of the situation. The insurance companies are under intense pressure to at least make everyone (and businesses whole)
D) After 9/11 - the economy in the city was great from 2002-2008. Those 'evil Bush tax cuts' certainly helped many people

Wed, 10/31/2012 - 15:30 | Link to Comment JMT
JMT's picture

This site has certainly milked the whole storm fiasco and made it seem like the world was ending.

The reality of the situation is:
A) As of 3:30pm over 60% of subway service in NYC is operating normally
B) Things are getting back to normal, people are going to work like any other normal day
C) EVERYONE WILL GET COMPENSATED for their losses and I am sure many will take advantage of the situation. The insurance companies are under intense pressure to at least make everyone (and businesses whole)
D) After 9/11 - the economy in the city was great from 2002-2008. Those 'evil Bush tax cuts' certainly helped many people

Wed, 10/31/2012 - 15:37 | Link to Comment akak
akak's picture

You can say that again.

And Oh look, you did!

And Oh look, you did!

And Oh look, you did!

Wed, 10/31/2012 - 15:41 | Link to Comment krispkritter
krispkritter's picture

Hello, Department of Redunancy Department, Hello?

He's no MDB but he sure is a Major DumBass...

Wed, 10/31/2012 - 15:48 | Link to Comment Uncle Remus
Uncle Remus's picture

Is that you Max? Dude, your shit is messed up man. Repeating a word or two is one thing, but dayum, entire an diatribe? Diatribe?

Heeey - you're not the new "glitch" semaphore are you?

Wed, 10/31/2012 - 16:03 | Link to Comment dscott8186
dscott8186's picture

but, but, but, we are told the 70% of economic activity is consumption spending. Except that all consumption spending is not equal any more than the bridge to nowhere or bike trails will generate NEW economic growth.

Assets (net worth or accumulated wealth), consumption spending and investment are three different animals that liberals frequently confuse deliberately to hide their looting of the country.  

Ripping up a road and rebuilding the exact same size does not stimulate the economy, it only consumes net worth.  The point of rebuilding a perfectly good road or for that matter torching a house for an insurance claim is to take someone else's money and then skim off the transaction, i.e. taxes.  Government revenue is dependent upon an economic transaction, therefore forcing the transaction is always in their (bureaucrats) interest.  However, we are only speaking of the net positive for the greedy political benefactors, the negative is in order to raise the money to pay that insurance claim, the insurance companies have to liquidate their investments (stock and bond positions) to meet their contractual obligations.  But then no one likes the insurance company, so screw them anyways, right?  Wrong, the insurance companies having to meet actuarial stability must raise insurance premiums to cover past loses and future claims, more so in a down economy where said investments are worth less so they must sell more at a loss.  Another economic transaction which the government taxes.  In other words, the premium increase must equal the past loses over a reasonable time of payback. So screw the premium payer, right?  Except that now the zero sum accounting kicks in later where the premium payer now has to cut back somewhere else in spending or saving. 

Which brings us to a corollary of ZH's motto.  Make any time line short enough and you'll always be ahead no matter how much you spend.

Wed, 10/31/2012 - 16:04 | Link to Comment falak pema
falak pema's picture

I don't buy that title; empires and economic models rise and fall. Every human experience teaches us a lesson as do acts of nature. An economic loss, real and all, can open doors to a new paradigm. Just look back in history, its always been that way.

Wed, 10/31/2012 - 19:49 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Yeah, the way the fall of Rome opened doors to a new dark age.

There's always a new experience waiting just beyond the door. Enjoy!

Wed, 10/31/2012 - 16:20 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

The next episode of Jersey Shore will be underwater.

No silver lining, you say?

Wed, 10/31/2012 - 16:38 | Link to Comment Debugas
Debugas's picture

the problem is that GDP is considered to represent economy's well-being where in fact it does not

Wed, 10/31/2012 - 16:47 | Link to Comment Wave-Tech
Wave-Tech's picture

Only "silver" has a SILVER LINING...

Also the feature article in this months "TRIGGERS"

Wed, 10/31/2012 - 18:05 | Link to Comment virgilcaine
virgilcaine's picture

Economists are sheep.. sheep are a herding animal. & They are good at predicting what has already happened. Having to go through 18 Yrs of Education for a Phd requires you to be one.  Looking at external events like Sandy and then running some formulas and then writing about them a month later, then have a Lecture to present findings and award ceremony with cocktail hour.. when the Market has already discounted the event.

Except for a few  like the Scotsman H Hendry and M Faber who have an understanding of History  and  an understanding of Austrian Econ.

Wed, 10/31/2012 - 19:54 | Link to Comment Dr. Sandi
Dr. Sandi's picture

How about exposing the economist sheep to AUSTRALIAN economics. Then we'd get all kinds of useful things from the mainstream economists. Lots of roasts for sure. And those fabulous furry slippers, like the ones I'm wearing right now.

That's Australian Economics at work. Mmmm, try some of this stew!

Wed, 10/31/2012 - 18:15 | Link to Comment Marco
Marco's picture

The problem with the broken window fallacy fallacy is that it doesn't take into account that unemployment destroys human capital, so there are real benefits as well besides just changing the GDP number. Of course there are far better ways to put people to work than destruction, but for whatever reason neither the market nor the government are doing it.

Wed, 10/31/2012 - 18:38 | Link to Comment are we there yet
are we there yet's picture

Exception: If a hurricane sucked up Obama and Geitner it would be kensian distructively productive.

Wed, 10/31/2012 - 19:06 | Link to Comment boh knows
boh knows's picture

Usually it is weather but let it be known CA is heating up for a quake and the signal indicates Sunday through Wednesday so far.

Watch it develop daily here - http://www.haarpstatus.com/status.html

Wed, 10/31/2012 - 22:35 | Link to Comment are we there yet
are we there yet's picture

Forget broken windows, lower manhatan island is 'gonna tip over and sink' if we use use the physics of south carolina senator.

Thu, 11/01/2012 - 10:05 | Link to Comment Ben_Dover_Bernak
Ben_Dover_Bernak's picture

Classic.  The sheeple will always follow -  as CNBC touted this morning the "good" that would flow from the hurricane to the economy (kudos Joe Kernan who wasn't buying it).  This blog is a good exercise in critical thinking.  You look at the extremes of the argument, and you see how flawed it is.  If one hurricane has a silver lining by increasing GDP and retail spending next quarter --> what if we had another one, then another, then another, in perpetuity.  What if the whole world was one big non stop hurricane?  Obviously not good. A modified formula for GDP could be: (Goods and services produced in the period) less (the waste and destroyed goods and services not realized from past periods) less (limited resources utilized).  This last component of limited resources utilized will 1) assign value to limited resource utilization and 2) will account for the value of resources we have used that we ordinarily would not have had to use during the period.  What also needs to be considered is the value of the limited resources utilized.  IF you pull usage in, then you are pulling "more expensive" resources in, and that value must be accounted for.   Breaking down the argument to its core and this is a great example of what a farce the majority of wall street commentary is. It is simple.  

  1. Sound, usable products have been destroyed, eliminating their useful life, thereby eliminating their present value AND de-facto reducing their value at inception.  Therefore GDP in the past was overstated.
  2. The fact that useable "limited" resources were destroyed, and we must "pull-in" resources to "make up", we pull in future GDP just to catch up, but at a price which is less available resources in the future.
  3. The store of resources on Earth has been "pulled in", which will give a boost to GDP"growth, but what they don't do is go back and show that GDP growth in the past was now overstated.
  4. Human capital, which is limited, is "wasted" by having to "redo", and not available to "do" something else.

Thu, 11/01/2012 - 16:07 | Link to Comment The Laughing Man
The Laughing Man's picture

"Naturally, if it were really true that we could create economic progress by breaking windows or digging ditches (we will admit that pyramids at least render what one might term 'monument services', even if the expense seems hardly justified by this), then the government should pay half the population for digging ditches and hire the other half to wreak wanton destruction."

Suddenly I'm hearing the voice of Gary Oldman from The Fifth Element.

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