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Guest Post: The Tremendous Economic Benefits Of Superstorm Sandy
Submitted by Jim Quinn of The Burning Platform
The Tremendous Economic Benefits Of Superstorm Sandy
The public relations propaganda campaign to convince the ignorant masses that Sandy’s impact on our economy will be minor and ultimately positive, as rebuilding boosts GDP, has begun. I’ve been hearing it on the corporate radio, seeing it on corporate TV and reading it in the corporate newspapers. There are stories in the press that this storm won’t hurt the earnings of insurers. The only way this can be true is if the insurance companies figure out a way to not pay claims. They wouldn’t do that. Would they?
It seems all the stories use unnamed economists as the background experts for their contention that this storm will not cause any big problems for the country. These are the same economists who never see a recession coming, never see a housing collapse, and are indoctrinated in Keynesian claptrap theory.
Bastiat understood the ridiculousness of Kenesianism and the foolishness of believing that a disaster leads to economic growth.
Bastiat’s original parable of the broken window from Ce qu’on voit et ce qu’on ne voit pas (1850):
Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—”It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
Economists and MSM faux journalists don’t want you to think for yourself. If you just consider some basic situations that are happening or will happen to average people throughout the Northeast, you’ll understand that this storm will have a huge NEGATIVE impact on the economy.
- Small stores, restaurants, and thousands of other businesses were shut down for at least two days and some will be closed for a week or more. These businesses employ hundreds of thousands of hourly workers. These businesses earned no revenue, therefore their profits were reduced. The hourly workers did not get paid. Therefore, they have less money to spend for clothing, tech gadgets, food, etc. Both the business and the workers will pay less taxes to the government.
- The reduced revenue at retailers due to being closed and reduced spending by customers will cause them to layoff more workers or in the case of smaller retailers, go out of business altogether.
- The damage caused by the storm will result in insurance companies providing billions in claim payouts. This will reduce their earnings, causing them to layoff employees in order to meet their quarterly earnings expectations. Some smaller insurance companies may go out of business.
- Anyone with a tree down in their yard, damage to their fence, roof damage, etc that is not covered by insurance will have to spend hundreds or thousands of dollars on fixing the damage. This is money they won’t spend on Christmas presents next month.
- Many people do not have the savings to fix the damage to their houses. They will put the costs on their credit cards paying 15% interest to the criminal Wall Street cabal.
- Politicians and government drones will declare we must rebuild and help those in need. They will approve $20 billion of “Federal” disaster relief. But, we all know the $20 billion does not exist. It will be borrowed from future generations. It will just be added to our current $16.3 trillion tab. We will pay interest on this $20 billion FOREVER. The true cost of the $20 billion relief will be $30 billion after decades of accumulated interest. It’s like an ignorant American taking a $20,000 vacation, putting it on their credit card and making the minimum payment for eternity.
You may realize that the only beneficieries of this tragedy will be the issuers of debt. That’s right, the criminal Wall Street banks will earn more interest as desperate Americans have to use credit cards to survive. The destroyed automobiles will be replaced with autos financed by Wall Street. Businesses and homeowners will go further into debt making repairs.
Considering the country has been in recession since June, this disaster will be the final straw that breaks the camel’s back. The powers that be will try to keep the broken economy fallacy going as long as they can, but anyone capable of thinking realizes the country is in the shitter. The mood continues to darken. The storm clouds continue to swirl and a bad moon is rising. But don’t worry, unnamed economists say everything is just fine. Fix that window and boost the economy.
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My heart bleeds for them - imagine the horror of losing your second home and having to spend vacations in hotels - surely this is worse than death itself?
How ultimately pathetic - people died you know - and all you want to write about is the poor rich bastards who have one LESS home.
Considering the country has been in recession since June, this disaster will be the final straw that breaks the camel’s back....
The issue of Sandy will become a bone of contention in the current intellectual tug of war between US deflationists and inflationists.
Get your popcorn out.
I love this summary of voodoo science, albeit from a guy who is not exactly reliable; but lets not nitpick :
A Modern Fairy Tale Of Three Economic Wizards - Business Insider
Great.
Let's stoke some riots, make some molotov cocktails, and create some "stimulus".
Bullish, right?
Good for the economy, right Krugmen, et. al.?
None of those activities are productive - do people on the right have a real difficulty telling the difference between 'productive' and 'destructive'?
Are you suggesting the hurricane was 'organised' - and could have been prevented?
Pray tell - explain how you would avoid the reconstruction after a hurricane - so you don't unfairly stimulate the economy?
what is the over and under on the timeframe its takes krugman to be institutionalized
Im betting 5 years
Krugman is the institution. He is a total nuthouse.
Like government spending, it very much depends on the multiplier. If the multiplier is greater than 1.0 (unlikely, but possible) then any damage covered by insurance is good for the economy. Example, $1000 paid out by insurers reduces the insurer's income by $1000, but it makes $1000 income for the windows guy, and maybe the windows guy then takes his family out for a meal when he wouldn't have before, and the restaurant does a little better so can afford to go on vacation, etc, etc.
Longer term, the problem is that the insurance company will put up premiums to get back that $1000, for example $10 per year rise for 10 customers for 10 years. That works like a general drag on the economy - like taxation - but it is spread over many years.
So insured damage is actually very similar to government spending, in its stimulus effect.
Also worth bearing in mind the insurance co which pays out $1000 in claims, does not lose $1000 income because the claims payouts are re-insured. The reinsurers are mostly either Berkshire Hathaway or giant reinsurers in Europe. The reinsurers in turn will recoup their claims payouts through slightly increased premiums in future years. But the point here is that a percentage of the insured loss willl fall on Europeans...
Seems to me that Government stimulus causes less inflation than private stimulus (through insurance)
This is because - as you say - the private sector wants recompensating for the outlay AND a profit on top. The Government requires no such profit.
.....and yet the claim that private sector is better in these situations?
Don't people think anymore?
madness driven by ignorance it is.
are you factoring in the inefficiency & redundancy costs built in to government-run projects?
Do you factor them in for private enterprise?
...or are you just another unwitting shareholder?
I work in the private sector - in banking - in IT. I witnessed $8 MILLION blown on one badly planned and 'dooomed to fail' project - and the cost was just swept under the carpet.
In public life this would be exposed and the people held accountable - in the private sector the shareholders pay (with reduced value) and if they are consumers - they pay twice!
Everyone kept their jobs and the bank carried on.
There is an impression that the Government is less efficient than the private sector - which idoes not seem to have any evidence to support it.
In the UK many public inductries are now private - and the consumer is being hammered by inefficiencies of the private sector. Least of all the debt managemnet which is now out of control.
The Government can borrow at less than 1% - companies cannot. Pray tell me how this is more efficient when you purchase goods which need to incorporate the increased funding costs?
...and did I mention the average salary of a CEO is far greater than his public equivalent - who do you think pays for that?
I owuld also point out that the place where Government stimulus often fails is because it's usually a large pot of money dumped on the problem.
This leads to massive corporations using their (apparently under free market impossible) monopoly power to divert all the stimulus money into their coffers - as the banks have done.
This is also because they can employ the economies of scale - which small scale firms cannot effectively.
The only problem with Government spending is distribution - but we know this can be fixed - we also know the private sector has the same problem - and it doesn't seem solveable - or they would have bloody solved it!
Best solution for Government is a $500 handout to everyone in the disaster area - no matter how badly they were affected.
Those who were not badly affected will still spend the money - and the spread would be far more even than tradictional stimulus methods.
When Keynes advocated Government stimulus - he is only advocating the distribution of capital which would have been distributed anyway. The difference being Governments can avoid supporting monopolies - consumers cannot.
This is why the parrots call for less stimulus - they want the capital to go to corporations as they have the belief their aims are shared.
I guess this must be because they don't vote - or they didn't vote for the president - as they have far more sya in who runs the country than who runs a corporation!
Clearly the suthor is new to Keynes as he makes such a big mistake. Keynes talks of 'USEFUL' economic activity - is the author saying that to not repair homes and places damaged by a hurricane is not useful?
You seem to think the Government caused the destruction so it can repair it - which it didn't. Is this the most extreme version of "Government controls everything" that the whackos in the T-party go in for?
I address your points
1) Yes shops were closed and they lost business - but do you think that business 'evapourated' because the shop was shut? Do you think people stop eating because the local store is closed? - or do they actually level off the demand through increased purchases when the shop re-opens? The ONLY things which never get bought are trivialities - are the supply siders so obvious now they demand people buy uneccessary things to keep the economy going? - a bit like the mis-unterpretation of keynes - no?
2) If a business has to lay off staff or close because it's shut for 2 days - then i would argue it wasn't a business in the first place. Did you forget a business needs demand - or do you noow expect the customers to buy - even if they don't need?
3) Fallen trees will cost money to replace - so what is the difference to the economy if the money goes to a landscape gardener or Toys'R'Us - to the economy it's just the same. This is a pathetic reasoning for hurricanes costing the economy - seriously have let yourselves down here ZH.
4) People don't have the money to fix their properties - and the danger is they will use their credit cards and support the banks - so what the fuck did you think they were going to buy christmas presents with????
What an idiotic statement from the contributor
5) finally we have the debt fearmonger coming out. So are you saying that the best thing to do after a hurricane is let people die? We should not borrow from ourselves to survive - instead we should pay homage to ursury and honour our debts? What were you saying about the banks earlier? - and yet here you are advocating repaying debt before saving people - contradictory much?
This article is the most foolish and incorrect I have seen on ZH yet. The market stuff is great - but steer clear of the economics if you don't understand the basics.
My suggestions for Jim Quinn are:-
a) Read about economics
b) stick to what you know
c) Don't repeat what other people say without considering it first
d) Don't confuse the already confused people of America with your inconsistent and inaccurate rubbish.
ZH will continue to go downhill if you write articelt like this which only attract economic dimwits and t-party teeth gnashers.
Yeah - you can mark me down all you like - it's now a 'poll' for ignorance on ZH.
I see no challenge to the logic - could it be that when the dimwits of America hear the truth they don't like - they simply shout and bawl and drown it out?
Please read Henry Hazlitt, "Economics in One Lesson." It will clear up all the misunderstandings.
Beent here - seen it - read it. It contains nothing of use and nothing revealing.
According to Hazlit - the people who are in danger in New York should be left to fend for themselves - as the austrian school demonstrate their lack of compassion by accepting everything as 'neccessary' - when it clearly isn't.
I also don't hold much weight with people whose "understanding of economics was further refined by frequent discussions with former Harvard economics professor Benjamin Anderson who was then working for Chase National Bank in Manhattan"
The people who want private citizens to take on debt - are also the ones who hold the view that private citizens are better placed to borrow than governments?
Once again - the right cannot defend their position - they can merely refer you to 'another source'.
This tactic has been seen many times before and it indicates a lack of understanding of the problem.
...besides - this was an article about Keynes and the apparent benefit of a stimulus caused by a hurricane - but rather than actually explain why you haven't misunderstood keynes (which you have) - you would rather point to a different source - which only generally critiques Keynes and is not specifically relevant to this instance.
Maybe i shoudl suggest you stop believing in Capitlism and read Das Kapital - where you might finally clear up your misundersating and flawed faith in capitalism.
Are you trying to be a complete dumbass or is this merely unintentional on your part? Most of us see the flaws in crony capitalism, which is what our economy is today. Rather, we advocate for true free markets and real, sound money, driven by genuine demand and supplied by the best firm to do the job, not the firm whose sister's husband's third cousin once removed's brother-in-law knows which politician.
Oh, and get your talking points straight. This blog isn't full of right-wingers, as you suggest. We see through the right-wing agenda just as easily as we see through the left-wing agenda.
it is you who demonstrates such unachievable ignorance.
1) you had the free market - what happened to it? Ah ha - it got regulated because the consumers DIED through poor regulation. Therefore Free markets can only exist in theory - not in practive. Even Adam smith talked of the 'invisible hand' - he doidn't know what it was - but it certainly affected the 'free' market. The idea that this "isn't capitalism" is another oft-repeated line of nonsense. If you had read Marx then you would know that 'this' is THE INEVITABLE RESULT OF CAPTIALISM. I knew that - so why didn't you? You can try to 'go back' as much as you like - you wil end up back here - it's been DEMONSTRATED through experience and predicted through reason.
2) The economic views on here are mainly libertarian - which is right wing. Hell someone just suggested I read Henry Hazlitt - you can't get much more right wing than that! Maybe you are reflecting how far right America has moved if you think ZH is 'balanced'
You should have spotted that once ZH focused on a 'simple concept' like "Gold is money" then it was bound to attract the dimwitted T-party cheerleaders who think that demanding a return to the gold standard is a 'good thing' and that removing government stimuls (which they receive most benefit from) will be in their interests.
LOL!
Still hopelessly trapped in the false left-right paradigm, I see.
Keep flailing, Marxist --- maybe one day you will actually fight your way out of your pseudo-intellectual paper bag.
Congratulations - we have at least 4 economic ignoramuses on here today - can we get more?
remember to vote for Romney next week - you clearly have an affinity with his stupidity.
I see you've been a member here for over a year, so how is it you don't know that many of us think Romney isn't worth a flaming bag of shit?
Still writing in Ron Paul...and writing appropriate anagrams next to the names of Obama and Romney.
If Ron Paul misunderstands Keynes as badly as this author does - then it won't matter who you vote for.
lets remember - Ron Paul would let new Yorkers DIE if they found themselves without 'insurance' - even though they have contriibuted to the society that exists today - they are owed nothing by their fellow humans?
http://www.youtube.com/watch?v=PepQF7G-It0
I'd rather have a president who cared about his people than one who is happy to see them die because of some half baked loyalty to 'free will' - which capitalism and the imbalance of wealth it's created has already defined (so it's not free at all)
I'd also be wary of voting for a candidate who talks 'theory' like it's reflective of life - mainly with the bizzarre idea that the world could return to the Gold standard.
FIAT wil have to collapse before the Gold standard returns - it cannot go back because the turmoil would begin WWIII and Ron Paul hasn't considered that.
"they are owed nothing by their fellow humans?"
Ahh, now I see. Which "ist" are you, a socialist or a communist?
If those people chose to live on an island, or right on the coast, or right next to a flood-prone creek, which has been hit by hurricanes or floods in the past, then they made a ridiculously stupid choice for which I shouldn't have to pay. I didn't hold a gun to their heads and make them buy beachfront property in Jersey. I didn't twist their arms behind their backs and force them to rent an apartment in lower Manhattan. I didn't threaten the lives of their firstborns if they didn't buy land that is lower than sea level. So why should I bear the cost of their poor choices?
Here's an analogy for you. Let's say I drank a fifth of Jack Daniels, got completely wasted, and ran around my apartment trying to light my farts. When the curtains caught fire, I said, "Big fucking deal, the insurance will pay for it!" and I passed out in a pool of my own vomit. The only trouble is, the fire spread, as fires tend to do, and it burned the apartments and wordly possessions of all my neighbors. I paid the ultimate price...my life. My neighbors only had to pay for my stupidity with the small loss of the roof over their heads and everything they own in the world. Thus, my neighbors were forced to bear the cost of MY poor choices with THEIR shelter, their iGadgets, their grandparent's heirlooms, their CD photo disks full of memories that can't be replaced, etc. Is that fair, just, and right? Oh, hell no. My neighbors in that instance would want to dig up my burnt corpse and piss on it.
In case you didn't get it, here's the breakdown:
Got drunk=bought land on coast
Lit farts=bought land on hurricane-prone coast
Curtains on fire=hurricane roared up hurricane-prone coast
Apartment house burned down=hurricane blew down or flooded flimsily-built homes on hurricane-prone coast
Neighbors lost everything=the taxpayers who will see an added tax burden (and less of their own fiat in their own pockets) when the federal gubmint hands out billions of dollars in aid that they borrow from my great-grandkids, because the federal gubmint certainly doesn't have it now to spend.
Or maybe I should make it even simpler for you...
In the 90's, I had a t-shirt with stick figures drawn on it in the style of a comic book. The first panel said "See Dick Drink" and there was Dick guzzling from a bottle. The second panel said "See Dick Drive" and there was Dick behind the wheel of his stick figure car, hiccuping. The third panel said "See Dick Die" and there was Dick crashing into another stick figure's car. The fourth panel said "Don't be A Dick!" and there was Dick, lying in his stick figure grave with a stick figure tombstone bearing the legend "A. Dick" And there was the other stick figure, lying in his own stick figure grave.
In short, don't be a dick!
If people choose to live in disaster prone areas, they should bear the cost of their decision and rebuild their homes with their own funds and not my tax dollars. If banks choose to lend to subprime borrowers, they should not get a bailout with my tax dollars...they should bear the cost of their decision and go bankrupt. If the bank investors don't do their homework and invest in banks that lend to subprime borrowers, they should bear the cost of their decision and lose their shirts, not suck the teat of my tax dollars. If a man chooses to eat Doritos and pizza and guzzle beer by the case and smoke and sit in front of the idiot box for his entire life and has a heart condition, diabetes, high blood pressure, high cholesterol, and arteries so clogged they have to call in Roto-Rooter, then he should bear the cost of his own decisions and either pay for his astronomically high health care or die, not get free health care my tax dollars paid for.
What is even more fascinating about the right's misunderstanding of Keynes is that they are constructing an argument which will impact them greatly.
Lets suppose the Government did let rip with stimulus - and lets say the consequences were inflationary.
...now wait a minute - isn't the right also arguing we're in so much debt - it needs paying off (suddenly) and the ONLY way of doing this is.....?
...through inflation - and yet the right argue against this????
Are they so seriously delluded they think this debt will be reduced through 'working harder'?
EVERY SINGLE CITIZEN IN THE US WOULD NEED TO WORK FOR NOTHING FOR AN ENTIRE YEAR
Still think this is possible? Still think this is the 'better solution'?
Typical - you call for a solution which nobody would accept or be able to achieve - and insist the ONLY faesible solution (inflation) is madness.
Classic.
Maybe I should make sure my vehicles are inside and burn down my house and stimulate my own micro-economy. Thanks for the idea!
Are you also confused between 'constructive' and 'destructive' activity?
Are you suggesting the hurricane was deliberate?
Please explain how you go from "the rebuild will stimulate the economy" to "in taht case - then if I smash everythingup and rebuild it - then I will be contributing to the economy"?
...and also - ask yourself why Apple makes NEW products when the old ones work perfectly fine?
...and then realise that you are merely swapping 'Government' for 'capitalist' - except you vote for the Government - you do not vote for the capitalist.
...and then stop repeating what others say because you don't htink for yourself and you think they sound clever.
Wow. What leftist horseshit. A president that "cares"? Are you shitting me?
First, the government provides flood insurance, which facilitates people to build in flood prone areas. Many of the homes that were damaged are homes that never should have been built in the first place.
Second, you are correct that this storm was not intentional. However, the money that will be spent, particularly by individuals and private insurance companies, is money that would have been spent somewhere else.So, there is no "net-plus".
Third, any gains as the result of this storm will be temporary. This has the very real potential of sending false market signals which can lead to mal-investments.
Fourth, you can not base an economic strategy on "good-will". The market is based on individual transactions, not how people should feel. You are introducing an *ought* into an *is*, which is a common Marxist fallacy.
Fifth, the US already has a government debt-to-GDP ratio of 105% and an overall debt-to-GDP of about 350%. Think about that for a minute.
What is most interesting is that the author has decided to REMOVE my critique of his nonsense from his OWN weebsite - rather than tackle them.
Like most 'libertarians' - Jim Quinn has only his liberty in mind. When it comes to challenges he is quite happy to impose a regime of enforced silence.
What a fraud.
Ever listen to Rosalind Peterson?
http://www.agriculturedefensecoalition.org/content/california-skywatch
It looks like weather modification goes on everyday in the US. Private companies are free to do whatever they want to our environment. It is no wonder there are unprecedented weather events happening regularly.
Geoengineering is a growing concern. Wall Street will be financing it.
Disasters along with war will be the industry of the US.
Krugman can be understood if put in the proper context.
Krugman equates the "economy" with profits for the Central Bankers. So "stimulating the economy" is pseudospeak for increasing the profits of the overlord bankers.
Thus, any event that causes people to borrow from the banks (broken windows, natural disasters, wars) for items they never needed before the event, results in interest profit for the banks, the only people he is concerned with.
The debt and human suffering on the other side of the equation are not a matter of concern for him. It is a one-sided world view that focuses on profits for a small elite group.
Keynesian thinking is ultimately destructive to FREEDOM. If the baker's window is never broken by the outside agent, then he or she has the CHOICE of spending whatever resources might have been spent on repair on something else, or saving and NOT spending them at all.
In this way, the foundational Keynesian concept of government spending as part of GDP is shown to be antithetical to freedom. What is taxed from one person and spent must first be taken from the capital stock or income flow of another. The idea of government spending as "stimulus" is the logical equivalent of breaking the window in order to provide an income to the "chosen" glazier.
duh, ya think?
Tyler pls don't post pictures of sociopaths, it makes me puke.