After The Storms Are Over: America Can't Afford To Rebuild

Tyler Durden's picture

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

A number of people have argued over the past few days that Hurricane Harvey will NOT boost the US housing market. As if any such argument would or should be required. Hurricane Irma will not provide any such boost either. News about the ‘resurrection’ of New Orleans post-Katrina has pretty much dried up, but we know scores of people there never returned, in most cases because they couldn’t afford to.

And Katrina took place 12 years ago, well before the financial crisis. How do you think this will play out today? Houston is a rich city, but that doesn’t mean it’s full of rich people only. Most homeowners in the city and its surroundings have no flood insurance; they can’t afford it. But they still lost everything. So how will they rebuild?

Sure, the US has a National Flood Insurance Program, but who’s covered by it? Besides, the Program was already $24 billion in debt by 2014 largely due to hurricanes Katrina and Sandy. With total costs of Harvey estimated at $200 billion or more, and Irma threating to cause far more damage than that, where’s the money going to come from?

It took an actual fight just to push the first few billion dollars in emergency aid for Houston through Congress, with four Texan senators voting against of all people. Who then will vote for half a trillion or so in aid? And even if they do, where would it come from?

Trump’s plans for an infrastructure fund were never going to be an easy sell in Washington, and every single penny he might have gotten for it would now have to go towards repairing existing roads and bridges, not updating them -necessary as that may be-, let alone new construction.

Towns, cities, states, they’re all maxed out as things are, with hugely underfunded pension obligations and crumbling infrastructure of their own. They’re going to come calling on the feds, but Washington is hitting its debt ceiling. All the numbers are stacked against any serious efforts at rebuilding whatever Harvey and Irma have blown to pieces or drowned.

As for individual Americans, two-thirds of them don’t have enough money to pay for a $500 emergency, let alone to rebuild a home.

Most will have a very hard time lending from banks as well, because A) they’re already neck-deep in debt, and B) because the banks will get whacked too by Harvey and Irma. For one thing, people won’t pay the mortgage on a home they can’t afford to repair. Companies will go under. You get the picture.

There are thousands of graphs that tell the story of how American debt, government, financial and non-financial, household, has gutted the country. Let’s stick with some recent ones provided by Lance Roberts. Here’s how Americans have maintained the illusion of their standard of living. Lance’s comment:

This is why during the 80’s and 90’s, as the ease of credit permeated its way through the system, the standard of living seemingly rose in America even while economic growth rate slowed along with incomes.

 

Therefore, as the gap between the “desired” living standard and disposable income expanded it led to a decrease in the personal savings rates and increase in leverage. It is a simple function of math.

 

But the following chart shows why this has likely come to the inevitable conclusion, and why tax cuts and reforms are unlikely to spur higher rates of economic growth.

There’s no meat left on that bone. There isn’t even a bone left. There’s only a debt-ridden mirage of a bone. If you’re looking to define the country in bumper-sticker terms, that’s it. A debt-ridden mirage. Which can only wait until it’s relieved of its suffering. Irma may well do that.

A second graph shows the relentless and pitiless consequences of building your society, your lives, your nation, on debt.

It may not look all that dramatic, but look again. Those are long-term trendlines, and they can’t just simply be reversed. And as debt grows, the economy deteriorates. It’s a double trendline, it’s as self-reinforcing as the way a hurricane forms.

Back to Harvey and Irma.

Even with so many people uninsured, the insurance industry will still take a major hit on what actually is insured. The re-insurance field, Munich RE, Swiss RE et al, is also in deep trouble. Expect premiums to go through the ceiling. As your roof blows off.

We can go on listing all the reasons why, but fact is America is in no position to rebuild. Which is a direct consequence of the fact that the entire nation has been built on credit for decades now. Which in turn makes it extremely vulnerable and fragile. Please do understand that mechanism. Every single inch of the country is in debt. America has been able to build on debt, but it can’t rebuild on it too, precisely because of that.

There is no resilience and no redundancy left, there is no way to shift sufficient funds from one place to the other (the funds don’t exist). And the grand credit experiment is on its last legs, even with ultra low rates. Washington either can’t or won’t -depending on what affiliation representatives have- add another trillion+ dollars to its tally, state capitals are already reeling from their debt levels, and individuals, since they have much less access to creative accounting than politicians, can just forget about it all.

Not that all of this is necessarily bad: why would people be encouraged to build or buy homes in flood- and hurricane prone areas in the first place? Why is that government policy? Why is it accepted? Yes, developers and banks love it, because it makes them a quick buck, and then some, and the Fed loves it because it keeps adding to the money supply, but it has turned America into a de facto debt colony.

If you want to know what will happen to Houston and whatever part of Florida gets hit worst, think New Orleans/Katrina, but squared or cubed -thanks to the 2007/8 crisis.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
wisehiney's picture

Dimocrats are fucked.

Nothing more to promise/give away = no more votes.

Kotzbomber747's picture

Of course the US can afford to rebuild, they'll just make it even cheaper and to an even shittier quality level than last time.

More plywood/sheetrock 'buildings' and more powerlines on matchsticks.

It's easy, it's the American way of overcharging and underdelivering, preferably all on credit, just look at the American car industry...

847328_3527's picture

Bush and Obama spent $19 Trillion bailing out their banker buddies and bombing the crap out of women and children in MENA.

 

No money left to rebuild.

Kotzbomber747's picture

p.s. Irma is a category 3 at the moment, expected to be category 4 when it makes landfall and leaning more to the western coast of FL.

More doom porn from ZH. You guys are rapidly losing credibility.

Now where are those "this is what Miami could look like on Sunday morning" pictures again? /sarc

The_Juggernaut's picture

Question: wtf is The Automatic Earth blog and what have they ever been right about?

38BWD22's picture

 

 

Trump might be in a position to do America a yuge favor!  If he declares the wars over, that we need the dollars to rebuild and strengthen our infrastructure, then he could not only save us a LOT of money, but MAGA!

skbull44's picture

As archaeologist Joseph Tainter asserts in his book The Collapse of Complex Societies, when a society no longer has the reserves to help offset what might otherwise be considered a recoverable disaster, collapse is not far off...

El Vaquero's picture

Upvoted for bringing Tainter up. Start looking at the last 2-5 decades, and it's pretty clear the US has been in a state of decline for a while now.  Historians will have a lot to argue about as to when the US's neo-empire began to collapse, but I'd say that the Nixon Shock of 1971 and the peak employment-population ratio of around 2000 are two points to strongly consider.  The first led to a boom in fiat backed debt (or debt backed fiat, if you prefer,) and the latter is the end of more and more women entering the workforce just to keep up with debt servicing and keeping up with the Jones's.  If you want to know what the end of an economic empire looks like, just look back at the sign twirlers in 2006. 

DeadFred's picture

Just when they think they might pass a bill to fund the hurricane relief that's when the first earthquake will come.

Escrava Isaura's picture

After The Storms Are Over: America Can't Afford To Rebuild

Nonsense, because America can print its own money.

 

skbull44's picture

If the ability of printing one's own money is an alchemist's wetdream, why has it failed so many times before? Zimbawbwe and Venezuela being the most recent.

 

 

yogibear's picture

But the US is doing Zimbabwe economics American style.

Nobody is calling the US on it.

Just print currency from thin air, hand it to China for real goods.

Produce nothing, print money and buy goods. What a deal!

CC Lemon's picture

People try to get out of the system, but they can the shit bombed out of them.

DWD-MOVIE's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

INTJ Economist's picture

You don't understand modern money if you're comparing the US with Venezuela and Zimbabwe.  US can "print" into oblivion because we have a sovereign currency AND a floating exchange rate.  

Crisismode's picture

"with four Texan senators voting against of all people."

 

You fucking ignorant Canuck  . . . Tak your Fucking Canadian ignorance somewhere else . . .

 

TEXAS DOES NOT HAVE 4 SENATORS, THEY HAVE THE SAME 2 SENATORS AS ANY OTHER STATE.

 

You dumb fucking Canadian Asshole go back to the asshole of the earth where you came from.

Five8Charlie's picture

If the author can't get simple facts right, there isn't much chance of getting any analysis right.

HalinCA's picture

With a name like that, what would you expect?  Totally confused ...

And of course, he's not Catholic either ...

 

https://www.linkedin.com/in/ra%C3%BAl-ilargi-meijer-892a1829/

 

Kfilly's picture

The US can print it's own money because we have the military bring some American democracy to any country that tries to challenge our ability to do so.

HalinCA's picture

Exactly ... Chavez, Qaddafi, Saddam ... all dead because they tried to dethrone the petro dollar.

But a nuclear Iran, China, and Russia?  I think they will pull it off ....

Escrava Isaura's picture

Ohh boy. Will you ever learn how money works?

Mefobills: Zimbabwe is the only example of government causing inflation.  In every other case in history it is through the exchange mechanism, where private credit and debts cause distortion.  The most famous case of course is the Weimar hyperinflation, where the Reichsbank was forced to privatize by Morgenthau plan.  After this private credit emissions went crazy in shorting bear raids. Why? The mark was under pressure due to Versailles treaty.

So, to use a group of African's as an example is not good thought.  This is my point - again.  Bad thinking not related to reality.  Why not pick Haiti as well?  Oh that's right, it is racist.  Let's reduce the statistical set to Western People, and then Zimbabwe drops out...they are an outlier.  Money's true nature is law, but it also needs to swap for goods and services, and Zimbabwe did not make goods and services, now did they?  In both Haiti and Zimbabwe, they killed off the white men who did grow food and make things.

Why was Versailles treaty so rapine?  In order so that te victors, France and Britain in particular, could take rents and then suppress the productive Germans.

So, money can be encoded improperly, and that is just the way it is, and the verdict of history. Volume and channeling have to be controlled. 

My problem with Libertarianism is that it is a false dialectic claiming morality, when in fact the systems it advocates encourage rental thefts on the unwary.  This is why Austrian theory and libertarianism is FUNDED by the money powers, to then cast a pall of confusion over the minds of the unwary.  The unwary are often fine people who want to do the right thing.   Usually libertarians are moral people, just confused on how money systems work, and often ignorant of monetary history.   

Notice that I always quote real examples from history. If one doesn't learn, or cannot learn from examples and experience, then what are they?

skbull44's picture

I certainly have been attempting to understand better how the monetary/financial systems work. I don't know if anyone can fully comprehend the complexities of such systems and how the various emergent phenomena will contribute to the sustainability/'success' of such systems--to say little of the negative unintended consequences and how they respond to black swan events. 

It's interesting to see how the various central banks and governments are attempting to balance thier numerous mandates by supporting the systems in the ways they do--especially with respect to credit expansion, equity purchases, etc.. 

I personally believe its impossible to predict and therefore contol such systems as our 'leaders' portend to do. 

I'm hoping the-powers-that-be aren't being careless with their responsiblities and fiat currency experiments. There seems to be quite the debate going on between those who argue endless money 'printing' is not problematic verses those who are diametrically opposed and warn of impending armageddon. 

I'm curious to see how this all turns out. I am doubtful that the endless growth infinite money 'printing' brings with it is sustainable on a finite planet. 

Escrava Isaura's picture

The problem humanity faces are not economics. Economics is just a mean to an end like religion and violence, meaning, it gives you a base for ones believe/actions (cover up). If religion and economics didn’t exist, humanity would come up with something to replace them. And a new god (magic) as well.

We, humans , are a very recent evolutionary specie, about 100 thousand years. Our cognitive abilities even less so, about 50 thousand years. So the question left is: Why did our genes develop our brains?

Of course no biologist would know it because we are very recent product of evolution. We know a lot about the mechanics of evolution, such as that the hydrogen fired the stars, thus enabling genetic replication, and therefore life.

Also, we learned a lot of our genetics by studying old skeletons; however, the nature of our mind such as irrational believes (religion) vis-à-vis high mental faculties (science) can never be explained.

What’s my point here?

Because of our irrational believes we deluded our view to the point of masking all trace of biological fact and truth.

The problem of humanity is in our brain.

  

 

HoyeruNew's picture

agree with all, except that "libertarians are moral people". Libertarians are the least moral people around, infact they are the most immoral. They preach social Darwinism, i.e. the strongest takes and wins all, while the weak has to go to the side and die. You sick? Who cares, go aside a die! You poor? Well, too bad, go and work more and you won't be poor. Help? Social services? Welfare for the poor? No, no no, say the Libertarians that's stealing from the haves to give to the undeserving lazy bums.

Escrava Isaura's picture

I did not write that post. I just repost what Mefobills wrote. I don’t think Mefobills believe that either, he just wrote that way to be diplomatic to the libertarians here. Like you, I don’t agree with Mefobills on that that libertarians are moral people, they’re not.

America libertarianism is the worst form of Neoconism one can imagine. They are downright tyrants of the worse kind because their capacity of being fear, and to compromise is very minimal.

 

Giant Meteor's picture

Petro dollar, enforced by MIC, although I'm of the opinion something has gotta give ..

bonin006's picture

Germany printed its own money in the 1920's, how did that work out for them?

Venezuela is printing their own money now. Hoe is that working out for them?

Zimbabwe?

Do I need to go on?

fleur de lis's picture

When the Germans printed their own money in the 30's it was backed up by steel not gold.

They also refused to play nice with the central bank system.

Free from the debt racket they rebuilt quickly.

The result was that they became a powerhouse in a decade and also became NWO targets.

 

 

Ajax-1's picture

If your assertion is true, why couldn't Zimbabwe print their way to prosperty? Why can't Venezuela print their way to prosperity? We all know that Japan is cuurrently trying to print their way to prosperity and yet the quality of life for their citizen's continues to degrade. Despite these modern day examples, why do you believe that America can defy the laws of economics indefinately? Please don't give some lame excuse about the USD being the "World's Reserve Currency" because historically we all know precious metals are the only real reserve currency that has withstood the test of time.

dobermangang's picture

We'll find out soon enough if bad news comes in 3s.

skbull44's picture

Chances are the US hit its 'peak' prior to Nixon's abrogation of Bretton Woods. Abandoning the US dollar's backing of gold was one of the more overt attempts to deal with obvious diminishing returns being experienced by the US Empire. Everything has been can-kicking and the consequence of 'overshoot' since. And let's remember, collapse is a process that usually (apart from catastrophic natural disasters) takes some time--the Roman Empire took centuries while the 'quickest' may have been that of Easter Island and its 2-3 generations.

 

https://olduvai.ca

El Vaquero's picture

IMO, we're going to be faster than the 'ole Western Romans simply because goods and information travels much faster today.  You can talk to somebody in China or India right now, you can wire funds to just about any bank account in the time it takes you to login and input the information, excepting possibly Antarctica, you can be on any continent on the planet in 24 hours or less, and a slow boat from China might take a week or two to cross the Pacific with a shitload of goods.  The level of complexity that we have achieved is staggering.  Combine that complexity with the necessity for speed, and I expect that it won't take centuries of decline, but rather decades, and we've already seen at least four and a half of those. 

J S Bach's picture

Meh...  This is why we have the Fed, Silly.   They always miraculously print us whatever amounts of money we need for welfare, medicare, political graft, or hurricane rebuilding programs.  Sheesh... this author just doesn't understand modern economics.

skbull44's picture

I don't disagree. For me, the real 'blow' will come if/when the power grid collapses (i.e. Richard Duncan's Olduvai Theory). Almost all citizens in today's complex societies have lost the ability/skills/knowledge to feed themselves. So, when the power goes off, it will be like Duncan argues: you're back in the Dark Ages (literally and figuratively). Such a collapse will hit in weeks/months in such a scenario.

El Vaquero's picture

It is possible that we are facing a new dark age - either way, we are looking at some serious trials and tribulations ahead.  On the flip side, it is possible for us to avoid that fate.  Another two issues facing us are soil degradation and ocean degradation.  (Look up a map of soil degradation around the world - it is shocking.)  We can solve all of our potential collapse problems with a triad:

 

1) Breeder/burner reactors and a decentralized grid.

2) Manufacture of liquid fuels using that energy.

3) Regenerative agriculture and aquaculture.

 

But, we'll need to stare into the abyss before the political will to implement those. 

Things that go bump's picture

Last summer I bought a slicing tomato from a roadside stand, a big, fat beefsteak tomato. I've bought vegetables and fruits there often in past years. Last year, though the tomato was beautiful, it was absolutely tasteless and a bit mealy. The next week, when I stopped at the stand, I complained and asked if they were hot house tomatoes. The vendor told me that they were grown under grow lamps in caves in Europe. However, she assured me that they were grown in Minnesota soil. It hit me like a smack in the face. Someone has been hauling away our good Minnesota topsoil! I wonder what else is being sold out from under us? I'm assuming everything. They're probably in negotiations with Satan to sell him our souls.

two hoots's picture

Trump will spend now and promise to fix the debt/balance the budget and all things great in his second term.

No more extra discretionary money for Congress to give away/buy votes.   Both Repubs and Dems are in a fix.  Now tie short falls in social security into the mix where Congress must give up more of what they no longer have to reach payroll to recipents, of course debt ceiling will be elimanted and we will all just ride it out.  

I put my $ bet on global corporations that can survive failed nations.   They will just refuse to pay any unrealistic taxes that will soon be needed and have mobile headquarters to come and go as they see necessary.

El Vaquero's picture

The budget cannot be fixed.  If deficit spending stops and the private sector doesn't pick up the slack with debt creation, the money supply to service the interest on existing debt will decrease and the whole ponzi will come to a stop.  Us government debt doubles, on average, about every eight years for a reason.  It's a feature of our monetary system.

HalinCA's picture

Well, what military will protect them?

TBT or not TBT's picture

He just did a deal with Pelosi and Schumer to raise the debt ceiling, and he just upper our commitment to the 17 year "war" in Afghanistan

Mr T's picture

Wow that is a great idea. If only. They have billions of dollars in heavy equipment all over the World. This is a little old and it is just scrap

http://www.foxnews.com/politics/2014/04/04/billions-in-equipment-supplie...

Were going back into Afghanistan it is our Will I guess.

I like your idea, "They" hate us tho 

Sonny Brakes's picture

The Boreal Forest will give its life to rebuild the USA.

Swampster's picture

Rebuild what?

 

It looks like the storm is going into the carribean and Fla will be relatively unscathed....that won't stop the jew media hype though

Theosebes Goodfellow's picture

~"If he declares the wars over, that we need the dollars to rebuild and strengthen our infrastructure, then he could not only save us a LOT of money, but MAGA!"~

Oh, some of it will most certainly get rebuilt. It's just who owns the properties that will be in question. The nation of renters expands. The middle class will fade into the west and abide.

dasein211's picture

Yeah right..... just after he picks the lead out of the back of his skull. DOESNT ANYONE UNDERSTAND AS LONG AS WE USE THEIR MONEY AND THEIR SYSTEM WE WILL NEVER BE RID IF THEM-ever!!! You want to have all this debt that needs to be repaid and STILL keep your money in a bank? After you bury your gold understand that they're coming for everything you've got left. Good luck finding my private keys bitchez.

cbxer55's picture

Yes, but the worst part of the storm will be the north east quadrant. Which will cover the entire state to the east while the eye goes up the west side. Still going to tear the place to smithereens. Count on it. 

Downvoted you for being too stupid to know this simple fact.

Crisismode's picture

"with four Texan senators voting against of all people."

 

You fucking ignorant Canuck  . . . Tak your Fucking Canadian ignorance somewhere else . . .

 

TEXAS DOES NOT HAVE 4 SENATORS, THEY HAVE THE SAME 2 SENATORS AS ANY OTHER STATE.

 

You dumb fucking Canadian Asshole go back to the asshole of the earth where you came from.

 

 

 

 

JuliaS's picture

Don't blame ZH. This site has no weather station or meteorologists. All the data trickles down from the media, along with forecasts and narrative.

With many past disasters they cried wolf too many times and when the first major hurricane hit this year, people simply didn't take it seriously. Then bam! Caribbean islands obliterated!

Then everyone jumps onto the fearmongering bandwagon! More hurricanes! People are watching news again. Don't let this crisis go to waste!

We're back to the last couple of years again, when you don't have a clue what's real and what's not. And the media will be, once again, throwing everything they have at as, until we're desentitized.

The cycle repeats over and over. Only one conclusion is that media is not to be trusted with anything - not with unemployment, not with war, not with natural disasters, not with elections, not with inflation, not with climate change. They are complete liars and they think that one disaster is going to restore their credibility? Well, bull shit! They continue digging their own graves.

Another organization that will take advantage is the govt. itself. It'll pad its pockets using whatever excuse and many are going to get rich off the so-called "aid".

In reality we're all fucked collectively.

ZH does thrive upon paranoia, but in this specific case, the data doesn't originate here and is almost entirely passed down from mainstream. You blame is entirely misplaced.

Ubuntuuser's picture

We need to start building clean energy power plants to
A) Defeat climate change in the US and end dependency on fossil fuels
B) Establish state owned enterprises in clean energy to be run for public profit to fund government. More state owned clean energy plants equals more revenue for government without tax increases. Government will run more on profits then taxes.