Of Disasters Natural And Keynesian

Tyler Durden's picture

By The World Complex

Natura And Keynesian Disasters

It seems that every week we are treated to a breathless dissertation of some natural disaster or other that is going to doom us. A few months ago I commented on one such impending crisis. Every so often I like to look at my stock portfolio, and it gets me thinking about disasters again.

It isn't a new phenomenon.

A common theme is a possible causative role for human activity. Indeed, there are reasonable physical mechanisms by which human activities may contribute to natural disasters. We have altered the composition of the atmosphere to measurable effect, and some believe that some component of recent climate variability is due to this action.

Human activity and earthquakes

Does human activity cause earthquakes?

We have known for a long time that injection of liquids into areas where there are tectonic stresses may reduce friction enough to trigger earthquakes--and direct relationships between (thus far, small) swarms of earthquakes and fluid injections at depth by the oil industry has been demonstrated in southwestern Ontario (Mereu et al., 1986), Colorado (Major and Simon, 1969), and other places--although no connection has ever been established between such action and large earthquakes.

The construction of large hydroelectric projects, which fills vast reservoirs with water, changes local mass balance and fluid pressures at depth, which has been suggested as a trigger for large earthquakes, such as the large Gujarat earthquake in January 2001. This mechanism has not been positively established as a trigger.

Given the amount of human activity, we might expect that there are more earthquakes now than in the past. It certainly seems that way reading the papers. Agencies like USGS (United States Geological Survey) and BGS (British Geological Survey) are valuable sources for data on geophysical disasters so that we may determine whether there is any correlation between catastrophes and human activities.

1900 - 1999

1900   13 1930   13   1960   22      1990     13
1901   14 1931   26   1961   18      1991     10
1902      8 1932   13   1962   15     1992N  23
1903   10 1933   14   1963   20      1993M 16
1904    16 1934   22   1964   15      1994     15
1905    26 1935   24   1965   22      1995E    25
1906    32 1936   21   1966   19      1996     22
1907    27 1937   22   1967   16      1997     20
1908    18 1938   26   1968   30      1998     16
1909    32 1939   21   1969   27      1999     23
1910    36 1940   23   1970   29
1911    24 1941   24    1971   23
1912    22 1942   27   1972   20
1913    23 1943* 41   1973   16
1914    22 1944   31   1974   21
1915    18 1945   27   1975   21
1916    25 1946   35   1976$ 25
1917    21 1947   26   1977   16
1918    21 1948   28   1978   18
1919    14 1949   36   1979   15
1920     8 1950   39   1980   18
1921    11 1951   21   1981   14
1922    14 1952   17   1982  10
1923    23 1953   22   1983   15
1924    18 1954   17   1984   8
1925    17 1955   19   1985   15
1926    19 1956   15   1986#  6
1927    20 1957   34   1987   11
1928    22 1958   10   1988    8
1929    19 1959   15   1989    7

Total 1900-1997 = 1960 events = 20 per year

* Most active year since 1900
# Least active year since 1900
$ Year with most people killed since 1900 (295,000 - 699,000;
 dominated by the Tangshan quake with casualty estimate from
 255,000 - 655,000)
N First full year of operation on NSN/digital recording system
M Year moment magnitude quotes were introduced
E Year energy magnitude quotes were introduced

Statistics were compiled from the Earthquake Data Base System of the
U.S. Geological Survey, National Earthquake Information Center, Golden CO

The table above used to appear on the USGS website years ago--but I can no longer find it. Part of it appears here.

Magnitude 7 quakes are pretty large, and it is reasonable to assume that we would be aware of them anywhere in the world going back to the beginning of the last century. We could not do the same sort of study for small earthquakes, as a those in remote settings would go undetected.

The maximum number of large earthquakes in the last hundred or so years occurred in 1943. There is no detectable correlation between large earthquakes on a global scale and human activity, although local correlations may exist which have not yet been established.

Human activity and catastrophe

However as we peruse the Munich Re statistics, we note that the economic costs of natural disasters do correlate with human activity. This correlation is due to the rapid spread of occupation of previously marginal lands, and the greater concentrations of wealth and developed property in geologically dangerous areas.

Comparison of distribution of insurable losses worldwide in 2011 and from 1980 to 2011. Figures from Munich Re annual report.

For instance, we note that there has been a remarkable increase in the fraction of insured losses due to natural catastrophes in Asia. From 1980 to 2011, Asia was responsible for 13% of insured losses worldwide. But in 2011 alone, the fraction of worldwide losses in Asia spiked to 44%. A lot of this was due to the damage done by the Tohoku earthquake and tsunami, but this was only responsible for 30% of Asia's insurable losses. This increase in importance is a reflection of the rapid growth of property values in Asia.

Data source here; graphic from Munich Re annual report.

We see a steady climb in the number of US Federal disaster declarations over the past sixty years. Are we to conclude that there have been more disasters? Or is it simply that more people have been impacted by them? If so, why?

Over the last 25 years it looks like US tornado activity is up, but worldwide hurricane activity is down. Global earthquakes, as we saw above, don't really have a trend. But there has been a definite increase in the number of declared disasters in the US. These have not been caused by an increase in the number of disasters. What we are seeing is the effect of the growth of suburbs and the expansion of expensive coastal properties in hurricane-prone areas of the United States.


In tornado-prone areas, sprawl like that depicted above greatly increases the chances that houses are impacted by tornadoes. Similarly, sprawl into forested areas increases the likelihood of forest fires consuming the neighbourhood; sprawl up the sides of hills increases the likely impacts of landslides, etc.

Keynesianism and the growth of suburbs

The symbiosis between the Keynesian expansion of the economy and the growth of suburbs in US cities has been ably discussed by Beauregard (2006). Sprawl was driven by the flow of money, the "American dream" of owning a home in the suburbs, and facilitated by the widespread ownership of cars. The suburbs were designed with cars in mind.

The growth of suburbs fulfilled two roles. Lots of houses were available for new buyers, which kept prices down; and city governments discovered that developer's fees and the new land taxes initially exceeded the maintenance cost of the new roads and infrastructure built to support them,. Unfortunately, as time passed and the infrastructure aged, soon maintenance costs exceeded tax revenues, necessitating another round of growth. Suburbs were able to maintain the required level of growth for a few decades, but we are reaching the point everywhere (it seems) where there cannot be enough new growth to maintain our crumbling infrastructure.

The mindset of the "ownership society" really drove demand for housing, and the best places to expand were in the southwest, so that cities like Phoenix and Las Vegas really grew. Low interest rates plus easy money led to a bubble in house prices and an explosion of sprawl.

The Austrian school of economics teaches us that easy money leads to malinvestment. Suburban growth certainly seems to qualify. Our urban sprawl malinvestment has left us with the interwoven problems of unlivable cities, financial crisis, and increased death and destruction from natural disasters.


Beauregard, R. A., 2006. When America became suburban. University of Minnesota Press, Minneapolis, 271 p.

Major, M. W. and R. B. Simon, 1968. A Seismic Study of the Denver (Derby) Earthquakes, 63 Q. Colo. School Mines 9.

Mereu, R. F., J. Brunet, K. Morissey, B. Price & A. Yapp, 1986. A study of Microearthquakes of the Gobles Oil Field Area of Southwestern Ontario, 76 Bull. Seismol. Soc. Am. 1215.

Nicholson, C. and R. L. Wesson, 1990.  Earthquake Hazard Associated with Deep Well Injection--A Report to the U.S. Environmental Protection Agency, U.S. Geol. Surv. Bull. #1951.

Comment viewing options

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

Well fuck a duck


Brazilian prostitute had collar bone broken when three U.S. marines threw her out of a moving Embassy car in fresh embarrassment for Obama

American marines injured a Brazilian prostitute after throwing her out of an official Embassy car, it was reported today.

Romilda Ferreira was left with a broken collar bone, two broken ribs and a punctured lung after the incident in Brazil's capital Brasilia.

The three marines on a U.S. Embassy security team, and an Embassy staff member, were pulled out of the country before police were able to press charges, according to Brazil's Jornal Nacional programme.

falak pema's picture



Its time to throw the US embassy people and SS personnel out of their cars. 

It makes me laugh that Keynes's name is now bandied for all the ills of the world.

Is the original Keynes really big brother, or an attempt to correct private sector euphoria and irrational exuberance by limited but consistent government sector efforts. That was the historical reality of its inception. Now its balooned into all attempts at big brother style governance.

Hell, Hitler and Mussolini and Stalin are all Keynesians according to that view! 

Now that...


GeneMarchbanks's picture

Someone has to play the supervillain in this farcist Hollywood blockbuster spoof, it might as well be a dead man. Maybe we can finally have the adults of the world speak out against adhering to dead mens ideas as if in some religious trance. Austrians included.

Spastica Rex's picture

Yeah, but we teach people that history didn't exist, that ignorance is strength, and that profligacy is God's gift to the worthy. And you also want to teach critical thinking?! The willing suspension of disbelief is the FOUNDATION of our world.

Gully Foyle's picture

Speaking to reporters in Brasilia, Mr Panetta said the men were pulled from the country, two of the marines had their ranks reduced and the embassy staff member was removed from his post.

He added that the embassy had tracked Ms Ferreira down and paid for her medical expenses.

He added: 'This incident was fully investigated and all those involved were punished. They are no longer in this country. This type of behaviour is unacceptable.'

He said he had 'no tolerance for that kind of conduct. Where it takes place you can be sure that we will act to make sure that they are punished.'

Ms Ferreira, who is still recovering from her injuries, said she now intends to sue the American embassy.

disabledvet's picture

I've always wanted to play "the bad guy"!

Gully Foyle's picture



No one knows what it's like
To be the bad man, to be the sad man
Behind blue eyes

No one knows what it's like
To be hated, to be fated
To telling only lies

But my dreams, they aren't as empty
As my conscience seems to be
I have hours, only lonely
My love is vengeance that's never free

No one knows what it's like
To feel these feelings like I do
And I blame you

No one bites back as hard
On their anger, none of my pain and woe
Can show through

But my dreams, they aren't as empty
As my conscience seems to be
I have hours, only lonely
My love is vengeance that's never free

When my fist clenches, crack it open
Before I use it and lose my cool
When I smile, tell me some bad news
Before I laugh and act like a fool

And if I swallow anything evil
Put your finger down my throat
And if I shiver, please give me a blanket
Keep me warm, let me wear your coat

No one knows what it's like
To be the bad man, to be the sad man
Behind blue eyes

gangland's picture



Events such as

market crashes,


epileptic seizures,

material breaking, etc.,

are ubiquitous in nature and society and generate anxiety and panic difficult to control.


Preventing them has been the chimera for which many scientists have devoted much of their work.

There always exists the hope that mathematics can supply tools and methods to predict when they will happen, but we need to understand the processes that produce them.

Even when we know that, complex systems can generate unpredictable outcomes while at the same time they present a series of general features that we can study.


In particular the financial market dynamics belongs to this class.


There are investors sending orders in many di fferent timescales,

from high frequency (minutes) to long-term (years) transactions.

To describe it, one needs to take an enormous number of unknown variables, although this does not impede us from finding some temporal correlation or patterns in the time series.


To address these problems we shall use multifractal techniques known to capture non trivial scale properties as shown by Mandelbrot

(a pioneer to find self-similarity in the cotton prices distribution [1, 2]),


by Evertsz [3], who confirmed the distributional self-similarity and suggested that market self-organizes to produce such feature also,


by Mantegna and Stanley [4], who found a power law scaling behavior over three orders of magnitude in the SP500 index variation.


These works were an important hallmark to shed light in the financial market dynamics.

It shows that we can use concepts and tools from statistical mechanics to model and analyze financial data.


From there on many researchers are gathering evidence that there exist alteration in the signal properties preceding large fluctuations in the financial market.


In this work we develop a new measure, the area variation rate (AVR) which will help for the first time to distinguish
between financial crises based on real economic or social problems and one possibly created to provoke financial


We do not attempt to explain the reasons of the crises, which are outside our scope,

but simply to introduce
a systematic way to look at the data

which may help to distinguish true underlying phenomena from fluctuations

generated by self-fulfilling prophecies, with the probable aim of benefitting specific groups.


We base our work in that of Canessa, who adapted calculations of time series onto previous results of Lee
and Stanley on di usion limited aggregation.


In the latter, motivated by the analogy with thermodynamics, a
partition function is calculated, such that the elements are the probability of a given event, which in our case will
be an increment in the time series.



Summarizing, we have identified a method by which market crisis can be identified and distinguished from simple

which could avoid di usion of panic. We noticed that when a crisis is real, where by real we are assuming

that it behaves as in the cases well recognized historically as crises, it is usually accompanied by a sizable increase

in the area variation rate by several orders of magnitude,

and it corresponds to a crash

only if the analogous specific
heat also presents a second maximum and all results are stable under changes in N, l and T.


making it extremely useful, in particular for medical cases such as
epilepsy (My Kid Brother Gets Seizures).

Although this is not a tool which can help to avoid crises,

due to the simplicity of its use, it can be easily
implemented to monitor economic data [In Real Time]

under the possibility of a crisis, so that undue panic will not provoke large





skepticCarl's picture

The author is adhering to Zero-Hedge Commandment no. 10:

"Thou shalt not respect the Fed Chairman, nor his bankster brethren, nor the Treasury Secretary, nor the POTUS, nor Keynesians, nor anything propagated by the Main Stream Media".

pods's picture

Guess they were defending her freedoms a bit too harshly?


JohnKozac's picture

It's all about winning hearts and minds, Mr Foyle.

HarryM's picture

Maybe her service was little too toothy

Jena's picture

Something like John Irving's "The World According To Garp"?  Rough trade, indeed.

AnAnonymous's picture

How is it an embarassment for your typical US citizen Obama?

It could be an embarassment for the corps, even though this kind of business is traditional to them, so it is not.

Embassy officials? Were they nominated by the prez?

Summatively, without the FED issuing easy paper, that would be the shame of the US people as they do fund those kind of activities.

You've got to be severely oriented to think that a president should be a substitute for responsibility.

akak's picture


You've got to be severely oriented to think that a president should be a substitute for responsibility.

I can only surmise that what your tortured mind, and your cryptic and bigoted Chinese citizenism mentality, was trying to say here was "severely oriental", yes?

Thank you for always standing ready to fill that particular role here.

Cognitive Dissonance's picture

I am so tired of this endless, and severely limited, thought experiment as to who, what, when, where and why.

Time to consider the impossible.......no matter how improbable it may seem.

disabledvet's picture

And because you don't "that is why you fail."

Badabing's picture

My own personal theory:

Most of the earthquakes are on the Pacific rim. It is known that the Pacific tectonic plate is the only plate covered with 99% ocean. If global warming is fact and the ocean levels rise just a little, the amount of extra pressure on the Pacific plate will be enormous on a continental scale. The main problem is unequal pressure in comparison to the other tectonic plates.


Gully Foyle's picture

"We have known for a long time that injection of liquids into areas where there are tectonic stresses may reduce friction enough to trigger earthquakes--and direct relationships between (thus far, small) swarms of earthquakes and fluid injections at depth by the oil industry has been demonstrated in southwestern Ontario (Mereu et al., 1986), Colorado (Major and Simon, 1969), and other places--although no connection has ever been established between such action and large earthquakes."

I find it hard to beleive that the recent rise in Tectonic activity, ring of fire shake rattle and role/Yellowstone activity so on, is totally ignored to have the blame shifted to fracing.


buzzsaw99's picture

It isn't fracking that causes the bigger 'quakes, it is the often adjacent wastewater disposal wells that cause the earthquakes. Millions of tons get dumped very deep every day.

Gully Foyle's picture


Prove that claim, then disprove that the rise in tectonic activity worldwide isn't causing more and greater earthquake activity.

People want an easy answer, something they can blame which the removal of will cure all their ills.

They just can't deal with the fact that nature occassionally wakes up and fucks people over.

Canaduh's picture

Agreed, humans have no impact on their environment, ever.


disabledvet's picture


pods's picture

No impact?

Didn't Guam almost TIP OVER because of humans?


Gully Foyle's picture


It does sadden me the way we fucked over the polar bears,



Hudson Bay polar bear numbers increase

And the way those Asian Glaciers disappeared,



Karakoram glaciers of Asia growing despite global warming, study finds

At least Lovelock is consistent



Lovelock: 'We can't save the planet'

Professor James Lovelock, the scientist who developed Gaia theory, has said it is too late to try and save the planet.


Global Warming Scientist James Lovelock Admits To Being An Alarmist

He admitted, “The problem is we don’t know what the climate is doing. We thought we knew 20 years ago. That led to some alarmist books – mine included – because it looked clear-cut, but it hasn’t happened,” Lovelock said

Canaduh's picture

Thanks for proving my point.

NewWorldOrange's picture

"...understanding capital markets as complex systems with power-law degee distributions is compelling...Earthquakes are phase transitions in complex tectonic plate systems, and their frequency and intensity measured by the Richter scale also correspond to a power law. The similarity of stock market charts to seismographic readings is not coincidental."

   /"Currency Wars" by James Rickards

GeneMarchbanks's picture

Sweet Buddha!

Please tell us more, maybe another lesson on entropy by Rickards(a lawyer -- poor one at that).

NewWorldOrange's picture

I figured that would be way over some heads, but that a few would with a good understanding of mathematical concepts might appreciate it (there are plenty of really smart people here from all walks of life and backgrounds, and better to challenge than to dumb down.)

Please provide a link or other evidence that Rickards was/is a poor lawyer, I mean, unless you're just trolling (shutter your ears for the deafening sound of a billion crickets.)

BTW, Rickards is a lawyer, economist, and an investment banker with about 40 years of experience working in the market. Along with folks like Jim Grant, Peter Schiff, and others, he predicted the real estate bubble collapse, the decline of the dollar, and the rise of gold years before it happened and advised his clients in line with that. What have you done lately?

Since you asked for a lesson on entropy, here are the basics:

The level of disorder in any closed system, i.e., your brain, increases.

GeneMarchbanks's picture

Aside from his usual nonsense he manages to somehow tie in sociology, physics, game theory while leading you through a vague, superficial history lesson on monetary theory. End result? Nonsense akin to the New Religionists.

My advice? Follow this blog and couple others and you'll be ahead of the game while saving ten bucks or so.


NewWorldOrange's picture


HEY EVERYONE! YOU'VE GOTTA SEE THIS (a CLASSIC lesson in why trolling on this blog is bad, futile idea):

GeneMarchbanks, Rickards has been interviewed RIGHT here and his books recommended and advertised RIGHT HERE. Here is one recent interview:



 2173201 GeneMarchbanks

"He performed brilliantly in the LTCM case. A true patriot, you should hang on every word he utters with all his amazing insights. You should purchase his book on amazon... or you can visit several blogs for free that document the glaringly obvious fact that economics in this century is a replacement for military expansionism." ************************************************** Just for you GeneMarchbanks: http://www.youtube.com/watch?v=HswzT8YCg4U


Beam Me Up Scotty's picture

There is plenty of money available to maintain the infrastructure.  All we have to do is quit wasting it on other bullshit programs.  There is so much waste in government and no one wants to address it. 

pods's picture

Of course, it could be also that the unit you are using to value disasters (if you can say that) is just becoming worth less and less?


Rock the Casbah's picture

It's time to privatize infrastructure. When politicians own infrastructure the long term costs (i.e. maintenance) are never recognized. At least with regulated monopolies there are stockholders whose present value net worth is impacted by mid- to long- term costs.

LawsofPhysics's picture

Right, something that must be used by everyone, controlled and maintained by a relative few.  What could possible go wrong?  I seem to remember this when I was living in Russia in the 1990's.  Long black markets, bribes, and corruption.

Take your pick - No regulation (all privatized) and 100% transparency OR 100% regulation and no transparency.  Can't have it both ways.

disabledvet's picture

"they don't hire" either. I could create 10 million jobs tomorrow if the interstate highway system were returned to the states. "Guy's with law mowers." the madness is that even the lawn mowers sit idly as well! Let's face it "they're not even trying."

Mercury's picture

Suburbs were able to maintain the required level of growth for a few decades, but we are reaching the point everywhere (it seems) where there cannot be enough new growth to maintain our crumbling infrastructure.

Sorry, I don't buy this.  Infrastructure is what a muni is supposed to provide above all else....and there are still Roman Empire era bridges still in service today.  The real take-away here is that all those muni social services and programs are actually unaffordable luxuries.

I'd be very wary of arguments such as these that essentially aim to cram the proletariat into densely populated urban centers and ugly, high occupancy hampster boxes.

Suburban dwellers' biggest problem is that they are captive to their local public sector via a wealth tax.

Umh's picture

When times are good the money spent on feel good stuff is increased; why not the money is there.

When times are bad we can't cut off these programs right now; times are too tough; let's skip the infrastructure maintenance.


Anyone who thought about it could have seen that loop coming.


mickeyman's picture

One problem with the suburbs today is that their infrastructure is really really cheaply made compared to the Romans'.

Consider the building materials--good stone roads and bridges will last centuries with minimal upkeep. Asphalt-covered roads require upkeep after a few months. However cars don't run too well on cobblestone streets--asphalt is much in demand.


cossack55's picture

Agenda 21, anyone.  Ah, the sheeple sleep peacefully.

TheFourthStooge-ing's picture

Fuck off, crapital3x spammer!


earleflorida's picture

in depth and thoughtful analysis -  excellent read

Ps.   nature certainly has a subtle way of getting its point[s] across - whereas, human nature plays nature  a fickle-fool - always predictable as mind-over-matter [as myopic it seems?], only to realize too late, that nature is,... 'a-matter-of-fact'!

thankyou tyler

mikesswimn's picture

"However as we peruse the Munich Re statistics, we note that the economic costs of natural disasters do correlate with human activity."

Or, since you're perusing the data of a global insurer (taken directly from their annual report no less), it'd make more sense to say that the economic costs of natural disasters correlates with insurance coverage.  Or, perhaps that human activity correlates with insurance coverage.  To look at an insurance company's statistics, then note the correlation between the cost of natural disasters and human activity is misguided at best.  Unless Munich Re has the same amount of policies on their books from 1980 to 2011 (not the case), all with the exact same face amount (definitely not the case), then the authors logic is severely flawed.

mickeyman's picture

I have attempted to use total damage, not total insured losses (which is rising faster for the reasons you mention).

But a key point is that there is no trend in number of disasters--yet the number of so-called 'disasters' (as defined by politicks) has increased exponentially. There are more instances of actual damage done to buildings with people in them.

skepticCarl's picture

The labeling of "natural disaster" is a human action, not a natural phenomenon.  We use that term for political and economic reasons; to get aid, insurance coverage, etc.  We just use it more often, because we are bigger pussies than ever.