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 businesses and the workers will pay less taxes to the government, increasing the national debt.
  • 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, flooded basement, 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.
  • States and municipalities are required to balance their budgets on an annual basis. They are already faced with $2 trillion of unfunded pension and healthcare liabilities owed to government union workers. These states and municipalities are now faced with lost tax revenue, lost transit revenue and a tremendous amount of unbudgeted capital and personnel costs related to this storm. The long-term result will be more government worker layoffs, higher taxes for the citizens of these states, and the acceleration of municipal bankruptcies due to an unsustainable financial dynamic. These bankruptcies will wipe out the retirement savings of government workers across the Northeast, with the predictable result of more pain and suffering for senior citizens already being screwed by Bernanke’s ZIRP. 
  • 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 in a government bank account. 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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MuckAbout

Assume the position. Wait a little bit while it takes to soak in that between $50 and $100 billion plus will be required to be printed (in addition to the $50 billion a week the Fed is currently running off) to even put a dent in repairing the infrastructure of the upper East Coast.

Instant recession. Not only that but this is lesson #2 (New Orleans was #1 and probably #3) about building big cities (and financial centers) on the seacoast where storm surges can do more than a little damage.

Never fear.. If Sandy didn’t teach anyone anything (as Katerina seemingly hasn’t), when New York (again), Baltimore, Washington DC, Savanna, Jacksonville, Miami, Mobile, Pensacola, New Orleans (again), Houston, Glaveston (remember that one? 3,000 people died there) or Corpus Christi vanish under the waves, maybe someone with an IQ of 80 or so will get the idea that building cities where they vanish under rising ocean storm surges is a bad idea!

That won’t stop our re-insurance premiums from doubling soon (to spread the poverty and rebuild all those wrecks along the Jersey Shore)..

MA

flash
flash

My NY trade union pals will likely have a new skip in their step after Sandy.
Happy days are here again….

Eddie
Eddie

Why is the truth always such a bummer these days?

Well said admin.You should run this on the front page. It’s news that needs to be read.

Roysyl

MA – I thought building a city (New Orleans) five feet below sea level in a hurricane zone with the levees maintained by Federal Government and then filling it with Democrats was absolutly brillient. The cities you named are blue cities so this will solve one problem. Now if we can only figure what to do with the Republicans.

Spell check still down.

ThePessimisticChemist

Let me get this straight:

They are trying to tell us that the replacement of destroyed goods is a net gain for the economy?

It's me, bitches!
It's me, bitches!

The MSN was yammering about how insurance doesn’t cover flooding so they need, get this….more insurance!

indialantic
indialantic

I honestly think Paul Krugman and his Keynesian butthole buddies actually believe their own bullshit.

printememoney
printememoney

I just slashed the tires and broke the windows on my car. My own personal GDP is gonna fly through the roof. Too bad its raining tonight………

Ron
Ron

I wonder about the true effect of this?Enough to be a black swan event?How far well the event be felt?

Leobeer
Leobeer

Yahoo poll:

POLL
What will the long-term impact of Hurricane Sandy be on the American economy?

It will have a significant negative impact (10377) 19%
Rebuilding will boost the economy (25943) 47%
It will have little to no impact (18704) 34%

flash
flash

In my little economically devastated burg, we are currently forming a committee to look into burning down the town in order to simulate the economy and so far it’s looks like a win , win for everyone.

So, get out into those neighbor hoods and break some windows.
Do it for the children.

ThePessimisticChemist
ThePessimisticChemist

I don’t think he realizes that the government doesn’t actually have any money. Its the people’s money, they just take it from us.

For Krugman and his ilk to be right, there would have to be a perfect transfer of public money into public works. Too bad they siphon off enormous sums to provide their “services” to the US people.

Services we neither need, nor want.

The supreme irony of course is that Krugman wrote a book detailing exactly what caused the pre-Teddy Roosevelt plutocratic USA, and here he is today aiding and abetting that very same thing.

Mary Malone

There should be an increase in employment for the trades. But since 50% of the properties damaged and destroyed do not have insurance to pay for the repairs, I honestly don’t see how the Marxists theory will come to fruition.

NJ has the second highest rate of foreclosure in the country, and that’s only if you count the homeowners who have been formally served. We meet tons of homeowners who haven’t paid their mortgage in years and have not been sued for foreclosure yet. The NJ legislature is estimating 65,000 homes will be added to the foreclosure rolls this year.

If people do not have the money to pay their mortgages, or insurance, how the hell are they going to pay for the repairs and replace all the stuff that they lost?

I think we’re going to see huge swaths of neighborhoods – especially the shore communities, where second homes were purchased for top dollar after the boom – with abandoned homes that are damaged. I also think a number of homeowners will simply walk away from their properties and hand in the keys.

Kill Bill
Kill Bill

If broken and destroyed things fixed economies and created wealth then the GWOT would have stopped the financial crisis in 2008 and the global economy would be awash in wealth and jobs,

Tom Christoffel

Frédéric Bastiat is an interesting person no doubt, http://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat but I fail to see great insight in this parable.

It’s a fantasy that, in the built environment, things last forever and no maintenance is required. Any window is at risk of being broken.

A broader view is to note that, in the built environment, anything of value has some maintenance costs. The higher the value, the higher the maintenance costs. Even the dumb gold we’ve taken from the earth has high maintenance costs due to the security required.

Cities are built environments of high value because of the centuries of public infrastructure investment which create the real estate value for intensive development. You can’t do much on a lot served by a well and a septic tank, and on a country road. Cost might be lower, but work opportunites and markets are much thinner, if they exist at all. City infrastructure is high maintenance. Skimp on it or take it away and the value deteriorates rapidly. Suburban infrastructure may be newer and have less maintenance, but such jurisdictions to not have local employment in basic industries. The tax base can be 90% residential. Service perpetuation depends upon resident incomes being high enough to be able to pay the taxes that are needed to provide their quality of life: schools, fire departments, prompt EMT response for heart-attacks, libraries, dog parks, etc. These jobs are where infrastructure supports a high density of intensive economic activity.

The highest value in cities, towns and counties, is the law-abiding nature of its residents who are committed to the perpetuation of their community for generations. This is the “community motive” which long preceded the lesser “profit motive,” which can only emerge in relatively safe and stable communities.

The investments of the fathers and mothers serve the current populations, just as the sins of the fathers can affect the third and fourth generations. Is deferred maintenance a sin?

The coastal cities now face some clear challenges. The Dutch, who have much territory below sea level, and receive water flow from inland sources, are working to beef up their water and storm management skills and infrastructure. They were stuck by the problems experienced in New Orleans and have gone there to learn and assist in the rebuilding so as to be able to manage water in storm events. The incoming water from the ocean stops drainage from the tributaries and rivers, increasing inland flooding. http://www.deltacommissaris.nl/english/topics/

These are problems the private sector is going to solve, but is a market for their services. No trading algo is going to solve this for it takes real, long term capital investment and maintenance in perpetuity.

Efforts to create new cities on vacant land have been failures. The best locations were found by the original settlers, regardless of the period. Wiser folk built back from the waterfront and those up close, built with rebuilding in mind. Our ancestors were smarter about these things as they lived closer to the land. Architecture was insync with the environmental variations.

Big choices lie ahead. Private homeowner associations won’t be able to address this. Nature needs to be respected. Its bigger than the elephant in the room.

Windows get broken. Your maintenance budget should anticipate that.

All life is risk management. Communities recognize and cooperate to mitigate the impact of events for their own perpetuation. Economics is involved, but not the prime motivator. Our evolutionary driver is “community motive,” since that is how problems are solved; freedom established and maintained.

With Sandy, like during 9-11, the greater community comes to the aid of those communities which have suffered. It is mutual aid on a large scale. Such provisions come out of the wisdom of generations that the unexpected can happen and that no area can be prepared for everything. Life has redundancy built in.

youcanthavemyglock
youcanthavemyglock

I can’t believe this dumbfuck Krugman got a Nobel prize, but then again, Obama got one too so…

Thinker

Jim, stay on top of the insurance story. You’re right; they’re not in business to pay — at full replacement rates — on anything that’s insured. You probably know it’s a numbers game, where they figure out how they can reduce the overall loss consumers incur without wiping it out completely. If they were expected to replace like-for-like, they’d be out of business in no time.

So all the fine print is designed to give them “outs” that keep them profitable, including things like not paying for a deck that was already rotting when the storm came in. Which means there are going to be a lot of people unhappy with what they actually get from their policies. They’re going to feel screwed, actually.

Storms of this size mean the whole country is going to end up paying — through federal flood insurance, but also if/when the insurers say they need a “bailout” to cover their own costs. It’s all the little people who will get nothing.

Mary Malone

We live in Bergen County, which the President failed to include in the the disaster zone.

I’m sure our app will be placed on the bottom of the pile.

sangell
sangell

Good news Mary, Obama has included Bergen County. I’m sure a FEMAcrat will now assure you Uncle Obama will take care of everything right down to the jar of spoiled mayonnaise in your refridgerator and sign you up for storm related unemployment benefits at least until the polls close on Tuesday. Then the bureaucratic nightmare will begin.

Thinker

Update to my “watch the insurance companies” comment above:

Couple Says Allstate Short-Changed Them, Put Home in Ad
By SUSANNA KIM | ABC News

A Staten Island couple said their insurance company short-changed them after superstorm Sandy destroyed their home, and then used their house in a commercial.

In October, Sheila Traina, 64, and her husband, Dominic, 66, had evacuated their home in New Dorp Beach in response to warnings from local authorities about the storm.

Traina said a neighbor who had stayed behind called and told them the wind had knocked the roof off their two-story home but their insurer, Allstate, said the damage to their home was due to flooding.

“He said the house came down before the storm, came down and water finished it off,” Traina said of her neighbor.

Allstate told her it was storm surge that caused the damage, she said.

The insurance company offered the Trainas, who did not have flood insurance, about $10,000 for the damages. They say the amount is well short of the $280,000 for which their home and its contents were insured.

“We have a witness,” Traina said. “If you witnessed a murder, someobody would get convictred I would think.”

The storm’s winds also knocked down a 30-foot tall tree across the street, Traina said.

She said she has refused to accept the $10,000 and is planning to hire an attorney to fight for a settlement that matches the value of her home.

In the meantime, the Trainas are staying in a family member’s home that is three miles away. Her husband is retired but they have income from his late mother’s home, which they are renting.

Traina, an administrative secretary, said she had hoped to retire next year, but her plans are on hold until they can rebuild their home.

A spokeswoman from Allstate said the company is “committed to resolving the matter in accordance with the policy they purchased from our company.”

“Allstate is always focused on ensuring our customers are completely satisfied,” the spokeswoman said. “In major disasters such as Sandy, we are often the first on the scene providing financial and emotional support.”

The Trainas said they previously had flood insurance, provided by the U.S. government’s National Flood Insurance Program, but their payments were more than the reimbursement amounts they received for previous incidents.

Traditional private homeowners policies, such as those of Allstate, do not cover flood losses, the company said.

“We encourage our customers to consider flood insurance to protect themselves in ways that would not be covered under a homeowner’s policy,” Allstate said.

What the Trainas said upset them further was that an image of their damaged home was used in a commercial for Allstate.

After their Thanksgiving dinner, Traina said her husband and grandchildren were watching a football game when her grandchildren said they saw their home in a television advertisement.

“It was just a picture of our chair and our kitchen window but it was noticeable what they were showing,” she said. “It was not a happy Thanksgiving after that.”

Allstate said the advertisement “showed general images of the destruction caused by Sandy including a partial image of the Trainas’ home.”

“It does not reference them as customers or in any way imply they are satisfied with the status of their claim. We regret any concern this advertisement may have caused the Trainas and images of their home will not be included in Allstate’s advertising,” the company said.

Allstate said it has made almost $1.1 billion in claim payments and continues to work with local Allstate agencies and The Allstate Foundation’s support of non-profit organizations.

Debra Hernandez, who lives on the same street as the Trainas, said besides flooding in her basement and a large shed that was destroyed, her home was spared.

“They paid me a decent amount for my structure so I’m more than satisfied,” said Hernandez, who bought her home a year and a half ago. “What I claimed was pretty close to what I asked for.”

Hernandez said she received a net of $2,700 after paying her $5,000 deductible.

Hernandez said she purchased flood insurance, and received a reimbursement for her flooded basement.

“Obviously I did not lose as much as other people,” Hernandez said.

http://news.yahoo.com/couple-says-allstate-short-changed-them-put-home-194957583–abc-news-money.html

Thinker

Update to the update:

Sandy Victims Hit with Steep Flood Insurance Bills

STATEN ISLAND, N.Y. – Jean Laurie isn’t taking any more chances.

Nearly a year after Superstorm Sandy swept through her close-knit neighborhood, destroying 22 houses and killing two of her neighbors, she’s finally getting ready to rebuild the home where she lived for years with her husband and their rescue dog.

The Lauries got about $30,000 from the Federal Emergency Management Agency (FEMA) to rebuild their waterlogged home. But they decided to knock it down and build a new one, rather than try to repair what looked unfixable.

But that rebuilding comes with a catch. New flood maps drawn up by FEMA, along with reforms to the National Flood Insurance Program (NFIP) enacted in 2012, meant that many residents, including the Lauries, must lift up their homes or face dramatically higher flood insurance rates.

So the Lauries hoisted their house 13 feet off the ground, so they never have to worry about flooding — or the skyrocketing insurance rates — again.

Few homes on Staten Island — one of the few places in New York City where middle-class people can afford a small yard and white picket fence — are elevated now, and it’s hard and even a little funny to imagine some of the island’s tiny bungalows propped up on stilts or pilings.

The new flood insurance rules, which went into effect on Oct. 1, are intended to make the deeply indebted NFIP solvent by no longer charging government-subsidized rates on homes in flood-prone areas. The hikes will affect about 20 percent of the 5.5 million people who have NFIP policies around the country, as well as thousands more who live in areas that didn’t used to be considered flood-prone but who now must buy insurance under the new FEMA map.

The NFIP subsidized rates have allowed people for years to build in flood-prone areas that, in some cases, probably never should have been built on in the first place. But the feds’ solution to this — hiking up rates over four years until they reach market price — could leave millions of homeowners unable to afford the steep new prices. If these homeowners try to sell their houses, they’ll most likely find it tough to find a buyer, who would inherit the new insurance rates. (People with mortgages are required to purchase the insurance — those who’ve paid off their homes can skip it.)

The Lauries were told their insurance rate could be as much as $9,500 a year if the house wasn’t hiked 13 feet. Before the storm, the couple paid no flood insurance at all, because they had paid off their mortgage and thus weren’t required to purchase it. They’ll pay just $435 per year for insurance when the new, elevated home is completed.

But others on the island began their pricey rebuilding process before the realized they had to lift their homes. Now they’re faced with the daunting prospect of coughing up more cash to elevate their homes or being forced out by the skyrocketing premiums, just a year after a storm made many of them homeless.

Eileen Pepel moved back into her badly damaged home last April, five months after the storm, after using all her insurance money to repair it. She learned later that her insurance premiums could go up dramatically if she didn’t elevate the house — a $30,000 expenditure on top of what she’d already spent.

“It’s not in the realm of reality,” says Pepel, who lost her job as an art teacher at a nearby Catholic school when her position was eliminated to save money after the storm.

“Before we did any work, I would have raised my house right away,” she said. But now, it’s too late.

Many people are also wary of paying to hike up their homes before the new FEMA flood maps are formalized, saying exactly how many feet the homes should be elevated.

Some homeowners are refusing to make the required changes.

“They can’t tell us how high we have to go,” said Pepel’s sister-in-law, Karen Zboinski, who is also choosing not to lift her home. “We have to move on.”

Rep. Michael Grimm, a Republican who represents Staten Island and parts of Brooklyn, said residents should see if they qualify for assistance from the city to raise their homes as part of the NYC Build It Back program.

“Unfortunately, they need to engage the city,” Grimm said.

The congressman said he is working to pass a bill to delay the rate hikes until the NFIP bill, called the Biggert-Waters Flood Insurance Reform Act of 2012, can be fixed. “It’s causing an undue burden on so many people that were just ravaged by storms,” he said.

Grimm said he’s worried the rates could be so high that some people don’t buy flood insurance at all, which means more people would need to be bailed out the next time a disaster hits, effectively undoing the fiscal good of reforming the NFIP. Those with mortgages must buy the insurance, but people whose homes have been paid off can forego it.

Joanna Tierno, a Staten Island resident facing a 4,000 percent rate hike under the new rules, says she’s considering borrowing money to pay off her mortgage and then going uninsured, because it would cost so much less. “We’re up against not just recovering from a disaster, but being hit by superhigh rates that’s basically … taking people’s homes from them,” Tierno said.

For their part, the Lauries are returning, but on their own terms.

“We were not going to try to come back unless we could come back how we wanted to,” Jean Laurie told Yahoo News on a sunny day in October. She stood on the empty lot where her home used to be, nostalgically pointing out the spots where she had built a Japanese garden and installed a heated pool before the storm swept it all way.

“It was gorgeous,” she said.

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