|
|
| weblog/wEssays | home | |
|
Katrina's Long-Term Effects (September 2, 2005) 
Anyone who thinks the aftermath of Hurricane Katrina will be short-lived or benign is in fantasyland. We have 500,000
homeless people, maybe closer to a million, people with no way to return home for months on end. Note that most major
cities consider 10,000 homeless people an enormous challenge. Also note that those who fled are the ones with
the means to do so--those with cash, cars, nearby relatives, and so on. Those who remained behind did so because they
had no place else to go, and no money for a few weeks in a Houston hotel. They are effectively
homeless people, with no place to go and insufficient assets to move or purchase other housing.
When residents do finally return to their houses--those left standing--they will find the walls filled with bacteria, mold and Lord knows what else. That means to make the house habitable again, the flooring will have to be removed, the drywall will have to be torn down to the studs and the electrical wiring replaced--and this is a minimum. Given the termite damage that is prevalent in the area, the initial reconstruction may include most of the major framing, or at least those parts which were blown off with the roof. Meanwhile, nobody has a job to go to, either, because the city is basically uninhabitable. What are people going to live on? Unemployment? Emergency funds? For how long? Some optimists see all this construction work as a boon for the economy, but what about the people who will be displaced for months while they wrangle with FEMA loans to fund the rebuilding of their home, and then the difficulties of finding someone reputable to do the work? This isn't building 50,000 houses in a production setting, with economies of scale--this will be rebuilding each house, one at a time, with financing and other conditions unique to each dwelling. Just lining up the money, the crews, the materials and the infrastructure (power, water, housing for the workers, roadways, etc.) will take months. As for the oil industry--listen to all the experts talking about the fact there's no strategic reserve for natural gas. In other words, the shortage of natural gas will not be alleviated by tapping the crude oil Strategic Reserve. Meanwhile the pundits are cutting GDP for the Q4 by a tenth of a point. Who are they kidding? With nine refineries out of production, there will be a shortage of gasoline unless people begin conserving. But the behavior we're seeing is the opposite of conservation--people are "topping off" their gas tanks, sparking a negative feedback loop of a shortage created by fear of a shortage. As the Wall Street JOurnal noted on August 31: "If the U.S. auto fleet of 220 million vehicles went up to three-quarters of a tank -- or, say, 10 gallons more --it would be an additional 2.2 billion gallons of demand."Panicked drivers are already topping off their tanks and using credit cards to do so, suggesting the piper will be paid down the line. Meanwhile, the nation's savings rate sunk to its lowest ever last month, -0.6%, suggesting a consumer class that's finally tapped out. But wait, the pundits shout--the Fed will start lowering interest rates again, sparking another wave of mortgage re-financing, putting another hundred billion dollars of free money in people's pockets. But suppose inflation rises with higher fuel costs, as it is wont to do. Then the Fed won't be able to lower interest rates; rather, they'll have to keep raising rates to control inflation. And further suppose that the predictions calling for more hurricanes this year than last turn out to be true. Maybe this isn't the last hurricane to sweep over the Gulf Coast Oil Patch. Then what? We haven't seen the worst of this yet. * * * copyright © 2005 Charles Hugh Smith. All rights reserved in all media. I would be honored if you linked this wEssay to your site, or printed a copy for your own use. * * * |
||
| weblog/wEssays | home |