I had been contemplating a post in light of the local daily’s stories last Sunday about the amount of consumer debt in the US. But what’s happening in New Orleans and the areas struck by the hurricane makes me wonder just what that event will mean to America’s financial stability.
For years I have wondered about how we have become the “United States of Buy.” You drive by even average sized homes today (which are twice as big as “average” homes when I was a kid) and it is not uncommon to see three or more cars together with a huge RV and a trailer in the driveway to haul two or more motorcycles or ATVs. I can’t imagine the debt load some people are carrying.
Now, we’re suddenly talking about essentially taking a metropolitan area of more than 1 million and wiping it off the map for at least a couple months. It would seem the economic dislocation would be incredible.
The mayor says it will be at least two or three months before New Orleans has electricity. More than half of the nation’s grain exports go through the port of New Orleans. Not only are the people who live in the metro area out of work, they are essentially homeless for an indeterminate period. Adding in the economic impact flowing from the damage in the other gulf states makes this even more significant.
I know the rebuilding effort will generate jobs and spending. Still, how long will it take before that can begin? Consider also that interest rates have been climbing for a while and we’re already seeing the effect on gasoline prices from the impact of the hurricane on distillate production. Then you throw in the hit the insurance industry is going to take and you can’t help but wonder how much this will rock the foundations of our debt-based economy. All this, of course, comes just prior to the new bankruptcy law going into effect in mid-October.
Maybe having had parents who grew up during the Depression makes me take too much of a doom and gloom view of the situation. Still, how can anyone not wonder just how extensive the economic ramifications of Katrina and its aftermath will be?
It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.
Harry S Truman
