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Economist Sees 'Modest' Impact From Storms
AP ^ | Sunday September 25, 2:45 pm ET | Jeannine Aversa,

Posted on 09/25/2005 12:52:58 PM PDT by BenLurkin

WASHINGTON (AP) -- The president's top economist said Sunday that hurricanes Katrina and Rita will have a modest impact on the U.S. economy. Ben Bernanke, chairman of the White House Council of Economic Advisers, gave his assessment in a speech to the Institute of International Finance.

"So far, the effects appear to be relatively modest on growth," Bernanke said.

Many economists estimated that Katrina alone could shave as much as a percentage point off economic activity in the second half of this year.

He expressed optimism the economy would weather the double blow and that the fallout would be temporary.

That hope is consistent with the message of Federal Reserve Chairman Alan Greenspan and his central bank colleagues. Last week they said that damage from Hurricane Katrina did not pose a "persistent threat" to the nation's economic health. Given that, the Fed went ahead and raised short-term interest rates to keep inflation in check.

"I remain pretty optimistic about the economy," Bernanke said.

Bernanke and private economists expect jobs to take a hit in the short term. Job losses for September could be heavy and the unemployment rate, -- now at a 4-year low of 4.9 percent, would rise.

The employment report for September is released by the government in October.

Bernanke expected the loss of "several hundred thousand jobs at least" in September.

The Congressional Budget Office estimated that job losses from Katrina through the rest of the year would total around 400,000.

Bernanke said early indications after Rita suggest "that the impact on refineries and pipelines has been less than we feared. It remains to be seen if there was significant damage to the offshore drilling platforms."

He said that so far, he is optimistic that the impact on energy from the two hurricanes will be limited.


TOPICS: Business/Economy
KEYWORDS:

1 posted on 09/25/2005 12:52:58 PM PDT by BenLurkin
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To: BenLurkin

Another article that tells half the story. Sure there will be a temporary slowdown in economic activity because of these storms BUT, once the rebuilding gets underway that will easily be more then made up for and growth next year will be even higher then it would otherwise have been.

Next years problem has a much greater chance of being inflation caused by too rapid growth then any slowdown in the economy.


2 posted on 09/25/2005 1:51:47 PM PDT by Eagles Talon IV
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To: Eagles Talon IV

How reassuring. Some hired hand gets to damn the whole mess with faint praise.
That kind a bull crap ought to be shoved back at the head wrangler as ridiculous.
We understand that disasters include major economic impact...that's part of the reason they're called disasters.
Economists need to stick to real numbers and not mood rings.


3 posted on 09/25/2005 2:22:07 PM PDT by CBart95
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To: CBart95

The scenario of an initial economic slowdown followed by an increase due to the rebuilding effort has long been known to be the case in disasters of this type. This sort of an article highlights the importance of people becoming educated about what is going on around them and how it is affecting their lives.


4 posted on 09/25/2005 2:27:21 PM PDT by Eagles Talon IV
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To: Eagles Talon IV

I share your concern regarding inflation.


5 posted on 09/25/2005 2:45:58 PM PDT by BenLurkin (O beautiful for patriot dream - that sees beyond the years)
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To: BenLurkin
"I share your concern regarding inflation."

Gold prices are up for the same reason.

6 posted on 09/25/2005 2:49:10 PM PDT by blam
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To: Eagles Talon IV

Read it again Sam. It does no such thing.


7 posted on 09/25/2005 2:50:37 PM PDT by CBart95
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To: Eagles Talon IV

So, you've bought into the "broken window fallacy" of a natural disaster?


8 posted on 09/25/2005 3:05:46 PM PDT by FreedomPoster (Guns themselves are fairly robust; their chief enemies are rust and politicians) (NRA)
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To: CBart95
"Read it again Sam. It does no such thing.

Perhaps you misunderstood me. I was saying that the article would be seen as only providing half the story UNLESS one was knowledgeable of how these disasters impact the economy in the long run.

9 posted on 09/26/2005 8:15:17 AM PDT by Eagles Talon IV
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To: FreedomPoster

Not familiar with this, please enlighten me.


10 posted on 09/26/2005 8:16:18 AM PDT by Eagles Talon IV
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To: Eagles Talon IV

One example of the 28,000+ Google hits for "broken window fallacy" is here:

http://freedomkeys.com/window.htm


11 posted on 09/26/2005 8:34:43 AM PDT by FreedomPoster (Guns themselves are fairly robust; their chief enemies are rust and politicians) (NRA)
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To: FreedomPoster
The problem with this theory is the assumption that money spent on hurricane repairs will not be spent on other things thus in effect robbing Peter to pay Paul. However these does not take into account that part of the money will come from Insurance companies who wouldn't be spending it on anything else to begin with. In fact by law they must remain highly liquid just so they can pay their insured this money. Either the cash sits in Insurance Co coffers or goes into the economy. BY it going into the economy it creates jobs and increases GDP, by staying with the ins co it enriches their bottom line only and benefits the relatively small number of shareholders only. The rest of the money comes from the Fed Gov't and that will in the short term increase the debt and may cause a spike in inflation. But since the outlays will be one time and over an extended period this debt increase should be manageable.

Yes I subscribe to the "broken window" theory and have given reasons why it is sound. The article you linked me to was flawed as I have explained.
12 posted on 09/26/2005 8:51:50 AM PDT by Eagles Talon IV
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To: Eagles Talon IV

All the insurance proceeds weren't sitting under a mattress somewhere. Those monies were in some sort of investment, and were already "in the economy", and will now not be available for other needs. AKA the tailor.

Also, the Federal $200B being discussed these days doesn't even get covered by your argument. In that case, we are robbing our children and grandchildren, practically.


13 posted on 09/26/2005 9:25:27 AM PDT by FreedomPoster (Guns themselves are fairly robust; their chief enemies are rust and politicians) (NRA)
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To: FreedomPoster
All the insurance proceeds weren't sitting under a mattress somewhere. Those monies were in some sort of investment, and were already "in the economy", and will now not be available for other needs. AKA the tailor.

I don't believe so. Insurance companies must keep a large % of their premiums in cash instruments so they can pay claims as needed. Perhaps some is in US treasuries and that may explain the rise is short term rates as they sell some of the holdings to have the cash on hand. In this sense the money is really NOT in the economy like a home builders money or a retail store owners money is in the economy.

"Also, the Federal $200B being discussed these days doesn't even get covered by your argument. In that case, we are robbing our children and grandchildren, practically.

I did mention that. I said it may cause a short term increase in rates. It depends on the amount of the fed expenditure and the length of time over which it will be spent. The 200 billion figure you are using is a wholly manufactured one and is being thrown about without any factual basis mentioned about how the figure was arrived at. To be sure, it could be more, but it could be less and the more critical thing is over what time frame will the money be needed. If it is needed in 2-3 years then it presents a problem but if, as some believe the effort to rebuild will take 7-10 years then at 200 billion even 300 billion it is easily manageable given the size of our economy.

14 posted on 09/26/2005 9:51:40 AM PDT by Eagles Talon IV
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