The way the wind blows…

So there will be course altering events piling up this week.

The most obvious being Hurricane Irene. I often wonder if a large natural disaster is a positive or negative factor for the economy? I try and look back for specific examples. I cannot really decide. I remember in the nineties, we had Hurricane Andrew. It wiped out South Florida. It was really a driving force that helped pull us out of the recession at that time by putting hundreds of thousands back to work in construction and building supplies. Lumber and Housing prices nearly doubled a short time after, and that spawned the beginning of real estate price growth.

While in the short term it was devastating for local economies, in the long term, insurance companies and federal agencies shelled out massive amounts of money to the one group that often is responsible for economic recoveries, the middle class. By putting people back to work, and giving the working class a steady pipeline of dispursible funds, economies thrived. It was a great time. It was prior to China manufacturing everything, so alot of the money stayed put in America.

That is another big question mark. If Irene causes tens or hundreds of billions in damage, and the Federal Government and Insurance Companies hand off replacement dollars to repair the damage, how much of that money is funneled overseas and mainly back to China? We have to admit, we have a gaping wide hole in our pocket. In fact, isn’t it China and India that now have most of our jobs?

Which leads to the next big event: Obama’s vacation is coming to an end, and he is expected to return to Washington to announce a new jobs plan that will include a barackage of stimulus policies and government spending to encourage companies to hire and rev up the construction industry. For those of you wondering, I made up the word barackage, just because I am always fascinated with how the Media always coins a new word of the week, so that is my contribution.

Anyway, as I am not the biggest fan of Obama, I have to think that at some point, he has to get at least something half right. I give him credit for the Osama Kill and that is about all so far. So I gauge a 50/50 shot that the jobs plan will have some effect. If you order the upgrade of airports, schools, highways, etc., that will put people back to work and start the engines turning.

Now, the jobs plan is coming at a time when we face uncertain record damages from this storm. I can’t really say if this will derail the Obama Jobs Plan. I really don’t know how deep the insurance companies pockets are. If you remember back in 2008, when we were handing our money out to big companies, Insurance companies received some of that money. They, at the time, blamed other large storms as the reason they were broke. Could Irene be the straw that breaks their back? In the south where storms often occur, housing is cheaper and per square mile, it is much less dense and populated. In the Northeast, the costs per square mile can probably be as high as 10 to 20 times higher than the southern coastal areas.

The insurance industry employs a lot of people. If that industry begins to fail, it could be the final factor in pushing us over the recovery cliff into another deep recession. If the government is largely responsible for footing the damage bill, then that will lead us back down the road of inflation.

Now how does all of this effect gold? I do always like to point out that gold usually acts negatively to stimulus talk, and just minutes after the earthquake in Virgina last week, prices sank 5%. Historic events like Hurricane’s Katrina and Andrew did not help gold either. In fact, I believe the outcome of Hurricane Andrew led to a major fall in Gold as banks abandoned the yellow metal after filling their vaults with dollars, probably generated by Hurrincane Andrew revenues that flowed in for years after the damage.

Needless to say, it will be an interesting period. So much happening. An election on the way, lower oil prices, job stimulus on the way, and an very busy hurricane season on the way.

My gut is that the Irene is going to be a positive force in assisting unemployed make some much needed cash. Out of work carpenters will be able to work around the clock. They will have to lower their wages, but being that it is for a good cause, they will probably do it with a smile, and with any luck, long after the damages are repaired, they will continue to work for a fraction of what they used to earn.

Which opens a whole new window into this mess. How many people are out of work because they are unwilling to accept wages lower than what they made during the height of the housing market bubble? I mean, if you once were making $60-100 per hour because there was so much demand, in a recession phase, you have to be willing to take $15-20 per hour, but, most guys won’t even start their truck for that kind of money, as they claim it is beneath them???

So with that said, I am leaning toward the Hurricane helping a recovery. People back to work. Supply stores and even grocery stores make more sales. Insurance companies and Federal Government are forced to put money in the hands of the middle class, and the last one there is the #1 reason why it helps. The middle class, the ones who receive no stimulus, who receive no assistance, who carry the rich and the poor, will finally get a check in their mailbox.

Be Safe and if asked to do so, EVACUATE!

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About CT Gold Buyer
Owner of CT Gold Buyers in Wallingford, CT. and USA Gold Refiners.....

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