Hurricane Sandy Could Cause $100 Billion In Damages (More Dollars That America Does Not Have)

[SEE3772]

As 60 million American prepare to absorb Hurricane Sandy’s worst, the economic costs of the storm could skyrocket in the days to come.

While economists disagree on the exact amount of damages, they’re saying the storm could cause between $2 and $100 million in destruction, according to a report by The Daily Ticker.

From Washington D.C. to New York, other experts believe the lost economic output could equal $10 billion per day, though they don’t see the storm blemishing the nation’s fourth quarter GDP.

"It's much more a regional story…[Sandy] will not have significant U.S. macro economic implications," Ryan Sweet, a senior economist at Moody’s Analytics, tells The Daily Ticker.

Even if Sandy doesn’t cause a major macroeconomic meltdown, it will still batter East Coast retail operations like restaurants, supermarkets, and shopping malls.

Lance Roberts, CEO of Streettalk Advisors, tells The Daily Ticker that widespread retail shutdowns could impact sales by half a percent. He also notes that while that while hurricanes often cause lost wages and unemployment claims, they can raise GDP as well.

Likewise, Diane Swonk, chief economist at Mesirow Financial, says Sandy could spur increased spending as consumers stock up on food, water, and other home essentials.

“This will show up in increased spending at hardware and home stores," she writes in a recent note. "There should also be an increase in spending, once damages from the storm are assessed and repairs get underway. That spending could borrow a bit from traditional holiday sales, depending on how much insurance is paid on those claims."

While troubled about consumers not spending, LPL Financial economist John Canally isn’t overly concerned about the larger economic picture, especially since last year’s Hurricane Irene failed dent American spending statistics.

"People are sitting in their homes and not spending," Canally says. But "it's not like a week before Christmas,” he adds.

Source: The International Business Times

[TexTushHog]

And your dear candidate Romney wants to shift disaster relief off the a federal government to the States because the Feds can't afford it.

[Whirlaway]

Tens of billions (of tax dollars) pent rebuilding in environmental areas that are a danger zone ...a waste.

[LovingKayla]

Ommmm isn't shit like this the reason you buy insurance? And donate to red cross? The government isn't going to pay for ALL of it drama queens.

[i'va biggen]

You pricks weren't as rabid about Joplin.

[joe bloe]

Rebuilding in the 100 flood plane is nuts. FEMA flood insurance is subsidized by the government. It encourages people to buy homes in flood prone areas. It's just another example of the federal government doing more harm than good.

[WTF]

There should be a FEMA to help people out with clean up but the local cost of insurance should be built into the cost of a home or business. IMHO

[pmdelites]

"they’re saying the storm could cause between $2 and $100 million in destruction," ????

talk about covering the bases!
the estimate range i heard on three different news reports [incl. the Dow Jones report] was between 20-50 billion. and that was just for damages covered by insurance claims. the reporter said uninsured claims would probably be double.

how about you compare the current highest estimate w/ damages from Hugo, Katrina, Joplin MO tornado, the Japanese tsunami, the indonesia tsunami, mt. st. helens, earthquakes in Mexico City and Central America, even Krakatoa?


http://www.insurancejournal.com/news.../31/268505.htm
"Sandy’s diameter was nearly twice the size of other massive hurricanes including Katrina (2005) whose diameter was 435 miles, Isabel (2003) whose diameter was 575 miles, and Isaac (2012) whose diameter was 450 miles, said Doggett."

http://www.reuters.com/article/2012/...89T0WT20121030
"One of the biggest questions now is who will pay for the extensive damage to municipal infrastructure -- subway tunnels, train tracks, electrical transformers, coastal boardwalks and piers -- that Sandy left behind along the East Coast.

The short answer, experts say, is that there may be some insurance in place for certain losses, but beyond that taxpayers could well end up on the hook for most of it."


yep, we're all in this boat together. some have insurance and agencies, non-profits, and the government help out as well.


websearch for "estimated insurance losses for hurrican sandy" = 32 million articles

[Guest032516]

Originally Posted by TexTushHog

And your dear candidate Romney wants to shift disaster relief off the a federal government to the States because the Feds can't afford it.

Actually, there is a lot to be said for letting the states and local authorities take the lead on disaster relief and also pay for more of it. The local authorities always know the most about where flooding is most likely to occur, how many police and fireman are on hand, where the best evacuation shelters are, which roads are good and which roads are lousy for evacuating.

The federal government should still provide money to pay for the damage and FEMA personnel to help with relief. But, there should also be heavy pressure on states to pay a greater share of the $$ in order to force the hand of states in terms of building proper infrastructure and changing their zoning laws to prevent so much damage in the first place. See what I wrote below to Whirly.

If the federal government gives money to the states and the states then help people rebuild oceanfront homes, the federal government in effect pays to rebuild those homes. There have to be strings attached to stop states from doing that.

It is always a bad idea to repay 100% of the damage a state suffers. There is moral hazard involved. Just as "too big to fail" banks will take bad risks if they know they will be bailed out by the federal government, so too will states. State and local governments love the big revenue streams they get from oceanfront property real estate taxes. Nothing like a 4 bedroom, 3000 SF house valued at $2.5 million to boost the property taxes in a town.

But if the states had to pay the full boat every 20 years or so to rebuild a bunch of those homes and repair the roads, phone lines and power lines feeding those homes, maybe they wouldn't allow them to be built in the first place.

Perhaps the federal government should declare it will only pay 80% of the first $100 billion in damages and 90-95% above that? If a state knows it must pay $20 billion in a major disaster, maybe they will adjust their zoning laws and infrastructure investments accordingly?

Originally Posted by Whirlaway

Tens of billions (of tax dollars) pent rebuilding in environmental areas that are a danger zone ...a waste.

Who says they will?

In disasters like this, state and local governments often condemn the land near the beaches and force the landowners to move inland. I've seen that happen on Long Island.

Certain townships stopped allowing people who had ocean front property to rebuild or made it impossible to get insurance near the beaches. And they denied them disaster relief. The homeowners were essentially forced to self insure. Result - when a home got washed away in a storm, that was it. The land went back to nature.

[Poet Laureate]

Certain townships stopped allowing people who had ocean front property to rebuild or made it impossible to get insurance near the beaches. And they denied them disaster relief. The homeowners were essentially forced to self insure. Result - when a home got washed away in a storm, that was it. The land went back to nature.[/QUOTE]
How exactly does a township make it impossible for a homeowner to buy insurance? If the insurance industry is willing to underwrite a risk, the township can't stop that, because insurance is regulated at the state level, not at the local level.

[Fast Gunn]

What do you mean "limited funding"?

We in the USA have infinite money.

. . . Don't you know?

[IIFFOFRDB]

Originally Posted by TexTushHog

And your dear candidate Romney wants to shift disaster relief off the a federal government to the States because the Feds can't afford it.

If we got ride of all Oblamo phones, 60% of welfare and gutted most entitlements we could afford it. What do you think Hog?

Should we help the helpless and the clueless too?

[Guest032516]

Originally Posted by Poet Laureate

How exactly does a township make it impossible for a homeowner to buy insurance? If the insurance industry is willing to underwrite a risk, the township can't stop that, because insurance is regulated at the state level, not at the local level.

Should have wrote "State and local made it impossible".

Also, as a practical matter, experience has shown that the premiums are so high on waterfront property that people will NOT buy it. Here is a good article on just this subject:

http://ordinary-gentlemen.com/blog/2...ways-populism/

Here is the money quote from the article:

"One of the hard lessons one learns in risk management is that no one funds for catastrophic losses unless they are required by an outside agency to do so. In many cases this is because it is not feasible to do so; but even in those cases where it is feasible, no one does. Were FEMA to be dismantled, for example, there would be no financial resources from which to quickly rebuild from disasters like Hurricane Sandy. Conservatives might argue that private insurers could provide such protection, and this is certainly correct – on paper. However, one of the axioms from my industry is that there is no such thing as an uninsurable risk, there are just risks people aren’t willing to pay enough premium for. This is absolutely true for natural disasters. If your insurance provider offered you or your business coverage that would protect you from disasters like Sandy, you would not be willing to pay the premium required. You might disagree with that statement, but history shows that it is true. In fact, it is almost universally true. Governmental disaster insurance schemes didn’t appear magically in a vacuum; they were created because prior no one was willing to pay enough money in premiums to allow insurance companies to properly fund for them, and as a result the inevitable losses were uncovered."

There is a reason why the federal government subsidizes many of the homes and farms built in flood plains along the Mississippi and other big rivers by funding disaster relief in those areas. We need those farms to grow crops, but the people there could never afford the realistic premiums that would be required. So the federal government bails them out as needed.

But we don't need to bail out beach houses. They are luxuries, not essentials. Snooki and The Situation can buy their own insurance or take a risk and live without flood insurance.

[Poet Laureate]

"There is a reason why the federal government subsidizes many of the homes and farms built in flood plains along the Mississippi and other big rivers by funding disaster relief in those areas. We need those farms to grow crops, but the people there could never afford the realistic premiums that would be required. So the federal government bails them out as needed.

But we don't need to bail out beach houses. They are luxuries, not essentials. Snooki and The Situation can buy their own insurance or take a risk and live without flood insurance."

This is wrong on so many levels; first of all, the reason the federal government created the National Flood Insurance Program was because private insurers didn't cover floods, period. It's only been in the last decade that some of the largest private insurers have begun underwriting some flood risks.
Now, many people will protest that they had flood insurance through an insurance company, but they didn't; they had flood insurance through the feds, and the insurance industry handled the claims because they're uniquely set up to do so.
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Now, to beach houses. It's easy to say No to federal coverage for beach houses, but where do you draw the line? Many beach houses aren't brand new palaces, but are closer to shacks that their owners stay in because they can't afford to go anywhere else. The home is uninsurable, and because of that it's worth next to nothing. Very often the land is worth more than the building.
-
What about the beach house that's built to use as a summer vacation rental? Look at all the money a house like this pumps into the local economy. Restaurants, theaters, grocers, and tourist attractions make money off those who rent these houses, and in many cases the owners put much of that money right back in to another property, creating local jobs in areas that desperately need the money.
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And in some cases the homeowners are willing and able to pay the premiums, but the insurers are not willing to run the risk. In many states this has led to the creation of quasi-governmental entities that underwrite risks no one else will touch, thus keeping the homeowner from having to face huge financial penalties for not securing the insurance required by the mortgage. The Texas Windstorm Insurance Association (TWIA) is one such entity. I worked for them after Hurricane Ike devastated the Bolivar Peninsula and much of the Texas coast. The issues and possible solutions are not as cut-and-dried as you might think.

[Guest032516]

Originally Posted by Poet Laureate

This is wrong on so many levels; first of all, the reason the federal government created the National Flood Insurance Program was because private insurers didn't cover floods, period.

Isn't that pretty much what I said above and what the article said? You said the private insurers don't cover them "period", but then you say now the big ones do. What changed? It is all a matter of the premium isn't it? They are always willing to cover it, but they can't find customers who can afford the realistic premiums. Which is why the feds have had to step in. That's fine in a farming area where we have no choice, but not on beach fronts where there is almost always another choice. More below.

Originally Posted by Poet Laureate

Now, to beach houses. It's easy to say No to federal coverage for beach houses, but where do you draw the line? Many beach houses aren't brand new palaces, but are closer to shacks that their owners stay in because they can't afford to go anywhere else. The home is uninsurable, and because of that it's worth next to nothing. Very often the land is worth more than the building.

Actually, the line is quite easy to draw. They can't rebuild, period.

If the houses are palaces, they should already have insurance. if not, that loss is on the millionaire idiot homeowner. Not on the rest of us.

If the house are shacks, then a hurricane is the perfect opportunity to get rid of those homes. The government can condemn the property and pay the homeowner the fair market value of the house, which isn't much if it is a shack. And if you are not permitted to rebuild on the land, then the land is not worth much either. The low income people living in beach bungalows can live in small modest homes a mile inland, too. And we don't have to rescue them next time, nor do we have to incur the cost of ever re-building those homes ever again. We do not need to subsidize their memories or the sentimental value they attach to being by the water.

Originally Posted by Poet Laureate

What about the beach house that's built to use as a summer vacation rental? Look at all the money a house like this pumps into the local economy. Restaurants, theaters, grocers, and tourist attractions make money off those who rent these houses, and in many cases the owners put much of that money right back in to another property, creating local jobs in areas that desperately need the money.

Whatever benefit a beach front home brings to the local economy is overvalued, because the cost of the re-building is not priced into the equation. The cost is borne by other people living elsewhere. It is fundamentally unfair for a landowner to pocket the money from a summer rental and for a town to pocket the property taxes and sales taxes, but then pass on the rebuild costs to the government because flood insurance is too expensive.

We see something similar in industry, where factories pollute the air or the water or both. The benefits of the jobs and products of those factories do not properly reflect the TRUE costs (i.e., external costs) to society in terms of health care and ruined land. That's why it is necessary to force them to install the necessary equipment to clean up their waste. If the equipment is so expensive the factory cannot be profitably operated, then do NOT build the factory.

Why don't we apply the same logic to houses located in flood zones?

Originally Posted by Poet Laureate

And in some cases the homeowners are willing and able to pay the premiums, but the insurers are not willing to run the risk.

Sorry, but I am not buying that. And the article I linked to pretty much states the same thing. Like the article says, there is no such thing as an "uninsurable risk". The problem is finding customers who can afford the premium.

The insurance companies cannot find enough customers. WHAT DOES THAT TELL YOU ABOUT THE WISDOM OF BUILDING IN FLOOD ZONES?

Originally Posted by Poet Laureate

In many states this has led to the creation of quasi-governmental entities that underwrite risks no one else will touch, thus keeping the homeowner from having to face huge financial penalties for not securing the insurance required by the mortgage.

You missed the fundamental first question regarding the homeowner: Why does he have to have the mortgage in the first place? If he doesn't build/buy the beach house in the first place, there is no need for a mortgage.

I acknowledge the necessity of having farms in the flood plain of the Mississippi - that's where the good soil is. So having the government underwrite those risks is necessary, even if distasteful.

But little if any of that applies to the beach front areas in NY and NJ that got hammered. In another thread, I posted links to pictures of the damage Sandy did. Check out the photos from Seaside Heights in NJ. Apparently, the word "Heights" is being used ironically.

Do we really need to rebuild the amusement park and the beach bars and restaurants that are RIGHT ON THE DUNES in Seaside Heights? Do we really need to subsidized their insurance in the future?