Thoughts on Disaster – Last Week and Next Week

by JDH on November 3, 2012

For anyone living in New York, New Jersey, and surrounding areas, that was a horrible week.  In Southern Ontario we had three days of very high winds and heavy rain, but nothing like what was experienced along the eastern seaboard.  It was a disaster.

On Friday I had a chance with some investment bankers in New York, and combined with what I’ve read in the press, there’s no doubt that New York is a tale of two cities.  The bankers in mid-town Manhattan said that everything is close to normal. The power is on, businesses are open, but getting around is a bit difficult because the power outages in other areas make it difficult to get fuel to the gas pumps for the cabs. Once you get to the south end of the city, or New Jersey, forget it. Power is still off, and may remain so for days.

The day after the storm people were coping, but after a few days without power, water and basic food, tempers are flaring:

Even worse, near freezing temperatures and the potential for another less severe storm this week are leaving residents frustrated and scared.

The “tale of two cities” comment is an apt metaphor. From my distant observation post, it’s quite obvious that there are “two cities”. The wealthy investment bankers are inconvenienced, but they aren’t suffering. The less affluent residents of the less affluent areas may be waiting for weeks for power to be restored, and they are left with no choice but to defecate in apartment building hallways.

A community can recover from a natural disaster. I don’t know if a society can recover from the real problem: a massive divide between the haves and the have nots.

Those of you who have read this blog for the last six years will know that I am anything but a “bleeding heart liberal”. I’m a capitalist, and politically my views slant heavily libertarian, as summarized by that esteemed political theorist this week, Bill Murray, who said that “I think we ought to be personally responsible.” I agree.

The hard-ass libertarian side of my brain says “how can you be out of cereal three days after a storm hit? I understand the electricity being off, but why didn’t you heed the warnings to take basic precautions like:

  • filling your bathtub up with water so you would have a supply of drinking water for a week;
  • have a supply of basic essentials like bottled water, cereal, and canned goods (and a non-electric can opener) to provide food even if the power is out;
  • have extra blankets and coats to survive in the cold.

I realize that if you are poor you can’t afford to stay in a fancy hotel until power is restored. I get that. But is it too much to ask that you always have two or three extra boxes of cereal in your house?

I understand that other side of the argument: in today’s society many people are living from day to day, and can’t afford to have even one box of cereal sitting idly by, waiting for emergencies. But is it that hard to fill up your bathtub with water so you have water when the power goes out? Perhaps I am naive; I don’t know.

What worries me is the underlying anger at the people who aren’t helping. Shouldn’t residents be mad at themselves for not making basic preparations? Of course we never blame ourselves, we always blame others. We blame the Red Cross, and FEMA, and the power company. It’s their fault that I’m not prepared.

Please don’t misconstrue what I’m saying: There is no doubt that power crews started restoring power in the affluent areas first, and no doubt the Red Cross and FEMA would start helping the easier areas first. If you are an aid agency and you have a choice between going to an area you can actually reach, or an area that’s under-water, where would you start? No doubt the criticisms are valid.

My fear is that, six months ago when basic infrastructure is back in operation, you won’t hear the community activists encouraging the people to be better prepared next time. All you will hear is calls for more funding for FEMA, and more government help to protect us against “the next one.” And that’s sad, because Bill Murray is correct; we should start by preparing for ourselves, so that we are not not reliant on government and others to save us.

The Election

Which brings us to the election on Tuesday, a contest between two psychopaths who have spent probably a billion dollars each to convince us that they can lead us to the promised land. Guess what, America: they can’t.

Governments cannot create jobs, they cannot create universal wealth and prosperity. Governments have one power, and one power only: they can take from one, and give to another. They do it monetarily through taxes, where they take money from one person and give it to another. They do it through laws and regulations that restrict one person’s freedom “for the good of society”.

Again, please don’t misconstrue my comments. I’m not saying we should have no restrictions. I understand the need for red lights at traffic intersections; chaos would ensue if everyone was permitted to drive wherever and whenever they wanted. I like private property rights; I don’t think we should be allowed to break into each other’s houses and steal whatever we want. I even understand the need for limited taxation, to fund the traffic lights and the police.

But do we really need massive taxation so that the government can take care of people who refuse to take care of themselves?

Do we?

I don’t blame the people. Humans act like humans. We are naturally jealous of anyone who appears more successful than we are, and when we realize that the Bankster class got there by cheating and government bailouts, it’s not unreasonable for the people to want their share of the government pie. I get it.

So what’s the solution?

We all need to be weaned off of government reliance. We need to stand up for ourselves.

Unfortunately the entitlement culture is so deeply engrained at all levels of society that it will take a lot more than a “superstorm” for those changes to happen.

As a Canadian with no horse in this race, I suspect that it doesn’t matter who wins the election. There are massive structural problems in the U.S., and neither savior will be able to fix them.

I also agree with David Rosenberg’s take that we will see negative GDP in Q4, an actual shrinkage of the economy, due it part to Hurricane Sandy. The economy was already weak, and now that the most affluent and free-spending consumers in America are double-bunked with relatives and facing massive repair bills, it’s unlikely they will be spending money at Tiffany’s this Christmas. The returning, or new, president will be faced with an even weaker economy on Inauguration Day.

And what will be his solution? More stimulus spending? If trillions in QE1 and QE2 did nothing, what are the chances that another trillion or two will make any difference? Not much.

My advice remains the same: Fasten your seatbelts. The losers in the election will be upset, and will claim fraud, and the results will further divide an already divided country. The economy will continue it’s downward march. The U.S. dollar will continue to weaken, although, conversely, as pointed out by onlooker on the Buy High Sell Higher Forum it’s quite possible that the stock market will power higher, since there is no other place for the money to go. And gold, long term, will be one of the few assets that holds it value.

The world may look completely different next week, or not, so tune back in next week and we’ll see where we are at.

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