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WARNING: “Silver Lining” Approaching!

Let’s just hope that Sandy is more of a media storm than a meteorological one and that casualties and property damage are minimal or, better yet, non existent.

If there is, however, extensive property damage then be on the lookout for some economic ignoramuses to start pointing to the so called “silver lining” in the form of increased economic activity.  Understand: destruction does not create wealth.  If we have to spend money to restore what we once had, that money will no longer be available for other purposes.  Money spent for new roofs will now not be spent for, say, new cars.  The roofer’s gain is the autoworker’s loss.  And the man that might have had a good roof and a new car will now have to settle for a good roof and no new car.

A powerful storm can change what we buy, but never enables us to buy more overall than we would have been able to absent the storm damage.  Don’t confuse money velocity with wealth creation through production.  Spending, particularly to replace things we already had, doesn’t make us richer, it makes us poorer.  So let’s pray that there is no further loss of life from this storm and that any damage to property is minimal.  Because when it comes to natural disasters there is no such thing as a silver lining.

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