Fox News Special on the cost of Katrina, Saturday Sept. 10. I joined the Fox News’ special report with Neal Cavuto to discuss the financial impact of Hurricane Katrina. With the 4th anniversary of 9/11 on everyone’s mind, we discussed the reaction of the financial markets after 9/11 compared with the response to Katrina. Katrina was the worst national disaster in U.S. history, but, unlike after 9/11, the market was up. What gives?
People fear disorder. We need order to survive. When we take a breath, we want to find oxygen there every time. When a disaster strikes, people’s sense of order is shattered. When we loose the patina of civilized order, we behave badly. But people survive and adapt to change.
Americans are tougher now than we were in 2001. In the past 4 years we have supped on chaos—9/11, anthrax, Dot.coms, SARS, Iran, Iraq, Tyco, Enron, MCI, Arthur Andersen, Martha Stewart, Mad Cow (no, this is not a redundant reference to the prior item), scandal, Bird Flu, Russian school hostages, London bombings, Sudan, steroids, and $3/gallon gas. We have fired our ‘priests’ and former trusted advisors. We have burned witches–Sarbanes-Oxley. We violate due process at Guantanamo. A new army x-rays our shoes at airports.
While we don’t like the flavor of chaos, we are getting used to it. The interesting thing to me is the world is no more chaotic today than it ever was; it’s just that Americans can see it now real time and unedited. The lights are on and the cameras are rolling now everywhere and all the time with real time news coverage. Cable TV, networked PC’s, satellites are the reason.
This stuff isn’t hard. Our parents had it hard. They had the Great Depression, World War I, World War II, Hitler, Stalin, Korea, China, and Nuclear Threat. They didn’t whine. They fought wars, went to work, raised families, saved and invested. And the economy grew.
We’re beginning to do the same. Growth is very strong. While Q4 GDP growth could decline by 1/2% from recent 3-4% levels in Katrina’s wake, it will be back on track by the first quarter of next year. New Orleans employed 600,000 people before Katrina out of 148 million total for the U.S. U.S. employment. Our strong labor markets grows by about 200,000 people each month. We will replace the jobs lost in Katrina in 2 months. Although there is no way to make up for the human suffering and losses, the strong economy will help people get back to work and begin to rebuild their lives. The Fed will continue to target low inflation as their primary concern, but they will be more cautious about raising the fed funds rate now, not wanting to derail the rebuilding after Katrina.
Inflation is low and will stay low. Interest rates will stay low. Profits are up. The stock market reflects those strong fundamentals.
It would be a big mistake to bet against the American economy today.