18.09.2017

Debt and Hurricane Damage

400The US national debt is now well over $20T thanks to a debt limit suspension approved by Congress that also includes $15.25B for hurricane relief. The FEMA (Federal Emergency Management Agency) had barely two days of funds left and was grappling with the damage caused by Hurricane Harvey and had to cope with the damage caused by Hurricane Irma. The Feds had no money left, so they resorted to debt to deal with the destruction.

         Estimates of the damage caused by the two hurricanes vary. Earlier estimates were very high: $150B to $180B for Harvey and $200B for Irma. These estimates have undergone strong reductions: estimates for damage caused by Irma are now $49B with $19B insured with some estimates as low as $10B and Harvey-caused damage is estimated to be $25B to $30B with many homes not insured for flood damage. Insurance companies will put up at least $20B and see their stock quotations fall as a result. 

                   On the positive side one can expect a boost to GDP thanks to all the money that will be spent on repairs and reconstruction. Much more serious is the disruption caused to businesses because of the electricity outages in Texas, Louisiana and Florida. It will also take a good bit of time to repair all the damage.

         The point that is really interesting is that the government used the hurricanes to promote a deal to suspend the debt limit ceiling for three months and postpone the debate on the debt to December. President Trump may be a deal maker, but one wonders what sort of deal he is going to make to avoid bankruptcy as the ratio of US debt to GDP is well over 100%, a fact that this Newsletter has been insisting on for quite some time.

         This increase in debt comes about as the attack on the petrodollar has now enlisted Venezuela. See the good article by Jay Syrmopoulos in Activist Post, dated 15 August 2017, who connects, in very much the same way that this Newsletter has been suggesting, the Sino-Russo cooperation in promoting a ruble-yuan oil market with reliance on gold as a reference currency. The 2014 gas deal between China and Russia can be seen as a decisive step towards getting around the US dollar as a petrol currency.

         Despite having to pile on more debt to aid hurricane victims, the US lumbers on antagonizing Russia, arming Ukraine, meddling in Syria and threatening North Korea. It would not be surprising if the US marines went to Venezuela for the oil.

Walter Snyder  
info@swissfinancialconsulting.ch

 

Disclaimer:
This Newsletter has been prepared by WWS Swiss Financial Consulting SA (the company). Even though every effort has been taken to ensure the accuracy of the content of the Newsletter, there is absolutely no guarantee that the information contained in it is correct, up-to-date, accurate or otherwise applicable. It is not intended as a solicitation, invitation or recommendation for the purchase or sale of any investment fund or product or security or financial instrument or to participate in any particular trading strategy or banking product in any jurisdiction. It is not to be distributed in any country or area where it is legally prohibited. No liability whatsoever is or will be assumed by the company for any damage, loss or negative result of any sort ensuing from following views expressed and contained in the Newsletter. Investors themselves assume the full risk for any decisions that they take (caveat emptor). The Newsletter may not be reproduced or published by anyone anywhere in any way or form without the express written permission of the company.

 


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