Rita, Katrina, Oil and the Economy

“Commentators at the positive end had already started writing their “why the world economy survived Katrina” pieces within a week or so of the disaster. The (economic) question is – will US consumer confidence (and market confidence generally) survive Rita? I leave for others the shorter term questions around whether the US authorities learned enough from the Katrina debacle to ensure that far more Americans personally survive Rita. As I write, Texans are evacuating. A second Cat. 4/5 storm in the Gulf within a few days is a very different thing for public sentiment to cope with than a single, not unprecedented event – two Cat 4 storms in a year last happened in 1915, when 275 died in Louisiana when Lake Pontchartrain broke its banks and 275 in Galveston, Texas a little later … Even if, as we all hope, Rita passes or fades without the dramas and human suffering of Katrina, the fact that it existed at all is going to change how people feel, and potentially push them toward saving for a rainy day rather than spending. If so, the world economy may be in for a storm of its own.”

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