HURRICANE KATRINA WILL HIT THE ECONOMY OF THE REST OF THE WORLD

The true ramifications of the massive disaster that struck Louisiana this week are slowly being revealed. Not only was there huge loss of life, but millions are homeless and vast amounts of valuable infrastructure have been destroyed. Only now can the cost of the reconstruction be estimated, and it seems likely that hundreds of billions of dollars will be needed. But in a world up to its eyeballs in debt where is this money going to come from? Xenox News has done some quick back of the envelope calculations for the funds needed to get the shattered states affected by this disaster back on their feet. And the numbers we have come up with are truly shocking. For instance it has been estimated that 10% of the Alabaman population have been made homeless by Hurricane Katrina. Whole communities have been destroyed along with vital infrastructure such as roads, rail and factories that served as their economic lifeblood. The rebuilding of these facilities is going to take more than a Telethon; to revive the Gulf Coast massive funds are required now and more will be needed well into the future.

And it is unlikely that this money can be loaned since, realistically, it will take decades before these states could pay off any debt. For Louisiana the destruction of their tourist resources could cripple the state till the end of the decade. Vast amounts of funds will be needed to rebuild them and to restore tourist confidence in them. Mississippi hobbles along with a derelict economy and fragile race relations; could this disaster be the push that causes this fragmented state over the edge and into chaos? Only immediate and significant assistance can keep this vital state afloat.

So where can this money come from? The US is staggering under the weight of histories greatest debt, with both Government and private debt skyrocketing. And it is this debt that ties the hands of other governments of the world, affecting their ability to offer significant amounts of money to the Hurricane Katrina-afflicted. For instance if China was to offer any significant monies it would almost certainly impinge on it’s current role of underwriting the US debt. Removal of this would drive the US into economic freefall, taking the rest of the world along with it. The other members of the vaunted G7 are the same; their cupboards bare and their consumer credit card driven economies deep in red ink.

The choice is stark indeed, either the debt binge of the West ends or we let the disaster afflicted states of the GulfCoast sink into an even more dire position and become breeding grounds of disease, resentment and revolution. It will take some difficult decisions from our world leaders, and if recent history is anything to go by, I seriously doubt they have the intelligence to make the right ones.

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