As the dust starts to settle on the massive destruction left by Hurricane Sandy, along with the tragic human cost, rational thought process has many of us pondering the macro effect. We really won’t know the exact impact on the United States economy until well into 2013 and, even now, the general consensus by and large is mixed at best with strong opinions on both sides of the spectrum.
With such unique events, the true question is how the full extent of the disruptions can be quantified while reviewing the various types of damage and duration of disruptions to various activities that result in economic impact. For starters, one would have to consider the cost impact to insurance companies as the rebuilding process takes place and this will be costly -- very costly.
The World Bank suggests that if the United States fiscal cliff is not averted it would reduce U.S. growth by 2.2 percent and global growth by 1 percent. It does not stop there as the World Bank also mentioned that we could see a 5 percent decline in U.S. import volumes, a 6 percent decline in oil prices, a 2 percent drop in metal prices, and a 1 percent drop in food commodity prices.
The stakes are high and the world would be the victim should the Republicans and Democrats not come to a solution regarding our debt. U.S. citizens, regardless of party affiliation, want to see progress. Anything short of that would cost us dearly -- to avoid solving this problem head-on could cause a ripple effect impacting real GDP of high income and developing countries in 2013. Not to mention this would again paint the U.S. as the 400-pound gorilla who can’t climb a tree to find its supper.