US Global Investors’ Holmes: Sandy Could Fuel $100 Billion Construction Boon

Wednesday, 31 Oct 2012 12:42 PM

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Super-storm Sandy might have brought with it a silver lining to the economy.

Should the cost of the damage inflicted by the storm come to $20 billion as many predict, the boon in terms of rebuilding and related spending could hit $100 billion, said Frank Holmes, CEO and CIO of money manager U.S. Global Investors.

“America is great at rebounding and it will reinvigorate the economy. When you have committed infrastructure projects by governments, you get this automatic multiplying effect … every dollar is worth $4 to $6, so I think the positive part is going into 2013,” Holmes told CNBC.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

“We’re going to get a lot of infrastructure spending.”

Other experts agree, in that once the damage runs its course, longer-term benefits to gross domestic product (GDP) could follow.

“The upfront decline in GDP and the destruction of physical wealth will be offset over time by greater economic activity,” Mohamed El-Erian, CEO of fund giant Pimco, wrote in a CNBC guest blog.

“So while the balance sheet of the country as a whole has been negatively affected, there will be a boost to certain components of aggregate demand as some of the delayed activity is made up and reconstruction proceeds.”

Sandy will likely zap $10 billion to $20 billion out of the economy in terms of damage and lost business, according to Eqecat, which provides loss estimates to the insurance industry, CNNMoney reported, which despite rebuilding efforts, doesn’t bode well for the economy.

“The bottom line is, it’s very disruptive, very painful, but at the end of the day these kinds of natural disasters typically don’t show up in national economic data,” said Mark Zandi, chief economist for Moody’s Analytics, CNNMoney added.

“There will be a lot of offsetting effects, both winners and losers. Restaurants get hurt. Grocery stores do better.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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