Economic Factor #10: Events

  • May 17, 2017

    Economic-Factor-10

    Very major disasters such as severe earthquakes, volcanoes, storms, famine, floods, and pestilence can devastate even large economies such as ours. The massive influenza epidemic of 1918 has been found to have damaged economic growth even through the 1920s.

    Events such as World War II decimated the economies of many nations. The U.S. has been fortunate to have been geographically isolated from major direct damages due to world wars. In fact, many economists view World War II as having been a driver of economic recovery from the Great Depression in the U.S. But the countries of the Middle East are current examples of the long term economic destruction of long wars. Nuclear wars can take the economic damage to much higher level.

    Terrorism is another manmade event that can destroy long term economic growth. Widespread terrorism of the type that the world has experienced in recent decades can devastate economies as seen in several Middle East countries. But an additional concern is extremely powerful terrorism such as nuclear, biological or chemical attacks.

    Reasonable preparation should be made to prepare for extreme events such as keeping portfolios diversified and unleveraged. But it is virtually impossible to forecast the extent to which the U.S. economy will be damaged by such events in the future or the importance that these events will take on as factors of future long term economic growth throughout the world.

    Importance of factor in general: B-
    Prospective influence of this factor on the U.S. economy: B

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