Lars Toomre now is virtually certain the American economy is tipping over into a deep recession. The key to how deep the 2023 recession will be has always been the mighty American consumer. Will the broad American population continue to spend in face of the COVID outbreak in the Far East, the steep rise in the US Treasury yield curve, the 2023-2024 European energy crisis in Europe, and …??
Most Americans experienced extreme cold during the past week or so. Friends located in Texas (west of Dallas and north of Austin), Arkansas, Tennessee, Alabama, and the Florida panhandle down to just north of Tampa all are reporting, complaining, and/or claiming frozen, or burst pipes in their respective residences. Yesterday, NPR ran a story “A deep freeze is breaking pipes and creating a water crisis across the South,” which has more details than just antidotal stories.
That story reports that Charleston, South Carolina is on the “verge of a boil water requirement for its hundreds of thousands of customers that could close restaurants and other businesses.” Apparently, the Charleston water system produces about 50 million gallons of potable water on a “normal” day. Over the past holiday weekend, that same system had an output of around 100 million gallons per day. As a spokesman for that water system said, “It’s death by a thousand cuts.”
NPR further reports: “More than 400 customers reported burst pipes, so between unreported leaks, closed businesses, and empty vacation homes, the [Charleston water] system figures thousands of leaky pipes are gushing water.”
Now spend a moment to reflect on the economic damage of more than 400 floods, and likely many have not yet even been considered yet. Who knows where the leaks are occurring and what it might cost both to fix the leaks and to repair the damage caused by cold water? This article from 2018 suggests that the average insurance claim across 433 burst water pipes was $27,000. The inflator to 2023 dollars is 122% or so. That means that Charleston’s loss is something close to 1,500 [eventually submitted insurance claims] * ($27,000 [2018 loss amount after deductibles] * 1.22% [2017 dollar expressed in 2023 dollars], or approximately $49,410,000.
Proceed further and start to perform some loss accumulations. How many municipalities are between Sarasota, Florida, and the Canadian border, west of the Atlantic Ocean and East of the Rocky Mountains? That is the area of the recent freeze zone. Roughly forty (40) states are involved. So as a guesstimate, I would ballpark the insurance losses at $8 BILLION.
One needs to also include the uninsured and families on the lower rungs of the economic spectrum who simply cannot afford to pay for flood insurance when one considers economic loss. It is a bit of a guess but insured losses are generally one quarter or less of the total economic loss. Using the $8 Billion from above, the total losses from the freeze event have to be close to $50 Billion.
What organizations and political entities budgeted for this unexpected freeze event? Where will the money come from to pay for all of the uninsured losses from as far south as Sarasota, Florida all of the way north to the Canadian border? America just suffered an unexpected insurance loss on top of the other bad economic news. Even $50 BILLION starts being BIG money!!!