Horrific Thinking At the New York Fed

Sep 11, 2017

New York Federal Reserve President William Dudley has flawed thinking. After Hurricane Harvey, NY Fed President Dudley said, “The long-run effect of these disasters, unfortunately, is it actually lifts economic activity because you have to rebuild all the things that have been damaged by the storms.” Dudley is wrong. Destruction does not increase economic activity. Destruction shifts economic activity. Instead of increasing the size of the economy, people will have to shift their efforts to rebuilding their houses and businesses that were destroyed by the hurricane. Instead of using their money to expand the economy by buying new goods and services, people will be having to rebuild and replace what previously existed. Dudley has a PhD in economics from the University of California Berkeley and was chief economist for Goldman Sachs.