The Train They Call the City of New Orleans (Part 2)

Previously, we discussed the good and the stupid aspects of Hurricane Katrina and the City of New Orleans. A very quick synopsis is that there is nothing good at all about it, but plenty of stupidity could easily be found. More important however, is how this impacts us now looking ahead. Before we address that critical idea, let’s first discuss the bad and the ugly.

Note: Part 1 and part 2 were written last Wednesday and Thursday. They originally appeared in Whiskey and Gundpowder. I am sure there is a lot more ugly to add but save for a small addendum at the end, I am going to go with what I originally wrote. Here goes....

Let's now turn our focus to the ugly.

Conditions deteriorated inside flooded New Orleans, with perhaps as many as 100,000 people left. The Federal Emergency Management Agency suspended boat rescue operations because the city had grown too violent.

Yahoo is reporting that the Unrest Intensifies at Superdome Shelter.

Fights and trash fires broke out at the hot and stinking Superdome and anger and unrest mounted across New Orleans on Thursday, as National Guardsmen in armored vehicles poured in to help restore order across the increasingly lawless and desperate city.

"We are out here like pure animals. We don't have help," the Rev. Issac Clark, 68, said outside the New Orleans Convention Center, where corpses lay in the open and evacuees complained that they were dropped off and given nothing.

Outside the Convention Center, the sidewalks were packed with people without food, water or medical care, and with no sign of law enforcement. Thousands of storm refugees had been assembling outside for days, waiting for buses that did not come.

At least seven bodies were scattered outside, and hungry, desperate people who were tired of waiting broke through the steel doors to a food service entrance and began pushing out pallets of water and juice and whatever else they could find.

An old man in a chaise lounge lay dead in a grassy median as hungry babies wailed around him. Around the corner, an elderly woman lay dead in her wheelchair, covered up by a blanket, and another body lay beside her wrapped in a sheet.

"I don't treat my dog like that," 47-year-old Daniel Edwards said as he pointed at the woman in the wheelchair. "I buried my dog." He added: "You can do everything for other countries but you can't do nothing for your own people. You can go overseas with the military but you can't get them down here."

The US Post Office suspends mail service

Effective immediately, the Postal Service is not accepting any Standard A Mail (Letters and Flats) or Periodicals Mail — from any source — addressed for delivery within the following three-digit ZIP Code ranges: 369, 393, 394, 395, 396, 700, 701 and 704.

This emergency action has been taken as a result of severe facility damage, evacuations and other issues resulting from Hurricane Katrina.

We are now formulating plans to address the handling of Standard A and Periodicals Mail already in the mailstream and addressed for delivery to these eight ZIP Code areas.

We will update this information as circumstances warrant.

Looting is rampant.

Some officers joined in taking whatever they could, including one New Orleans cop who loaded a shopping cart with a compact computer and a 27-inch flat screen television.
Officers claimed there was nothing they could do to contain the anarchy, saying their radio communications have broken down and they had no direction from commanders.

“We don't have enough cops to stop it,” an officer said. “A mass riot would break out if you tried.”

Inside the store, the scene alternated between celebration and frightening bedlam. A shirtless man straddled a broken jewelry case, yelling, “Free samples, free samples over here.”

Another man rolled a mechanized pallet, stacked six feet high with cases of vodka and whiskey. Perched atop the stack was a bewildered toddler.
Throughout the store and parking lot, looters pushed carts and loaded trucks and vans alongside officers. One man said police directed him to Wal-Mart from Robert's Grocery, where a similar scene was taking place. A crowd in the electronics section said one officer broke the glass DVD case so people wouldn't cut themselves.

“The police got all the best stuff. They're crookeder than us,” one man said.

Mish, what about gas gouging? Hmmm good question. Let's take a look.
According to The Atlanta Journal-Constitution Georgia governor enacts anti-gouging law.

"Lines at Atlanta area gas pumps grew along with prices this afternoon as word spread of possible fuel shortages. By noon today, several metro Atlanta gas stations had posted prices above $3.15 per gallon. Some metro area stations were charging as much as $4.75 a gallon, according to a Web site that keeps track of such things, www.atlantagasprices.com. Prices were rising so fast in some areas that signs at gas stations no longer matched what was being charged at the pumps. Declaring that there's 'credible evidence' of price-gouging at the gas pumps, Gov. Sonny Perdue late Wednesday signed an executive order threatening to impose heavy fines on gasoline retailers who overcharge Georgia drivers."

That seems pretty ugly doesn't it? Well what about the bad?
I am afraid I do not have time to report about everything that is bad. It would be an endless task. It's everywhere you look: homeless, dead, people out of work, property destroyed, rising gas prices, power outages, fuel shortages, lack of food, lack of drinking water, overabundance of every other kind of water, etc etc etc. Here are a few lowlights for those that insist.

Utilities see wide damage to systems

Utility systems torn apart by Hurricane Katrina continued to assess damage to power lines in the Gulf region on Wednesday and warned of extensive damage.

Some utilities have begun to make progress returning power to customers but said the hardest hit areas are still likely to face weeks without electricity and predicted vast repair effort.

Estimates of outages calculated from reports by major power companies in the region were still near 2 million on Wednesday and officials indicated these figures remain fluid.

Gas shortages in North Carolina
North Carolina suppliers usually have a five-to-seven-day supply of gasoline on hand, but they haven't been resupplied since Sunday, Easley said. Some off-brand gas stations already have reported shortages, he said.

Gas supplies in Florida
At least four of 17 suppliers in Florida told local stations to expect less-frequent deliveries of fuel.

Florida ports have about 159 million gallons of fuel on hand -- enough to last about seven days under normal circumstances, said Cragin Mosteller, spokeswoman for the state Department of Environmental Protection.

Let's now get to the heart of the matter.
According to the US Coast Guard 20 oil rigs missing in Gulf of Mexico.

"We have confirmed at least 20 rigs or platforms missing, either sunk or adrift, and one confirmed fire where a rig was," Petty Officer Robert Reed of the Louisiana Coast Guard told AFP.

According to the latest tally Wednesday from the federal Minerals Management Service, a total of 561 platforms and rigs have been evacuated in the Gulf of Mexico, which accounts for a quarter of US oil production.

Over 91 percent of normal daily crude oil production in the Gulf -- 1.5 million barrels -- is now shut down, and more than 83 percent of natural gas production, the MMS said.

Among the firms reporting missing rigs was Newfield Exploration Company, which said an aerial survey of its operations in the eastern Gulf showed that one of its platforms at Main Pass 138 "appears to have been lost in the storm".

"As of this morning, boats and helicopters are mobilizing to better access damages, identify any environmental impacts and begin the repair process," Newfield said in a statement.

Here are some Dow Jones Newswire headlines:
*DJ Mississippi R Traffic To Be Halted 'Many,Many Days' -USCG
*DJ Katrina 'Cataclysmic Event' For Energy Facilities -Industry
*DJ At Least 2 Refineries Inaccessible Due To Floods -Industry
*DJ Power Outages A Major Obstacle To Refinery Restarts -Industry
*DJ Katrina 'Cataclysmic Event' For Energy Facilities - Indus

According to the New York Times Carriers Are Stricken by Cancellations and Lack of Fuel
"The airline industry felt the brunt of Hurricane Katrina yesterday, with some airports running low on jet fuel and carriers canceling hundreds of flights. Meanwhile, Wall Street feared that the financial problems of the sickest airlines could grow worse.

And with gasoline selling for upward of $3 a gallon in some parts of the country, versus $1.88 for jet fuel, airlines were worried that refineries might choose to produce gasoline rather than jet fuel, which would be less in demand."

As of August 31st here is a status of key energy facilities.

On the human side of things the Guardian is reporting Katrina Refugees Will Go to Astrodome.

A slow exodus from the smelly and sweltering Superdome began Wednesday as bedraggled refugees boarded giant trucks and then buses for a trip to more comfortable surroundings in the Houston Astrodome.

The evacuation was kept almost secret to avoid a stampede. People were taken a few at a time through a garage, then to trucks that plowed through 4 feet of water and delivered them to the buses.

With no air conditioning and little electricity, the heat and stench inside the Superdome were unbearable for the nearly 25,000 refugees housed there. As the water pressure dropped lower and lower, toilets backed up. The stink was so bad that many medical workers wore masks as they walked around.

"These conditions are atrocious," he said. "We'll take trucks, planes, boats, anything else, I have to get these people out of here."

By midafternoon, medics were hauling people off one after another because of heat-related problems. Even as the evacuation was going on, people walked through waist-deep water to get to the Superdome.

Tempers flared in the crowd. One woman yelled: "You're just lying to us! You had us standing all day in this heat, and you're lying to us. You're not taking us anywhere!"

The oficer yelled back, "Look, ma'am, do you think I'm in charge? Do you think I'm making decisions? I told you what they told me."

I could go on and on and on.
Unfortunately I do not know where to stop. Heck, I do not know where to begin. Should I begin or end with the human tragedy or the destruction of refining capacity and infrastructure? At any rate, and for the time being, the US can release all the petroleum it wants from strategic reserves but point blank there does not seem to be refining capacity to produce gasoline. Many refineries have been damage by this storm as noted in the link above. It could take weeks or longer to be back up to full capacity. Extra supplies of crude do us no good unless we can refine it.

OK Mish where to from here?
Wall Street is salivating over this disaster. Interest rates are falling and billions of dollars in handouts are awaiting the right companies. Interest rate futures plunged and the US dollar fell. This was great news for US multinational corporations but bad news for US consumers and US taxpayers. Who cares about them anyway?

Bernie Schaeffer had this to say in Schaeffer's addendum on Wednesday August 31, after a huge stock market rally in the face of this disaster:

"Now I get it. The markets have become invulnerable to 'nonrecurring events.' Presumably, such events would also include a hedge fund blow up that leads to a derivatives meltdown, a major terrorist attack on a large U.S. city, or an event that takes down a large portion of worldwide oil production capacity. An old adage on Wall Street was 'Never confuse brains with a bull market.' These days, it might go something like this: 'Never confuse a market that is structurally supported by complacent derivatives players and by abnormally high liquidity that is threatened by a tightening Fed and an inverting yield curve with a market that is invulnerable to external shocks.'"

Thanks Bernie, I could not have put it better myself!

In the meantime, 1,000,000 people or so are displaced, without a home, without a job, without any money or clothes and in many cases without any hope. In the face of that, homebuilder stocks stages a big rally today as if any of those people will be buying a home any time soon. Who cares? After all lower interest rates might prolong the housing party for a few more months.

Unfortunately for those from displaced by Katrina, it is going to take months if not much much longer for things to get back to normal. We've no got a million new homeless and currently jobless from New Orleans. There are another million without power, bankrupt airlines unable to buy jet fuel, a lack of refining capacity, and looting by police in a major city.

We were headed for a recession anyway, but rest assured it will all be blamed on Katrina or rising oil prices or both. Wall Street has its "out" now and that is all that matters. Any excuse is good enough for Wall Street but this upcoming lie is perfect simply because it will be so believable to so many. No one will blame the real cause: rampant credit growth and speculation with falling loan standards on top of it, all supported by a bubble blowing FED.

It will be interesting to see exactly how the BEA handles the upcoming jobless numbers. The job loses should be staggering. That said, it gives "someone" a very very easy out. All the government has to do is over report the job losses to make the reports that follow look good. I expect huge "one time" over reporting of job losses, conveniently blamed on Katrina. Rest assured, anything that can be blamed on Katrina will be and then some.

No doubt there are those that think this is inflationary. Rest assured it is not. One million people suddenly put out of work, with no income and destroyed houses is simply NOT inflationary. Rising gasoline prices without rising incomes is not inflationary either regardless of what anyone tells you. This is going to cut into consumer discretionary spending big time, and unlike 911 there is NOT going to be a big housing boom to bail us out.

September 6th Addendum:
It seems President Bush wants to personally lead a task force to shift the blame away from himself and his admistration. Let's take a look at what Bush is saying as well as a translation of what he is saying.

What Bush actually said: "What I intend to do is lead an investigation to find out what went right and what went wrong. We still live in an unsettled world. We want to make sure we can respond properly if there is a WMD (weapons of mass destruction) attack or another major storm."

Bush translation thanks to tenworlds on the Motley Fool: "What I intend to do is lead an investigation to take credit for what went right and to blame others for what went wrong. We still live in an unsettled world, and I intend to keep it that way. We want to make sure we can avoid responsibility again if there is a WMD (weapons of mass destruction) attack or another major storm."

The Intellectual Activist penned an interesting piece on the welfare state in New Orleans. An Unnatural Disaster: A Hurricane Exposes the Man-Made Disaster of the Welfare State.

The man-made disaster we are now witnessing in New Orleans did not happen over four days last week. It happened over the past four decades. Hurricane Katrina merely exposed it to public view. The man-made disaster is the welfare state.

To give you an idea of the magnitude of what is going on, here is a description from a Washington Times story:

"Storm victims are raped and beaten; fights erupt with flying fists, knives and guns; fires are breaking out; corpses litter the streets; and police and rescue helicopters are repeatedly fired on.

"The plea from Mayor C. Ray Nagin came even as National Guardsmen poured in to restore order and stop the looting, carjackings and gunfire....

"Last night, Gov. Kathleen Babineaux Blanco said 300 Iraq-hardened Arkansas National Guard members were inside New Orleans with shoot-to-kill orders.

" 'These troops are...under my orders to restore order in the streets,' she said. 'They have M-16s, and they are locked and loaded. These troops know how to shoot and kill and they are more than willing to do so if necessary and I expect they will.' "

So what explains the chaos in New Orleans?

All of this is related, incidentally, to the incompetence of the city government, which failed to plan for a total evacuation of the city, despite the knowledge that this might be necessary. In a city corrupted by the welfare state, the job of city officials is to ensure the flow of handouts to welfare recipients and patronage to political supporters—not to ensure a lawful, orderly evacuation in case of emergency.

What Hurricane Katrina exposed was the psychological consequences of the welfare state. What we consider "normal" behavior in an emergency is behavior that is normal for people who have values and take the responsibility to pursue and protect them. People with values respond to a disaster by fighting against it and doing whatever it takes to overcome the difficulties they face. They don't sit around and complain that the government hasn't taken care of them. And they don't use the chaos of a disaster as an opportunity to prey on their fellow men.

But what about criminals and welfare parasites? Do they worry about saving their houses and property? They don't, because they don't own anything. Do they worry about what is going to happen to their businesses or how they are going to make a living? They never worried about those things before. Do they worry about crime and looting? But living off of stolen wealth is a way of life for them.

People living in piles of their own trash, while petulantly complaining that other people aren't doing enough to take care of them and then shooting at those who come to rescue them—this is not just a description of the chaos at the Superdome. It is a perfect summary of the 40-year history of the welfare state and its public housing projects.

The welfare state—and the brutish, uncivilized mentality it sustains and encourages—is the man-made disaster that explains the moral ugliness that has swamped New Orleans. And that is the story that no one is reporting.

The Salt Lake Tribune reports Frustrated fire crews to hand out fliers for FEMA

ATLANTA - Not long after some 1,000 firefighters sat down for eight hours of training, the whispering began: "What are we doing here?"

Many of the firefighters, assembled from Utah and throughout the United States by the Federal Emergency Management Agency, thought they were going to be deployed as emergency workers. Instead, they have learned they are going to be community-relations officers for FEMA, shuffled throughout the Gulf Coast region to disseminate fliers and a phone number: 1-800-621-FEMA.

"They've got people here who are search-and-rescue certified, paramedics, haz-mat certified," said a Texas firefighter. "We're sitting in here having a sexual-harassment class while there are still [victims] in Louisiana who haven't been contacted yet."

But as specific orders began arriving to the firefighters in Atlanta, a team of 50 Monday morning quickly was ushered onto a flight headed for Louisiana. The crew's first assignment: to stand beside President Bush as he tours devastated areas.

As if that was not stupid enough FEMA accused of flying evacuees to wrong Charleston.

"A South Carolina health official said his colleagues scrambled Tuesday when FEMA gave only a half-hour notice to prepare for the arrival of a plane carrying as many as 180 evacuees to Charleston.

But the plane, instead, landed in Charleston, West Virginia, 400 miles away.

A call seeking comment from FEMA was not immediately returned."

To cap off this addendum the Washington Post asks Time for a Tough Question: Why Rebuild?

Should we rebuild New Orleans, 10 feet below sea level, just so it can be wiped out again?

Some say we can raise and strengthen the levees to fully protect the city. Here is some unpleasant truth: The higher the defenses, the deeper the floods that will inevitably follow. The current political climate is not conducive to having scientific arguments heard before political decisions are made. But not doing so leads to the kind of chaos we are seeing now.

This is not a natural disaster. It is a social, political, human and -- to a lesser degree -- engineering disaster. To many experts, it is a disaster that was waiting to happen. In fact, Katrina is not even the worst-case scenario. Had the eye of the storm made landfall just west of the city (instead of to the east, as it did) the wind speeds and its associated coastal storm surge would have been higher in New Orleans (and lower in Gulfport, Miss.). The city would have flooded faster, and the loss of life would have been greater.

What scientific facts do we need before making fateful political, social and economic decisions about New Orleans's future? Here are just two:

First, all river deltas tend to subside as fresh sediment (supplied during floods) compacts and is transformed into rock. The Mississippi River delta is no exception. In the early to mid-20th century, the Army Corps of Engineers was charged with protecting New Orleans from recurring natural floods. At the same time, the Corps kept the river (and some related canals) along defined pathways. These well-intended defensive measures prevented the natural transport of fresh sediments into the geologically subsiding areas. The protected land and the growing city sank, some of it to the point that it is now 10 feet below sea level. Over time, some of the defenses were raised and strengthened to keep up with land subsidence and to protect against river floods and storm surges. But the defenses were never designed to safeguard the city against a direct hit by a Category 5 hurricane (on the Saffir-Simpson scale) or a Category 4 hurricane making landfall just west of the city.

Second, global sea levels have risen less than a foot in the past century, and will rise one to three feet by the end of this century. Yes, there is uncertainty. But there is no doubt in the scientific community that the rise in global sea levels will accelerate.

What does this mean for New Orleans's future? Government officials and academic experts have said for years that in about 100 years, New Orleans may no longer exist. Period.

It is time to face up to some geological realities and start a carefully planned deconstruction of New Orleans, assessing what can or needs to be preserved, or vertically raised and, if affordable, by how much. Some of New Orleans could be transformed into a "floating city" using platforms not unlike the oil platforms offshore, or, over the short term, into a city of boathouses, to allow floods to fill in the 'bowl' with fresh sediment.

The problem with rebuilding is a simple question: at whose risk? If there are government subsidies (AKA taxpayer subsidies) the city will be rebuilt. If someone wants to rebuild it's fine by me, as long as it is on their dollar not the taxpayers's dollar. The problem with government subsidies is they never end and they are never cost effective. Period. A strong case can be made for rebuilding the port and enough of the city to service that port but outside of that, rebuilding should be at private sector expense and private sector risk. If it is done with taxpayer money it will just lead to another boondoggle some time down the road at even greater expense.

End Addendum.

The train they call the city of New Orleans just wrecked.
Let's close with a song.

Nighttime on The City of New Orleans,
Changing cars in Memphis, Tennessee.
Half way home, we'll be there by morning
Through the Mississippi darkness
Rolling down to the sea.
And all the towns and people seem
To fade into a bad dream
And the steel rails still ain't heard the news.
The conductor sings his song again,
The passengers will please refrain
This train's got the disappearing railroad blues.

Good night, America, how are you?
Don't you know me I'm your native son,
I'm the train they call The City of New Orleans,
I'll be gone five hundred miles when the day is done.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/