Recently, economic news from both Wall Street and Washington has become increasingly more dismaying. Officials are desperately working to quell fears that America is heading toward financial disaster. Some of the language that has been chosen by these officials, however, has been indicative of the opposite conclusion. For instance, one term that has been bandied about rather freely regarding the subprime mortgage crisis is “perfect storm.” Since the release of the hit movie of the same name, this term has been overused to hyperbolically describe nearly everything that has gone wrong. However, the term might still be useful in deconstructing the metaphor in order to predict where we possibly could be headed.

                The term “perfect storm” refers to a set of conditions that occur simultaneously in order to create the worst possible outcome. It originally was used to describe the Halloween Nor’easter that hit Atlantic Canada in 1991. The storm was the result of an unlucky confluence of weather events that, while individually would have been rather benign, resulted in the second most costly hurricane of that year. Like many powerful coastal storms, there was immediate damage and loss of life, and, while the storm was raging, widespread fear and panic occurred. People could only hunker down and wait for the storm to pass, all the while hoping for the best.

           After the storm, the people who were spared during the initial onslaught emerged to face the destruction that was left in the storm’s wake. The effects of the storm were widespread, and the building process was extremely costly and time consuming.  Bearing this in mind, reflect for a moment on Hurricane Katrina. It made landfall on New Orleans and the Gulf Coast in August of 2005 and caused incredible damage not only to the infrastructure of the region, but also to the inhabitants. Widespread disease and looting occurred even after meteorological calm returned to the region. The consequences of this storm were so appalling that some residents who were stranded in the aftermath expressed that they wished they had fallen victim to the fury of the actual storm itself. Even today, more than three years later, conditions in New Orleans are inexcusable: crime, poverty, and unemployment are rampant. While a storm can be terrifying as it is battering us, it is often the rubble left in its wake that is the hardest to cope with.            

What does all of this have to do with our current financial situation?
Assuming that the subprime mortgage crisis was (or is) in fact a “perfect storm”, it means that after the visible bank closures and the initial wave of bankruptcies and foreclosures, we still have a long way to go. The aftermath of this financial hurricane will not be contained to the banks that owned the risky (and now valueless) mortgages, nor to the people that invested heavily in an inflated stock market. Every one of us will be forced to deal with the destructive wake of this financial crisis.           

Even in relatively affluent areas the situation is grim. Unemployment, bankruptcy, and foreclosures in Suffolk County have risen immensely from October 2007 to October 2008, and this trend throughout the country is either comparable or far worse. The initial shock to the economy will reverberate for years. The preliminary losses will, due to basic economic principles, continue to multiply. Furthermore, a lack of credit from banks stifles job creation, which slows spending, which in turn causes businesses to cut back. This downward spiral is self-perpetuating, and needs to be actively broken. We can all contribute to this by making wise decisions regarding our financial situations and especially our credit. If you do not fully understand what you ought to do to help not only yourself, but also the economy at large, consult an attorney who is experienced in matters relating to credit, bankruptcy, or foreclosure. It cannot eliminate the fact that the initial storm occurred, but it can help staunch the bleeding and speed the rebuilding process of our storm-damaged economy.    –

This entry was posted on Wednesday, December 3rd, 2008 at 7:06 am and is filed under Economy & Politics, Long Island Bankruptcy, Long Island Law Firm, Nassau & Suffolk County. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.