How Much Would A California Earthquake Hurt The Economy?

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Chile was hit with an 8.8-magnitude quake devastating some parts of the South American country today. Officials say it is the worst earthquake to hit the country in a quarter of a century. The event occurs less than two months after a quake hit Haiti and killed over 200,000 people. The Haiti disaster will ruin the country’s economy for years.

No one knows what a huge earthquake in California would cost both in lives and economically. The last big quake to hit San Fransisco, which struck in 1989, caused an estimated $5.6 billion in damages. Much of the nation’s most populus state sits on several fault lines, the San Andreas Fault being the largest, and some experts expect that it is only a matter of time before the “big one” hits the coast. There have been several minor earthquakes in the state over the last month.

Experts recently said that a big quake in California is likely. According to Fox News, “scientists believe a tremendous earthquake in California is almost inevitable. In 2008, a multi-disciplinary collaboration of scientists and engineers released the Uniform California Earthquake Rupture Forecast (UCERF), which predicts a 99.7 percent likelihood of a 6.7 or larger earthquake in California in the next 30 years.” The last huge quake on the West Coast was the event in Alaska in 1964 which measured 8.4 to 8.6 on the Richter Scale.

The death toll and economic damage of the Alaska quake was limited because of its remote location.

California has 37 million residents, more than 12% of the US population. Its GDP is nearly 14% of the nation’s. A huge quake in the state, particularly one in Los Angeles or San Francisco could cost tens of thousands of lives and shut down a large part of the US economy. A blow to the nation’s GDP during its current fragile state of recovery could drive the country back into recession. A natural catastrophe in California would certainly stunt its economic activity which is over $2 trillion each years. A huge quake could cost hundreds of billions of dollars in damage and the need for massive aid.

Haiti and Chile were great tragedies. Image of one of the most densely populated parts of the US was hit be a quake of comparable power to those two, and the US economy had to absorb the impact.

Douglas A. McIntyre

douglasamcintyre@247wallst.com

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