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American Morning

Economic Impact of Blackout

Aired August 15, 2003 - 09:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BILL HEMMER, CNN ANCHOR: Rajeev Dhawan is the director of Economic Forecasting Center for Georgia State University. He's our guest right now to talk about in any way we can at this point, the economic impact.
At the outset, what is your best guess right now, knowing that things were closed down with such an abrupt way yesterday afternoon?

RAJEEV DHAWAN, ECONOMIC FORECASTER: Well, the best thing that happened was, it happened after the market closed. Society trading was done for the day, and the best thing that's happening today is the market has opened. And that's really important for the proper functioning of a modern economy. It's like refrigerating your house. You don't go to it every time, but you need it to be humming and running when you go it. That's the way I look at the markets. They provide the liquidity. They provide the financial muscle, and their opening is very symbolic to the confidence of the people.

HEMMER: What does it do for investors right now as they look at the stalemate of the city, knowing that the stock exchange essentially is in the heart of it all? The effect today for investors and their confidence is what, then?

DHAWAN: Well, the traders are coming from all over the world, and they're doing their trades. So they want the trades to be executed. And if the exchange is open and it can do that, the job is done. That's the efficient in working on the market. The trouble would be if it wasn't open, and it's not because of a terrorist act and other stuff like that, then you start wondering, if tomorrow I make a big bet and I need to redeem that thing, will the market be open or not? So psychologically, it's very important, and I am very glad it happened that the market did open, and the power problem is not there.

HEMMER: We have undertones of 9/11 here, and clearly, we are nowhere near the events of 23 months ago, but at that point, the stock market had closed down for four days and there was a lot anticipation when the market reopened on that Monday morning. Then again into trading on Tuesday, and we saw precipitous drops in the Dow then the Nasdaq, really across the board investors were just completely selling off at that point. We'll see which direction we go today.

Another question about the economics. We talk about Broadway shutting down. We talked about the damage to restaurants here in New York City. That is just a small part of the economic ripple across the country and across these five states and Canada. Can you put a price tag on it right now? What do you look for in terms of economic impact from the events of yesterday and today?

DHAWAN: You know, Bill, when we talk about economic impact, we have to think about activities that have been lost forever. For example, the sales in the restaurants from yesterday and today is probably gone. And it's going to be very hard to make it up down the road. But if you are going to a shopping mall and were not able to buy the stuff today or yesterday, you can buy it later. So then it washes out. So doing that calculation, you know, the highest number you can come up with is probably a billion dollars, or two billion dollars for the eastern seaboard, and part of the Canadian economy. But what happens, it's like a snow day. You know, the loss happened, for perishable items and stuff like that.

But down the road, if you make it up -- remember, the whole assumption is, if you can make it up, then there is no loss. In fact, at times, later on with all of the investment that is going to come back into the power generation sector, you know, maybe more plants will be built, maybe transmission lines will be updated, and all the supporting ripple effect that will come with it is going to show a positive impact maybe year, two years down the road. But currently, for these two day, the businesses which depend upon day-to-day sales and revenues, they are going to lose the money.

HEMMER: You mention snow days. Is it that simple? Is it the best comparison?

DHAWAN: That's the closest I can come to, because there is one part of this thing that happened. Right now, we are all getting the news that it wasn't a terrorist act, or wasn't another problem.

But let's take history. After 9/11, we always have that in the back of our mind that perhaps this is not fully -- you know, maybe there was something else over here. Now let me give you another scenario. Let's Say it was a buzzard hawk diving after the chipmunk, got stuck in the transformer and the whole thing blew up. Well, that's a very random event. I'm giving an example of the chaos theory, how a random event percolated down the system and shuts it down.

Well, can it not happen again? That possibility, people will ignore. But what if this was a bigger problem that there is really a very bad transmission line which really can trip again tomorrow or the day after? You can not rule that out. When that kind of a thing happens, people start thinking in their mind, uh-oh, I need to be very careful when I make plans for tourism in that area, or I need to execute my trades in starting a new business. And that is where over time you will figure out whether this is -- because a snowstorm day or a snow day is like storm is over, it's gone, it's not coming back. But this can come back, and that minor suspicion in your mind can affect economic activity.

HEMMER: Thanks for your perspective. Rajeev Dhawan, Georgia State University, with us from the CNN Center.

DHAWAN: Thank you, Bill. HEMMER: You got it, sure thing.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired August 15, 2003 - 09:31   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: Rajeev Dhawan is the director of Economic Forecasting Center for Georgia State University. He's our guest right now to talk about in any way we can at this point, the economic impact.
At the outset, what is your best guess right now, knowing that things were closed down with such an abrupt way yesterday afternoon?

RAJEEV DHAWAN, ECONOMIC FORECASTER: Well, the best thing that happened was, it happened after the market closed. Society trading was done for the day, and the best thing that's happening today is the market has opened. And that's really important for the proper functioning of a modern economy. It's like refrigerating your house. You don't go to it every time, but you need it to be humming and running when you go it. That's the way I look at the markets. They provide the liquidity. They provide the financial muscle, and their opening is very symbolic to the confidence of the people.

HEMMER: What does it do for investors right now as they look at the stalemate of the city, knowing that the stock exchange essentially is in the heart of it all? The effect today for investors and their confidence is what, then?

DHAWAN: Well, the traders are coming from all over the world, and they're doing their trades. So they want the trades to be executed. And if the exchange is open and it can do that, the job is done. That's the efficient in working on the market. The trouble would be if it wasn't open, and it's not because of a terrorist act and other stuff like that, then you start wondering, if tomorrow I make a big bet and I need to redeem that thing, will the market be open or not? So psychologically, it's very important, and I am very glad it happened that the market did open, and the power problem is not there.

HEMMER: We have undertones of 9/11 here, and clearly, we are nowhere near the events of 23 months ago, but at that point, the stock market had closed down for four days and there was a lot anticipation when the market reopened on that Monday morning. Then again into trading on Tuesday, and we saw precipitous drops in the Dow then the Nasdaq, really across the board investors were just completely selling off at that point. We'll see which direction we go today.

Another question about the economics. We talk about Broadway shutting down. We talked about the damage to restaurants here in New York City. That is just a small part of the economic ripple across the country and across these five states and Canada. Can you put a price tag on it right now? What do you look for in terms of economic impact from the events of yesterday and today?

DHAWAN: You know, Bill, when we talk about economic impact, we have to think about activities that have been lost forever. For example, the sales in the restaurants from yesterday and today is probably gone. And it's going to be very hard to make it up down the road. But if you are going to a shopping mall and were not able to buy the stuff today or yesterday, you can buy it later. So then it washes out. So doing that calculation, you know, the highest number you can come up with is probably a billion dollars, or two billion dollars for the eastern seaboard, and part of the Canadian economy. But what happens, it's like a snow day. You know, the loss happened, for perishable items and stuff like that.

But down the road, if you make it up -- remember, the whole assumption is, if you can make it up, then there is no loss. In fact, at times, later on with all of the investment that is going to come back into the power generation sector, you know, maybe more plants will be built, maybe transmission lines will be updated, and all the supporting ripple effect that will come with it is going to show a positive impact maybe year, two years down the road. But currently, for these two day, the businesses which depend upon day-to-day sales and revenues, they are going to lose the money.

HEMMER: You mention snow days. Is it that simple? Is it the best comparison?

DHAWAN: That's the closest I can come to, because there is one part of this thing that happened. Right now, we are all getting the news that it wasn't a terrorist act, or wasn't another problem.

But let's take history. After 9/11, we always have that in the back of our mind that perhaps this is not fully -- you know, maybe there was something else over here. Now let me give you another scenario. Let's Say it was a buzzard hawk diving after the chipmunk, got stuck in the transformer and the whole thing blew up. Well, that's a very random event. I'm giving an example of the chaos theory, how a random event percolated down the system and shuts it down.

Well, can it not happen again? That possibility, people will ignore. But what if this was a bigger problem that there is really a very bad transmission line which really can trip again tomorrow or the day after? You can not rule that out. When that kind of a thing happens, people start thinking in their mind, uh-oh, I need to be very careful when I make plans for tourism in that area, or I need to execute my trades in starting a new business. And that is where over time you will figure out whether this is -- because a snowstorm day or a snow day is like storm is over, it's gone, it's not coming back. But this can come back, and that minor suspicion in your mind can affect economic activity.

HEMMER: Thanks for your perspective. Rajeev Dhawan, Georgia State University, with us from the CNN Center.

DHAWAN: Thank you, Bill. HEMMER: You got it, sure thing.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com