Eyjafjallajokull and California

Iceland is a long way from California. But nowadays, the global economy is interconnected. So the Eyjafjallajokull volcano eruption will affect our economy, and possibly our climate.

First hit is Europe’s economy. Yahoo News reports:

Economists say so far they have not changed their models or predictions for European growth, hoping normal service could resume this week. But in a worst-case scenario in which the ash cloud closes European airspace for months, one economist estimates lost travel and tourism revenue alone could knock 1-2 percentage points off regional growth as long as it lasts. European growth had been predicted at 1-1.5 percent for 2010.

“That would mean a lot of European countries wouldn’t get any growth this year,” said Vanessa Rossi, senior economic fellow at Chatham House. “It would literally stifle the recovery. But the problem is it is incredibly hard to predict what will happen. Even the geologists can’t tell us.”

Europe’s economy is bigger than America’s, and a major trading partner. If they’re hit, then we’re hit.

We can’t know what the impact will be. Maybe not much. But this is a good reason why the state government always should run a surplus on its budget, and set aside a rainy-day fund of $5 billion or so, just in case something bad happens and state revenues drop.

Instead, for two decades, the state has usually run deficits — including every budget in recent years. It’s total irresponsibility.

And if Eyjafjallajokull doesn’t scare you, how about an earthquake right here that kills thousands and rips up a large parts of the economy?

— John Seiler

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