With so much interest in the economic effects of Hurricane Katrina, this
forthcoming Journal of Economic History 64:4, December 2004 paper by Kerry Odell and Marc Weidenmier on the relationship between the San Francisco Earthquake in 1906, a subsequent severe but brief recession, and The Panic of 1907 might be of interest. The Panic of 1907 was the last in a series of financial crises that helped to motivate the creation of the Fed. The paper also contains references on the economics of natural disasters:
Real Shock, Monetary Aftershock: The San Francisco Earthquake and the Panic of 1907, Kerry Odell and Marc Weidenmier (RePec, NBER, Paper): Abstract The Panic of 1907 is an important episode in American financial history because it led, in part, to the creation of the Federal Reserve. Although much has been written about the crisis, little has been said about its underlying causes. This study identifies the San Francisco earthquake and its subsequent conflagration as the proximate cause of the panic. London fire-houses insured San Francisco during this period. The payment of claims by British insurance companies following the quake and fire produced a large capital outflow in the fall of 1906, forcing the Bank of England to nearly double interest rates and discriminate against US trade bills. These actions pushed the US into a recession and made markets vulnerable to shocks that otherwise would have been transitory in nature. World financial markets crashed in October 1907 with the collapse of the Knickerbocker Trust Company in New York.