My buddy says hurricane sandy is an exception to the broken window fallacy because a majority of the people who were affected were rich (whether or not this is true or untrue is somewhat irrelevant to the argument) and tend to just "sit" on most of their money. This money will now be spent because it will end up in the hands of middle class workers who will go out and spend the money.
My arguement would be that without savings, banks would have no money to lend! It's not like the money is just under some mattress somewhere, it's probably saved or invested. Does anyone else have any other argument for this specific case? Thanks!
There's a thread on this not too far down the page. Conveniently, the OP makes basically the same argument, though considerably more detailed and not event-specific:
In short, your buddy is wrong. There may well be a wealth transfer from rich people to the workers, however that is not an exception to the fallacy.
"Sitting on money" = saving. If those savings aren't being distributed to entrepreneurs then it's a problem with financial intermediation, not saving.
If the rich are sitting on their money you don't have to compete with them when you go buy stuff. Now when your buddy goes to buy a new window he will have to outbid a rich person to get it.
The only one worth following is the one who leads... not the one who pulls; for it is not the direction that condemns the puller, it is the rope that he holds.
There may well be a wealth transfer from rich people to the workers, however that is not an exception to the fallacy.
That's the seen; there's also the unseen where some of their savings was invested in companies that had indirect benefits, but now will be taken out of them. Besides, like someone else said, what the hell is wrong with letting some fiat currency sit somewhere? That means they did something useful for someone but haven't yet consumed the result of that trade, thus temporarily leaving more stuff out there for others to consume.