Revelation 13:16-18 “Also it causes all, both small and great, both rich and poor, both free and slave, to be marked on the right hand or the forehead, so that no one can buy or sell unless he has the mark, that is, the name of the beast or the number of its name. This calls for wisdom: let the one who has understanding calculate the number of the beast, for it is the number of a man, and his number is 666.”
Important Takeaways:
- In case you’ve still got money in a bank, Bloomberg is warning that defaults in commercial real estate loans could “topple” hundreds of US banks.
- Leaving taxpayers on the hook for trillions in losses.
- To set the mood, a new study predicts that nearly half of downtown Pittsburgh office space could be vacant in 4 years. Major cities like San Francisco are already sporting zombie-apocalypse downtowns, with abandoned office buildings baking in the sun.
- So what happened?
- The Fed’s yo-yo interest rates first flooded real estate with low rates and cheap money. Which were overbuilt.
- Then came the lockdowns, which forced millions to figure out new workday patterns.
- These days, everyone talks about hybrid models of working, some in-person and some remote… In any case, even a 30 percent reduction in the footprint of office space once the leases are renewed could topple the entire sector.
- The restaurant and retail sectors of downtown feel the pinch, with more closures all the time. Adding to the pressure are absurd levels of inflation and ever-riskier streets on matters of personal security. Put it all together and there is ever less reason to slog to the office.
- When the Fed panic-hiked interest rates in the 2021 inflation, that put trillions of commercial real estate underwater even without other factors. Add to that crime, inflation, plus remote work, and you have a dangerous mix that could toppled cities as we know them.
- That crisis only stopped when Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell effectively bailed out every bank in America with sweetheart loans written on fictitious asset values along with unlimited taxpayer guarantees through the comically underfunded FDIC.
- Without those government pre-bailouts, one paper last year by researchers at Stanford and Columbia estimated that 1,619 US banks – about a third of them – could be at risk of failure.
- The problem is that nothing was actually fixed. In fact, it’s getting worse. For the simple reason that as the months roll by there’s more and more debt coming due.
- And that brings us to Crombie, who notes that there’s $929 billion of commercial real estate debt coming due in the next 9 and a half months.
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