By PAUL CRAIG ROBERTS
For a picture of the US real estate crisis, imagine New Orleans wrecked by Hurricane Katrina, and before the waters even begin to recede, a second Katrina hits.
The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears.
The over-building was helped along by the irresponsibly low interest rates, but the main impetus came from the slide of the US saving rate to zero and the rise in household indebtedness. The shrinkage of savings and the increase in debt raised consumer spending to 72% of GDP. The proliferation of malls and the warehouses that service them reflect the rise in consumer spending as a share of GDP.
Like the federal government, consumers spent more than they earned and borrowed to cover the difference. Obviously, this could not go on forever, and consumer debt has reached its limit.
Shopping malls are losing anchor stores, and large chains are closing stores and even going out of business altogether. Developers who borrowed to finance commercial ventures are in trouble as are the holders of the mortgages, derivatives and other financial junk associated with the loans.
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punditman says...
Punditman hates to be a bearer of bad news, (lest he start to sound like the ever morose Peacenik). Punditman likes to think he is fundamentally an optimist and tries to see the good side of people and society and the innate capacity for creative action. However, he is also one who hates to have the wool pulled over his eyes, and there's a lot of wool pulling by elites in media and government at the moment. Unfortunately, there is also a glut of willful ignorance on the part of the populace, which does not bode well for anyone's short -and long-term futures.
Unlike Europe, where people are hitting the streets in a wave of discontent, North Americans remain cocooned in their insulated, shopping mall worlds, following their sports teams, driving around on cheap gas, playing video games, wasting bandwidth on chain emails and getting hammered on the weekends. I suppose it's better than staring down debt loads or shrinking retirement portfolios, or, increasingly, lost employment.
Thankfully, Paul Craig Roberts is here to sort through all the nonsense economics taking place behind the CNN curtain and to issue yet another wake up call. He also offers an alternative to the bailing out by taxpayers of financial criminals, gamblers and incompetents. This offers punditman a glimmer of hope—which makes punditman an optimist.
For a picture of the US real estate crisis, imagine New Orleans wrecked by Hurricane Katrina, and before the waters even begin to recede, a second Katrina hits.
The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears.
The over-building was helped along by the irresponsibly low interest rates, but the main impetus came from the slide of the US saving rate to zero and the rise in household indebtedness. The shrinkage of savings and the increase in debt raised consumer spending to 72% of GDP. The proliferation of malls and the warehouses that service them reflect the rise in consumer spending as a share of GDP.
Like the federal government, consumers spent more than they earned and borrowed to cover the difference. Obviously, this could not go on forever, and consumer debt has reached its limit.
Shopping malls are losing anchor stores, and large chains are closing stores and even going out of business altogether. Developers who borrowed to finance commercial ventures are in trouble as are the holders of the mortgages, derivatives and other financial junk associated with the loans.
Keep Reading...
punditman says...
Punditman hates to be a bearer of bad news, (lest he start to sound like the ever morose Peacenik). Punditman likes to think he is fundamentally an optimist and tries to see the good side of people and society and the innate capacity for creative action. However, he is also one who hates to have the wool pulled over his eyes, and there's a lot of wool pulling by elites in media and government at the moment. Unfortunately, there is also a glut of willful ignorance on the part of the populace, which does not bode well for anyone's short -and long-term futures.
Unlike Europe, where people are hitting the streets in a wave of discontent, North Americans remain cocooned in their insulated, shopping mall worlds, following their sports teams, driving around on cheap gas, playing video games, wasting bandwidth on chain emails and getting hammered on the weekends. I suppose it's better than staring down debt loads or shrinking retirement portfolios, or, increasingly, lost employment.
Thankfully, Paul Craig Roberts is here to sort through all the nonsense economics taking place behind the CNN curtain and to issue yet another wake up call. He also offers an alternative to the bailing out by taxpayers of financial criminals, gamblers and incompetents. This offers punditman a glimmer of hope—which makes punditman an optimist.
