The commercial real estate market is in bad shape and it’s going to get worse. From Michael Maharrey at schiffgold.com:
In March, I warned that the commercial and investment real estate markets could be the next thing to break in this bubble economy. A recent article in the Wall Street Journal put a face on my warning.
The rampant money creation and zero percent interest rates during the COVID pandemic on top of three rounds of quantitative easing and more than a decade of artificially low interest rates in the wake of the 2008 financial crisis created all kinds of distortions and malinvestments in the economy and the financial system. It was inevitable that something would break when the Federal Reserve tried to raise interest rates in order to fight the price inflation it caused with its loose monetary policy.
Easy money is the lifeblood of the US economy and financial system. The Fed started draining that lifeblood away when it stepped in to fight the price inflation it could no longer write off as transitory. There was no way the central bank wasn’t going to break something.
The first crack in the dam was the ongoing financial crisis kicked off by the failures of Silicon Valley Bank and Signature Bank. The Federal Reserve and the US government managed to plug that hole in the dam with a bank bailout. But there are plenty of other cracks in the dam.
