All gigantic financial crises start somewhere and then spread out over the financial firmament. Commercial real estate is melting down, and when things finally get marked to market and loans are revalued or written off, it’s going to leave gaping holes in banks’ balance sheets. From Peter St. Onge at The Epoch Times via zerohedge.com:
In case you’ve still got money in a bank, Bloomberg is warning that defaults in commercial real estate loans could “topple” hundreds of U.S. banks.
Leaving taxpayers on the hook for trillions in losses.
The note, by senior editor James Crombie, walks us through the festering hellscape that is commercial real estate.
To set the mood, a new study predicts that nearly half of downtown Pittsburgh office space could be vacant in four years. Major cities such as 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. People liked foregoing the long commute (not to mention the free money). Despite every effort, downtown businesses have not been able to get all workers back.
These days, everyone talks about hybrid models of working, some in-person and some remote. But judging from observation, remote is winning. In any case, even a 30 percent reduction in the footprint of office space once the leases are renewed could topple the entire sector.
What a grand leveller was the COV-LARP.
Massive insurance losses for the Marilyn Moseby (shake it baby) rebuild and banks go brrr.
Don’t the Long March comrades have enough room to destroy?
Their Bolshevik bankster buddies may not be able to finance the Great Leap Forward redux meet me outside the faculty lounge?