Thread: Ignoring the $3.5 Trillion Implosion

America socialized the private losses and more of the same will shift onto the taxpayers' ever expanding debt which remains at interest rates that deny the risk of default.

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Ignoring $3.5T implosion

Commercial and construction loans combined are bigger than the entire subprime market and CRE values have now fallen by 43 percent from their peak across multi-family units, hotels, and retail space. And with the CRE collapse there is a harder time selling off this space if there is no economic demand for certain spaces. You also have a smaller pool of borrowers looking for retail space. Take for example retail space near empty suburban housing divisions. With the busted homes if you lower prices enough, there will be a market created at a certain point. Yet this takes time. But with commercial real estate you may have no market at any price. Much of the CRE space is used as a business. With no business there is no need for CRE. So we have a giant $3.5 trillion market of loans that are largely toxic but the market seems to be ignoring this.

Why? Part of it has to do with the banking system bailouts. It is now assumed that any large and significant problems are going to be handled by the U.S. Treasury and Federal Reserve.

Japan gives us an example of what happens when a country turns their banking system into a zombie like nation. The big banks like hungry alligators demand more and more money and this sucks away from the productive economy. You also have a rise in part-time employment (Japan has one-third of their workers on part-time status). We now have seen a massive rise in this part of our underemployed economy, the largest ever.

And Japan spent trillions in trying to stimulate their economy and here they are two decades later with little to show for their massive financial bailout. Instead of facing the music at once it was spread throughout the Japanese citizens to pay over decades.

The outcome is the same, someone has to pay for the bad bets. Will it be the institutions or the people? The United States with their bailout policy has decided that it will be the people who pay for this mess.

http://www.mybudget360.com/commercial-re....rime-implosion-–-why-is-the-market-ignoring-the-3-5-trillion-commercial-real-estate-market-implosion-pricing-in-another-bailout/

Hold on until another year or so, commerical rents will become cheap enough that some local areas with 10-15 people will be able to open up a storefront for our local White Patriot organization or perhaps local offices for A3P.

Think positive.