Commercial Real Estate Is The “Boa Constrictor” That Will Crush The Economy And “Force The Fed To Restart QE” (Nothing Has Been The Same Since The Financial Crisis And COVID Economic Shutdowns)

From ZeroHedge, here is a tantalizing story … behind a pay wall. But here is the gist of what I think the article says. Or at least my spin on it.

Here is a chart of US office vacancies nationally (yellow), New York (white), San Franciso (green) and Los Angeles (orange). Note the rapid decline in office vacancies just prior to the financial crisis (often mislabeled as the subprime mortgage crisis). Then look at office vacancies after The Fed’s massive monetary experiment of setting rates to near zero and buying a ton of Treasuries, Agency MBS. etc. While San Francisco returned to pre-financial crisis levels of office vacancy, in general the office market never fully recovered.

And then “the slammer” struck: the COVID economic shutdowns. After 2020 shutdowns, office vacancy rates rose dramatically. Two complicating factors: 1) the US moved to working at home rather than commuting to an office and largely remains that way. 2) crime is going bonkers in American cities, particularly New York, Los Angeles and San Francisco (don’t worry, I haven’t forgotten about other gang nests like Chicago and Detroit). I saw that California’s woke governor Gavin “Nancy Pelosi’s nephew” Newsom said the word “gang” then apologized and replaced it with “organized groups.” No wonder Newsom can’t fix anything, but he is running for President of the US! (insert Edvard Munch’s “The Scream” painting here,)

The Fed responded to the financial crisis by lower rates to 25 basis points and printing a boat load of money. Unfortunately, office vacancies rose to a peak in October 2010 then began falling again. Only to start rising again after Trump took office in 2017. Alas, Covid struck in 2020, The Fed and Federal government panicked. States and local governments (not to mention teacher’s unions) shut down economies and schools. Office vacancies are now higher than at peak of the Covid shutdowns!!!

But never fear! Too low for too long (TLFTL) Fed Chair Janet Yellen is back as Biden’s Treasury Secretary. To royally screw things up even more.