This is the first in a series of articles on why I feel in the next few months a pending crash of the US and much of the global economic system, will become our obvious future to even the most casual observer. I can not precisely time the when but anyone who really looks at trends can see the whys and the whats clearly. These articles will also not be long deep academic dives into these problems, they will be short, common sense looks at what was already going to happen and how our over reaction to Covid-19 has accelerated it.
And you know what, you don’t even have to agree with me that our response to CoVid is an over reaction, you can think it was the right thing or even that we should have locked down harder, it won’t change what those actions have set in motion.
I want to start out by telling you each factor in this series was already a mega trend. We begin today with real estate but there are many other trends we will discuss in future articles. I have been discussing each of these trends for several years on my daily podcast. I’ve stated up until this year that the decade from 2020-2030 would be the the biggest decade of flux that any living person would ever see. Each of the mega trends in this series was already set to drastically shape this decade. The thing CoVid has done is accelerate them all. I now foresee about 85-90% of the shift that was going to take us 10 years, occurring in 2-3.
These shifts were already going to create a decade of extreme flux but we were going to have 10 years to adjust. While many people were going to lose jobs and get hurt the best analogy I can give you is this. We were going to get a direct hit by a Cat3 hurricane, now we are getting a really big, really nasty Cat5 and it is going to hit at high tide and come ashore slowly.
So here is why real estate is going to lead this cascade of economic flux and why it will hurt so bad. Let’s get the first part out of the way, it is pretty simple. The single largest store of real wealth in the US is real estate. Technically stocks are larger but we all know stock values are far more subjective. Real estate is REAL PROPERTY, dirt and buildings. Tangible assets. For most Americans who own homes they are the fall back, “if I get old and run out of money I will sell the house or get one of those reverse mortgage things Magnum PI is always talkin about”.
So when you get a real estate collapse everything else falls with it. Credit dries up, people get stuck in homes, people get under water, people get evicted, credit is destroyed and it keeps going. The chief cause of the 08-09 recession (which long time listeners can tell you I called long before it started) was real estate.
This crash will be worse though a lot worse. It is first aggravated by the recession we are now in, yes in. We are in a recession now, the beginning of them is always pretty mild. Millions are jobless, many of those jobs are not coming back, ever. Moratoriums on evictions have protected renters for a time, they are going to expire and landlords are going into default on their loans anyway. The foreclosures will come next, all of this will look a lot like 2008-11.
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