Commercial mortgage crisis hitting now will demolish any illusion of recovery.

http://online.wsj.com/article/SB125167422962070925.html?mod=rss_whats_news_us

The crisis is upon us. Foreclosures on commercial property mortgages in July ran at 3.41 percent, which was six times higher than July of 2008.

Commercial mortgages have been turned into mortgage-backed derivatives in the very same way residential mortgages were. This makes the mortgages, again, almost impossible to re-negotiate. Moreover, it means that the shake out of bad mortgages is going to effect the financial and securities sector in the devastating and widespread way the collapse of residential mortgages did. Therefore, we could expect the government to continue to bail out the Wall Street Companies most responsible for the mess. Except, given TARP's unpopularity, they will be doing it secretly, through "innovative" opaque programs set up by the Federal Reserve, which slip freshly created money to those companies under the table. Major banks will have unlimited access to liquidity but will continue to be progressively more insolvent. They have literally staged a coup that has taken over the US Treasury.

The implications of the collapse of commercial mortgages is as bad as the housing collapse. We now have a service economy. A dearth of service businesses means higher unemployment. Commercial businesses also make up the vast bulk of most community's and school district's tax revenue, meaning bonds at the local level cannot be paid, and so it will be bad for the bond market. Many municipalities will either have little to no services, or will totally disappear. School budgets will have to be cut.

Under further job losses, it is quite possible that retail prices cannot be maintained or will decline, leading to more closings and job losses.

We are not looking at a recovery now. We will be lucky if we are not looking at a Great Depression.

The downturn in the commercial real estate market has been foreseen for quite a while.

...but it's not a causal factor, it's just another tier collapsing. THIS is not a warning that "the crisis is upon us"...THAT should have come over 2 years ago.

and paid off every little bill we owed in order to buy a place out in the country in preparation that things could get worse. The Crash we saw this mess begin with was later than we expected and has not been as bad...yet.
We saw the beginning of the turn when we lived in Fla , which we left for NC in 2002 after repeated downsizes and outsourcings of our jobs.

I got sick on top of a job injury so I am on a small disability.

We know we are lucky as far as it goes that we have some income, we have house payment and car payment, the car will be paid out in a few years then we will push paying off the house.
We did not buy the biggest mortgage we could get into, nor did we settle for adjustable rate mortgage. Our payments are half what our rent was.

We expect the economy to sink further so we hunkered down the best we could with what we had..

I have years and years of practice. I was in the Navy and was to join the air traffic control corp. many fucking thanks runnyraygun. I hope you are in hell.
He seems to be the turning point or rather the shitheads that voted for the bastard.

Deregulation , unregulated corpses and banks.. letting the banksters just do whatever they think they can to make illicit $ is a big part of the problem, then union busting, shitting on the people who actually make stuff, while the bastards at the top siphon more and more out of the company then move the jobs out of the country. It really is sad and it is disgusting and I think we should decorate roadside signs with the rich bastards, they are the ones that got us here and the damn bushco pushed through bailout for the banksters when they really should be in jail for fraud and malfeasance.

Sorry, I didn't make it clearer by saying: "This long unacknowledged stage of the larger economic crisis is upon us."

Many economist have warned that this problem was still out there, but no part of the rescue plan has addressed it. Still, believe it or not, there have been Conservative economists that have denied it will happen, and the MSM and Administration have been anxious to show success in the economic rescue, and so have pretended this problem wasn't there.

So, we agree on the points you've given.

Too many people are in total denial about the state of the economy at home and abroad.

You have to see that for the non-wealthy (I hesitate to call them middle-class now) we either have to hope the rescue plan, as it is, works. In that case, where the wealthy simply steal it and don't follow through with a recovery, then the non-wealthy will be pushed into poverty indefinitely. The only steps to improve the situation from there are extremely difficult, risky, and are not in any way pretty.

The General Strike will happen--don't know when, nor under what circumstances. If it doesn't work, then there probably will be blood in the streets. Americans may be passive, but they aren't patient.

where became apparent that the government had to do something or face the danger of being overthrown. . . and they never would have tried a giveaway to banks like this to create a "recovery" then, either.

The wealthy have produced their own influential technocratic class of supply-siders and economists, examples being Bernanke and Geithner, who one hundred percent believe as a scientific fact that making the rich richer improves the lives of everyone. The wealthy in the 1930s had no such overall social philosophy. Social Darwinism was dominant, if anybody in the class stopped long enough to justify their actions. They would have laughed at the very notion that their making money would ever help anyone else but their family and friends, except by accident.

The wealthy today, though, are dangerously self-deceived about their importance to society. Many think of themselves as the only social program the country needs.

Commercial is 15-20%. Also, those property values have declined already by nearly as much as the residential property sector. The issue is that defaults are starting to hit now in a big way.

It's certainly a problem, but it was never the problem that residential property was.

Commercial property is by far the most important revenue stream for communities. This is among the main reasons why so much of our farmland is being turned into strip-malls. Commercial property actually pays for the services residential property requires.

although industrial properties are sometimes excluded. It's illegal in a lot of states to apply different tax rates on property classes, including Wisconsin. Commercial is often a larger share because special "taxes" are applied in the form of impact fees and special assessments. I took a masters course in local government financial planning. I'm pretty familiar with this subject.

Or if the principle is perhaps incorrect? It is an economic principle relating to community planning described in It's found in Joel Garreau's book, "Edge City: Life on the New Frontier."

http://www.amazon.com/Edge-City-Life-New-Frontier/dp/0385424345


Here is the principle as I understand it: from a city and county revenue versus expense standpoint, residential costs money, commercial makes money, industrial breaks even.

The reasons are that residential property demands services including police attention, schools, roads, recreational facilities, fire fighting, and all other things the citizens demand. This holds no matter how expensive the property. In contrast, industrial property pays good taxes, because of all the assessed value off the industrial machinery inside, but they also consume a lot of taxpayer dollars in extra policing costs, extra road repair, pollution cleanup, and so on. However, commercial property consumes almost no taxpayer dollars. None. The buildings aren't terribly flammable (usually), there are fewer fire hazards on most of the properties than in either the average home or the average factory, and they're more likely to have extensive high-tech fire suppression systems. For policing, the crimes they attract require less police work than average, and they're even more likely than homes or factories to go to the expense of putting in ultra-tech alarm systems and they hire their own private security in large numbers. They often, in modern office parks, and often even pay for their own roads.

Now, please set me right on this if I have misunderstood or have been mislead by the Joel Garreau's book.

in a few months, whether they're right or not.

As long as the WSJ reporter presents it as some kind of aberration or human error in the otherwise scientifically proven effectiveness of the capitalist system, the publisher of the WSJ will have no problem.