ECONOMIC UPDATE: Banks Feel the Pressure…and it Will Get Worse
The world of remote living is a reality and the cost to owners of commercial buildings and those who hold their mortgages will rack severe economic damage
NOTE TO READERS: The following is our weekly Economic Update — Market Overview found in this week’s issue of The Trends Journal. Consider subscribing here for in-depth, independent geopolitical and socioeconomic trends and trend forecasts that you won’t find anywhere else.
As we have been forecasting, with interest rates rising, not only would depositors take their money out of banks and invest it money market funds and high-yielding Treasuries, but more importantly, the socioeconomic and geopolitical damage inflicted upon humanity by politicians who launched the COVID War, would also devastate much of the banking system.
From early March to early May of this year, Silicon Valley Bank, Signature Bank and then First Republic Bank registered the second, third, and fourth-largest bank failures in U.S. history. Indeed, our Trend Forecast on the banking crisis and that its ramifications would linger was completely ignored by the mainstream media. Those presstitutes followed the marching orders from JP Morgan’s Jamie Dimon who said the crisis was over.
Among the main elements contributing to our forecast for continuing banking failures is our forecast of an Office Building and Commercial Real Estate Bust.
And beyond the high office vacancy rates and record-low office occupancy rates that resulted from the lockdowns, the boost in e-commerce spending as work became remote has also hit the mall owners who will also be defaulting on their loans… many of which have floated much higher along with rising interest rates. The world of remote living is a reality and the cost to owners of commercial buildings and those who hold their mortgages will rack severe economic damage.
Indeed, some three-and-a-half years after the COVID War was launched, in July, 33 percent of American workers were going into the office just part time, according to Stanford University.
Putting yet more pressure on the banks are multi-family apartment owners whose delinquencies will rise along with the increase in borrowing costs, which have more than doubled from their COVID War lows. Indeed, according to CoStar, and reported by The Wall Street Journal, “Apartment-building values fell 14 percent for the year ending in June.” According to the Mortgage Bankers Association, in that sector alone there is some $1 trillion of outstanding mortgage debt, and Trepp states that it has to be paid off between now and 2027.
The Wall Street Journal went on to note that: “Further, apartment-building values are more vulnerable to higher rates than their commercial counterparts because they are closely tied to the price of 10-year Treasury notes, which plunged as rates rose,” said Chad Littell, CoStar’s national director of capital-markets analytics.
Even some veteran real-estate investors that weathered past storms look vulnerable. Veritas Investments, one of San Francisco’s largest landlords, defaulted on debt backing 95 rental buildings during the past year. It stands to lose more than one-third of its San Francisco portfolio as a result.
“The multifamily real-estate sector is facing many of the same financial challenges as have been reported on for other asset classes including office, retail and hotel-hospitality,” the company said earlier this year.
Worst is Yet to Come
As reported by Wall Street on Parade,
“Deposits at the 25-largest domestically-chartered U.S. commercial banks peaked at $11.680 trillion on April 13, 2022, according to the updated H.8 data maintained at the Federal Reserve Economic Database (FRED). As of the most current H.8 data for the week ending on Wednesday, July 26, 2023, deposits stood at $10.709 trillion at those 25 commercial banks, a dollar decline of $970 billion and a percentage decline of 8.3 percent.”
Equally noteworthy, the decline shows no signs of letting up. According to the FRED data, between July 5 and the most current reading on July 26, the 25 largest U.S. banks shed $174 billion in deposits.”
The banking crisis was exacerbated by the COVID War when governments pumped in countless trillions to fight it and central banks dramatically lowered interest rates to artificially pump up equities and economies with cheap money which elevated the phony spending spree.
Now, with reality hitting The Street, Moody’s lowered the credit ratings for 10 small U.S. banks and will also analyze the stability of six larger ones, thus raising more questions and fears of the health of the banking system.
As though it is a script from a sitcom, because that’s all the mainstream media is—a house of whores, Presstitutes who put out for their corporate pimps and government whoremasters—this is how CNBC reported the banking downgrades: Moody’s downgraded the credit rating on several regional banks, including M&T Bank and Pinnacle Financial, citing deposit risk, a potential recession and struggling commercial real estate portfolios. The credit agency also placed the Bank of N.Y. Mellon and State Street on review for a downgrade.”
“Deposit risk, potential recession and struggling commercial real estate portfolios”? What nice language. No Shit! The crisis has been building for all those who are not deaf, dumb and blind to see.
The higher interest rates have also hit consumers hard. Back in the day, they would blast the Mafia and others that loaned people money and charged 10 percent interest rates. Now that the Bankster Bandits have become “legit” by the politicians who they paid off with what imbecilic morons call “campaign contributions,” there are no interest rate limits.
As reported by Epoch Times, WalletHub notes that “the average interest rates for new offers—which are often offered at a discount compared to the standard rate—is 22.39 percent, a sharp increase from 18.89 percent one year ago.”
Amerika with credit card interest rates at 22.39 percent and in “normal” times nearly 19 percent, in front of everyone’s eyes for all to see, a money mob crime syndicate is running the nation… into ruin.
Yes! The New York Feds reported that in the second quarter of this year, credit card balances for the plantation workers of Slavelandia increased to a record $1.03 trillion. And according to WalletHub, the average household is burdened with over $10,000 in credit card debt, WalletHub estimates.
Epoch Times also notes that “A recent Northwestern Mutual study found Americans with debt on average owe more than $21,000 outside of mortgages, and the top source of that debt was credit card debt.”
TREND FORECAST: There are now increasing expectations that the Federal Reserve will keep interest rates in their current range. Should they do so, we forecast that the equity markets will decline in late September/October, there will be weak holiday sales and the nation will slip into recession in the coming months.
The interest rate wild card, of course, is will the Fed radically lower interest rates in the run up the race to the White House in 2024 to support Bidenomics?