Commercial real estate developers are the latest group of pigs to waddle to the federal trough. With upwards of $530 billion in commercial mortgages coming due in 2009, developers are warning “that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies.”
This is what happens during periods of systemic malinvestment. The Federal Reserve has for too long distorted the money supply in an arrogant attempt to play God with the economy. No one wants to face the reality that there are periods of natural boom and bust; rather, we have used money supply manipulation, coupled with fiscal borrow-spend policies, to prolong booms and cover up busts.
Reality always catches up. Now we have commercial real estate lobbying interests who face a massive bust in their sector of the economy. What’s natural is for commercial real estate to lag residential. Residential has been getting hit hard since 2007 and the folks on the commercial side realize their turn is pending.
Rather than face reality we have a new game to play: beg federal politicians to loot the public to offset their losses. Politicians don’t require much begging, since this is what they normally do.
We can contrive one reason after another for why it is a good thing to bail out this group or that, but in doing so we create significant moral hazard, incapacitate the wonderful creative destruction mechanism of markets, and render our society poorer in the process.
The bad thing here is that those who have made prudent decisions are not allowed the opportunity to profit from the mistakes of others. This is how capital goes from the foolhardy to the prudent. Society is better off when this happens. Now the prudent are raped through taxes to subsidize the fools.
We must take a stand and tell our politicians it is no longer OK to take our money and continue to play the kids games that have crippled America!
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