I love receiving feedback or questions from subscribers… and today, I’d like to take some time to respond.
As always, if you have a question, feel free to drop me a line at [email protected]. Just know I can’t give personalized investment advice.
First, readers write in concerned about the commercial real estate market…
Phil, please make a comment on the commercial real estate market in the USA. It has been reported that a “CRASH” is likely very soon. Thank you.
– Jim C.
Hi Jim, thanks for emailing in. You’re right about commercial real estate. It has been reported that a crash is likely very soon.
But Jim, when everybody starts forecasting a crash… it isn’t going to happen.
It’s my opinion based on all my historical research that yes, there is definitely a problem in some areas in the commercial real estate market, absolutely without question.
But because banks are well capitalized and because the rest of the markets – industrial housing and things are exceedingly unlikely to decline.
And because there’s a perceived housing shortage and so many people homeless – it really isn’t a housing shortage, but I’ll leave that for another day – I think governments will come in around the areas and start to mandate that some of the empty commercial real estate will need to be transformed into housing, apartments, warehouses, various things which will give another use to these buildings.
They’re already doing it here in London and I think they’ll start shortly in the U.S. I think that will alleviate most of the concerns.
It will in some instances need government assistance, and that’s always a dirty word in the U.S. But I just don’t think that it’s a big enough sphere to worry about commercial bringing everything down.
Also the farming areas are doing well, as well as warehousing. You’ve got a lot of car manufacturers building all sorts of brand new places. And of course, the chip industry with the Inflation Reduction Act and the subsidies that the Biden administration started giving away.
I just think these will overcome the difficulties in the commercial area. So I hope that helps, Jim. Thanks again for emailing in.
And I elaborate a bit more on commercial real estate for reader Jono C…
Hi Phil, some commentators including Joel Litman are saying there is going to be a big crash in the commercial real estate market and then will further cause the stock market to drop and also more volatility. Can you please let us Signal readers know your thoughts on this? Thanks.
– Jono C.
Thanks Jono for emailing in. It’s my opinion that you shouldn’t listen to other people’s opinions if they don’t understand the land market… because understanding the land market gives them a better view on how the economy actually works.
I’m also wary of people who continually forecast big crashes because one of the things I learned is that markets never give you time to panic.
And if you do get time to panic, then it’s all over. So I think over the next couple of years, markets will find a way to deal with the issues in the commercial real estate.
And I acknowledge to you there are some issues. I’ve written a little bit about this in my previous mailbag issues, which you should refer to as well. Thanks again for emailing in.
Reader Katy M. surprises me with mentioning the Georgist scheme and Henry George…
Hi Phil, I’m reading your book with attention and interest, as I’ve been an Austrian economy fan for some time; I was one of the founders of the California Libertarian Party back in 1971. I follow the gold and derivatives thereof markets and I want to explore the innards of the Georgist scheme in detail, at my own rate.
I ran to my Murray Rothbard to see what he had to say about the “single-tax” plan, and to my dismay I thought his analysis, in his “Issues” book, uncharacteristically superficial, though full of abstraction, always my favorite. In particular my ears went up at your mention of the root of the satanic fractional reserve system, which as you may suspect makes me reach for the garlic and holy water like a good Austrian. I have not reached the part in your book that goes into this, but I’m looking forward to it. Cheers.
– Katy M.
Hi Katy. Thanks for emailing in. Well, I don’t very often get people writing in mentioning the Georgist scheme and Henry George.
Yes, I’m a keen reader of Murray Rothbard. I think he had some great sensible things to say. As regards to Henry George, he had a lot of sensible things to say too. His ideas were deliberately written out of economics.
So I’m going to talk a bit more about that in some of the Postcards, which my Signal subscribers receive. The best thing I could say is since I think most Libertarians, Austrians like to read, so I’m glad you’re reading my own book, The Secret Life of Real Estate and Banking.
That gives you a good history of the real estate cycle. Also, I think credit creation is a process that is flawed only because we permit credit to be created on government-granted licenses of which land value is the largest. If we took away that ability, then credit could only be created on productive activity.
And when that productive activity – like the building of a bridge – is done, the credit is then withdrawn and we don’t get the huge ups and down moves. But I’ll let you read that in my book. So thanks Katy again for emailing in.
That’s all for today. Feel free to email me at [email protected]. I love getting questions from subscribers.
Editor, Cycles Trading with Phil Anderson
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