
More than half of American retailers didn't pay their rent in April and May - pseudolus
https://www.businessinsider.com/retailers-didnt-pay-rent-may-upset-the-entire-economy-2020-6
======
chkaloon
I am afraid we are in a real Wile E Coyote moment here. You know, where he's
suspended in air for a few seconds before he goes crashing to the ground?

Our crash may come in the fall when UI payments stop and the rent floats
become unsustainable. About the time the second wave hits.

[https://66.media.tumblr.com/bbbf0aec68490ae2679ef489709c3d18...](https://66.media.tumblr.com/bbbf0aec68490ae2679ef489709c3d18/tumblr_nhuh59FSDw1r2ad2vo1_500.gif)

~~~
ikeyany
> _fragile ... the word is fragile. We 've built an insanely fragile economy.
> Take a look. There's been no war. 100% of the (not so great) US
> infrastructure that was there before SARS-COV-2 is still there. We've lost
> about 100k people, which is horrific but in the scheme of things at "USA"
> scale, and with the skewed demographics, not much of a hit to the economy.

And yet the economy is staggering and it's likely to get worse. Why? Because
people have stopped doing things

We've built an entire economy around people doing things they don't really
need to do. In and of itself, that's not so bad, but we've also built an
economy with so little resilience, so much fragility, so little spare capacity
that the mere fact of people stopping doing a bunch of stuff has the potential
to cause complete economic disaster for, what 15-20M Americans?_

[https://news.ycombinator.com/item?id=23328234](https://news.ycombinator.com/item?id=23328234)

~~~
crazygringo
> _We 've built an insanely fragile economy._

Citation needed. Things seem to be functioning pretty well, all things
considered. I can still buy virtually everything I need from the local grocery
store and Amazon.

I've lived in third-world countries where regular products would be out of
stock for months at a time under _normal_ circumstances.

To me, the economy looks insanely resilient in a global pandemic.

> _the mere fact of people stopping doing a bunch of stuff has the potential
> to cause complete economic disaster for, what 15-20M Americans?_

That's just how it works, if people stop buying the stuff that 20M people
produce, the work for those jobs stop existing for the moment. That's neither
good nor bad, it just _is_. There's _literally_ no way around it.

The problem isn't fragility or doing unnecessary things. You just need a
social safety net, which Europe has been better at providing than the US, but
the US could easily provide if it wanted.

If you want to have a conversation, the one to have is about social safety
nets, not an "economic resilience" bogeyman.

~~~
save_ferris
> To me, the economy looks insanely resilient in a global pandemic.

We’re still in the early days of this pandemic, as it usually takes many
months for the upfront shocks to fully process through the economy. Numerous
reports detail a potential collapse of the commercial real estate market, the
government is signaling that it is going to hand out any more stimulus money,
and health experts are warning about a second wave. Economists aren’t ruling
out 40% unemployment down the road, which puts us firmly in depression
territory.

I have no idea where you live, but I live in Austin, TX, a fairly affluent
city, and the changes to the city have been dramatic and very visible. So much
retail is still closed, and many thousands are out of work with little
opportunity to renter the workforce and likely without future stimulus.

Just look at the George Floyd protests, there’s an inherent economic component
to American racism and Covid provided a lot of fuel that the senseless killing
of Floyd ignited. Those events did not occur in a vacuum, which is partially
why we’re seeing unrest that we haven’t witnessed in 60 years.

Not to mention that millions never recovered from the last major crisis while
politicians and big business pretended like everything was back to normal
after the big market rallies.

~~~
RhysU
Austin, despite the government and technology economy narrative, has been in a
service economy bubble for some time as local businesses capture dollars
arriving from elsewhere in the form of brunch costs.

------
aazaa
> Bed Bath & Beyond, Famous Footwear, H&M, and the Gap, AMC and Regal movie
> theaters, and 24 Hour Fitness gyms have all missed payments, jeopardizing
> the stability of their property management companies and municipal
> governments that rely on property taxes, The Post's Heather Long reported.

All roads lead to the Federal Reserve. Stores defaulting on rent payments
starves landlords for cash. Landlords unable to service mortgages or pay taxes
starves banks and state/local governments. Banks starved for money turn to the
Fed for bailouts. States starved for cash turn to Washington. Washington
issues bonds which the Fed buys because nobody in their right mind would buy
10 or 30 year Treasuries with the goal of holding to maturity.

The Fed's balance sheet has exploded higher (>20% GDP), with no end in sight:

[https://fred.stlouisfed.org/series/WALCL](https://fred.stlouisfed.org/series/WALCL)

Where does it all lead? There are two options:

1\. Default on the national debt.

2\. Currency depreciation.

The most likely outcome is (2). One way or another, the dollar is headed
lower. Perversely, this could be great for stocks, bonds, and other assets
nominally. The problem is the size of the dollar depreciation that would be
required to bring the Fed's balance sheet back under control.

The only problem is that the dollar happens to be the world's reserve
currency. As the Fed does its best to slaughter the dollar bull, every other
country is printing money as fast as possible to depreciate their own
currencies.

Nobody knows where this mess ends.

~~~
ping_pong
The US by definition can't default on its own debt. It's literally impossible
because all debt is in USD. If the US gets into the situation where it doesn't
have enough money to pay off its interest payments, the only one solution is
to print more money to pay off the debt. This will lead to #2 in your list,
which is actually just #1.

When the US starts printing money, it will lead to a lot of destruction of
assets because China will also start selling their UST causing interest rates
to jump. I can see a weird situation where inflation starts to jump but also
interest rates jumping as well.

~~~
pjc50
It can default on its debt by .. refusing to pay it. Remember all the debt
ceiling fiasco and the furlough of federal workers? It would be a huge moment
of voluntary stupidity, but anything's possible.

~~~
refurb
The debt ceiling had nothing to do with not paying debt, it was caused by _not
taking on more debt_ and thus the gov't didn't have the funds to run.

~~~
postingawayonhn
And a big chunk of the 'funds to run' go to servicing existing debt. This is a
big part of why interest rates never substantially increased to pre-GFC
levels. Governments would never be able to afford the higher interest rates.

------
jawns
It feels like a huge wave just crashed, and many people standing waist-deep in
the water think things are on the upswing now -- when really they're about to
get sucked into a powerful undertow.

Judging by the state of the stock market, many investors seem oblivious to the
magnitude of the effects of the pandemic.

The S&P 500 lost more than a third of its value in the pandemic crash. Yet the
index is now two-thirds of the way back to its high point:

[https://www.npr.org/2020/06/04/865117170/the-economy-is-
in-t...](https://www.npr.org/2020/06/04/865117170/the-economy-is-in-trouble-
try-telling-the-stock-market)

But look at the levels of initial jobless claims still coming in at multiples
above where they should be. Look at how many businesses are still shuttered,
with an uncertain H2 ahead.

Given the harsh economic reality, I'm very bearish right now. I think we're
going to see another significant drop as the full effects sink in, which is
what has happened in other crashes. Investors call it a dead-cat bounce. But
in this case, I'm picturing a bigger animal. Hippo maybe.

~~~
serf
>Given the harsh economic reality, I'm very bearish right now.

as am I.

I've more-or-less frozen my trading until a) a recovery plan is clear and
being executed or b) until it is more clear we've hit a real bottom.

All these hopeful spikes that do not correlate to the economic reality are
probably going to throw a lot of people through hoops until any real roof or
floor is hit.

It sucks because I keep having these "buy the dip" moments, but then I have to
hand-wave the opportunity away knowing that whatever dip i'm looking at is
likely one of many upcoming movements.

~~~
satvikpendem
Time in the market beats timing the market. If you continue to invest
regularly even in a down market you will eventually make more than those who
target peaks and dips.

~~~
prewett
> Time in the market beats timing the market.

This has merits in a bull market regime. However, we may not in a bull market:
history suggests that we will have a deeper bottom within 3 - 12 months. So if
you buy stock now, when the market is within 10% of it's peak, and you have to
wait for two years for the market to recover to that peak, there's plenty of
time for someone to wait for the trough and substantially outperform you.
Hopefully you are at least collecting dividends, but 2% is a small solace for
spending 30% more than you would need if you were patient for a few months.

~~~
devalgo
IF you're so confident then why don't you plug your life savings into shorting
the market? You'll make millions.

There's been countless examples of projecting returns for an investor who
tries to time the market and one who keeps buying and almost universally the
timer loses.

~~~
leetcrew
being pretty sure that the market will crash at some point in the next year
isn't really actionable information for an investor. a temporary rally at any
point could trigger a devastating margin call. you could just sell all your
long positions and buy back in whenever you think the market is at its lowest
point, but you're probably not gonna make millions this way.

FWIW, I haven't sold anything, but I haven't bought any shares either since
the beginning of the crisis. I would be wealthier today if I had kept buying
on my normal schedule.

------
russellbeattie
Both of the movies The Big Short and Too Big To Fail have a moment where
they're watching people come out of a subway or walk down the street, and say
something like, "They don't have any idea what's about to hit them."

It sort of feels like that now. Lots of normality still. There is definitely
something not right about the stock market not feeling the impact of millions
of unemployed and more than half of retail stores missing rent payments.

Maybe there's macroeconomic explanations involving credit and the Fed. Maybe
the stock market is in fact disconnected from the general economy as a whole,
and is really just a plaything for giant corporations and the 1%. Maybe it's
not as bad as it seems. Maybe everyone's betting on a V shaped recovery after
the virus fades. But as we saw during the financial crisis, everything seems
fine until it isn't - then things go pear shaped in a hurry.

~~~
IAmGraydon
The difference here is that in the financial crisis, The market was in a
bubble. Almost anyone you would talk to at the time would tell you the Stock
market has never been stronger. A very, very few number of people knew what
was coming. Now, every armchair trader is believing they’re reliving The Big
Short and they’re the main character. They fail to realize that this is
literally the opposite situation- a crash that has already happened and now
the subsequent recovery we’re in.

How many crashes did you know about before they happened? I’m guessing zero.
You still believe this time is different.

~~~
9nGQluzmnq3M
You're asserting that the crash happened (came to an end) and we're in
recovery now. A lot of people, myself included, are less than convinced that's
the case: believe it or not, there's still a lot of room for this to get much
worse. The pandemic is barely getting started in places like India and South
America, and the US is not out of the woods yet.

~~~
tonyedgecombe
Poorer parts of the world are going to see the virus work its way through
their population without much resistance. I doubt it will have the economic
impact that it will in the developed world.

------
RcouF1uZ4gsC
When the next pandemic hits, I doubt any government will dare to attempt a
closure.

The costs for these closures have been high in terms of economic pain. In
addition, the protests, though they are justified due to the oppression the
community has experienced, are likely undoing a lot of the effects of social
distancing by putting a lot of people together in close proximity for hours.

So in the end, we will have experienced a lot of economic pain for not that
much benefit.

~~~
toast0
> When the next pandemic hits, I doubt any government will dare to attempt a
> closure.

> The costs for these closures have been high in terms of economic pain.

It's not as if the choice is have a lock down and reduce deaths but ruin your
economy vs don't have a lock down and have a lot of death with a good economy.
Having a lot of death will ruin your economy too.

~~~
mycall
Humans are better prepared for next pandemic, knowing what to do. This should
be a factor to consider. We have adapted.

Also, I'm sure coronavirus is now a high priority for science to master.

------
rwmj
Purely as a thought experiment, if we suspended mortgage repayments for N
months and rental payments for N months, what bad (or good) effects might we
see?

~~~
jdm2212
The whole banking system would collapse like in 2007-2008 because "everyone
stops paying mortgages all at once" is basically what happened then.

Renters stop paying their rent so landlords go broke. Landlords stop paying
their mortgages. Mortgage-backed securities go into default. Anyone with lots
of exposure to mortgage-backed securities folds. Their counterparties in all
sorts of financial arrangements can't collect (insurance, bonds, you name it).
Credit markets dry up, and all the Main Street businesses that are rolling
over some of their debt find they can't borrow, so they file for bankruptcy.
Normally, they'd take out loans to make it through bankruptcy and
restructure... but no loans are available, so they liquidate.

EDIT: worth noting that this is less likely now than in '07-'08 because the
Federal Reserve has been buying up bonds like crazy (that basically means
financial institutions, governments and businesses are often able to get
unlimited cheap credit) but if they scaled that back or stopped doing it,
things are already so bad there would've been a credit crisis in March or
April _without_ a national rent/mortgage freeze. So imagine how much worse it
would be with one.

~~~
ubercow13
Doesn't seem to be happening in the UK yet, where many mortgages are
suspended.

~~~
ars
Suspended, but interest keeps accumulating, and will eventually have to be
paid? Because banks can handle a bit of that, if the bank is able to borrow
from a central bank.

Or suspended and never paid?

------
perfunctory
> Many retailers have asked for assistance from their landlords to no avail.
> For some businesses, even pinpointing who to ask can be difficult as the
> majority of commercial properties are owned by real estate investment trusts
> and investors in commercial mortgage-backed securities.

 _even pinpointing who to ask can be difficult_ \- can it get any more
comical?

------
fortran77
They really should have offered dollar-for-dollar grants to landlords who
forgave rents. (Or dollar-for-dollar property tax discounts.)

I own commercial property in 94089. We didn't charge our tenants rent in April
and May. They received $44,000 in stimulus and grant money--each. We received
zero. Weren't eligible for anything.

Fortunately, we have no mortgage to cover. But we do have a $50,000 property
tax bill coming due. There's no relief for property tax.

------
seph-reed
I'm kind of glad things are falling apart. It's like walking in the slightly
wrong direction, every day you don't change course you add a bit of debt. At
this point we're hitting something of a dead end, and it may finally be time
to fix things.

It's going to be painful, ofc. But it always was.

~~~
devalgo
The burn it down and rebuild approach is terrifying. There's absolutely no
reason to think there will be anything left to rebuild. Do you really think a
Country like the US with thousands of nuclear weapons will allow itself to be
torn down? You really think strongmen won't appear and enforce totalitarianism
on any country sufficiently destabilized? There's a million ways for that
sequence to go horribly wrong and like 5 where it works out. It's not a real
solution.

~~~
seph-reed
You walk down the wrong nature path until it reaches a cliff. Do you jump off,
or start walking through the brush?

Ofc we should just turn back, but humankind is far too head-strong for that.

------
Simulacra
Is there an economist here that might know if this would lead to stores
decreasing prices on products in order to move merchandise, keep the same, or
increase?

~~~
crispyporkbites
There’s plenty of economists that know the answer to that, not so many that
will be right.

~~~
munificent
Given a sufficient number of astrologers, you are guaranteed to have one with
a correct prediction for your future. The hard problems is picking which one
to listen to.

------
dzonga
US is on the brink of two major things.

1\. a civil war: lots of guns lying around n a demagogue in the white house. n
trump like a rat, he's been biting n blowing air on the wound. come nov, he
can easily say the elections were rigged, if in the small chance event he
loses to sleepy Joe i.e Biden. he's supporters will buy it, as they already
bought about mail in voter fraud. n his repeated calls for violence against
minorities etc. people frustrated by the economy n elites etc

2\. a major depression: this is already in play, as unemployment numbers had
been propped up. n the fragility of the US economy i.e dependent on excessive
credit n consumption.

so it's catch 22: which one is gonna happen first.

~~~
tonyedgecombe
Probably neither.

