The Empty Streets of San Francisco A Sign Of Impending Banking Collapse?

I've occasionally put up links or included videos of various modern ruins--abandoned shops, houses, factories, and so on, and sometimes whole towns. An example is this Daily Mail photo exposé on an abandoned amusement park in Cyprus: "A silenced merry-go-round and dusty dodgems: Haunting images show an eerie abandoned funfair in Cyprus." Most of the homes seen are abandoned because owners died or developers went bankrupt. Factories close for economic reasons. Small towns are abandoned as their local industry--a mine or factory--closes. Sometimes a disaster forces everyone out, as in Chernobyl. In the case of the Cyprus, certain areas were abandoned because of war. 

    But recently, the Daily Mail also published an article with photos entitled: "Nothing to see here! San Francisco journalist shares photo of tourists walking down 'GUTTED' main street in crime-ridden city, where almost all shops have now closed." This is almost unique in that it shows a downtown of a major city almost completely abandoned because of crime. From the article's lede:

    A journalist has shared alarming images of a once-prominent street that's been rocked by store closures in San Francisco.

    One snap, taken in the heart of the city's famed shopping district, shows tourists wandering down a gutted Powell Street.

    But instead of being graced with an array of shops, cafés, bars, and restaurants, the party is seen encountering countless shuttered storefronts.

    More shots from Erica Sandberg show more of the same, and how the thoroughfare that runs adjacent to the city's Downtown, all the way from Market to Fisherman's Wharf, has become a shell of its former self.

    The sights, while startling, should come as no great surprise to anyone keeping up with the now-years-long saga of the crime-ridden, homeless-overrun city, which recently had two nets installed around its seminal bridge to prevent suicides.

    The emptiness of the streets of San Francisco isn't just a cautionary tale of what happens when Democrats are allowed to be in charge, but also a harbinger of a possible financial catastrophe. In his article, "Batten down the hatches, a financial hurricane is on the way," John Le Sueur warns that the collapse in value of commercial real estate might lead to bank collapses. 

    We have all seen high streets closing down. We blame Amazon, and that is partly true. A far bigger problem is that high street rents and taxes are so high that shops cannot compete. As a general rule, landlords cannot reduce them either. This is because the property value is determined by its rental price, and if you devalue the property by renting it cheaply it will damage the value and the financial gearing of your property portfolio, potentially causing bankruptcy. So it is better to sit with an empty commercial property and hope things turn a corner.

    In my view that is a forlorn hope for the next few years.

    In the US, vast swathes of office space are empty. The landlords have some brutal decisions to make as $117billion is due in financial payments this year for commercial property. If the landlords cannot re-negotiate their loans, they go bankrupt, dumping property on the banks, which in turn will have to face their loan portfolios going delinquent. Which could of course cause them bankruptcy.

    Banks are already tightening up on their lending as hard times come. They know full well which clients are a lost cause, which are liabilities and which will be able to re-negotiate. It is thought some 30 per cent of bank loans in America are already delinquent and in arrears. No one knows, as the banks are not telling anyone yet.

    Meantime banks are queueing up for central bank loans and help. Which indicates that the banks have a problem.

But it isn't just commercial real estate. Consumers are also overdrawn and maxed out in debt:

    Americans are already in a situation where their credit cards are maxed out. Renegotiating loans might not be possible. Some banks are already stopping credit cards without warning. The Bank of America is getting many complaints about this. Customers are saying: ‘I was already hungry and now I’m starving.’

    With regard to finance customers, some are branded ‘prime’ with a good payment record, or ‘sub prime’ with a poor payment record. Sub prime auto loans in the US now stand at 50 per cent in payment arrears. Sub prime represents people who already have financial issues, and some who are struggling now will default badly soon. This further increases pressure on the banks which finance sub prime loans.

    I am sure many readers will remember the Freddie Mac and Fannie Mae sub prime mortgages that featured in so many derivatives being sold during the 2008 crash. What is coming is many times worse.

He blames Biden for taking a pretty good economy and turning into a disaster with an unpayable debt and destroying the U.S. dollar as a reserve currency. 

    The USD as a reserve currency is often referred to as the petro dollar. If, say, Spain wants to buy oil from Saudi, it buys USD and then pays for the oil in USD. Not euros. This makes money for the US Federal reserve and costs Spain as it converts euros into USD.

* * *

    Biden’s policies have meant that Saudi is now accepting payments for oil in a country’s own currency if Saudi approves of that currency. Saudi approves Chinese yuan because it is backed by China’s huge gold reserves. Russia put the ruble on to the gold standard two years ago to stop the US attacking its currency, so it is well regarded by Saudi. Spain, for example, being part of the EU has to pay in US dollars as Saudi does not accept euros, which are regarded as not sufficiently stable nor backed by gold.

    Saudi accepted Chinese yuan in payment for oil. India did such a transaction recently. This is because BRICS (Brazil, Russia, India, China, South Africa) has risen as a backlash to US policies, hegemony and currency. BRICS has close to half the world’s population supporting it while US influence is dramatically diminishing, placing the USD under the greatest threat of serious devaluation it has ever seen. Imagine, if you will, that the USD is worth 25 per cent of what it is today – that is a possible future for the US. It is that possible future that is terrifying world bankers, investors, speculators and economists. 

He doesn't have high hopes for the British pound or the Euro, either.  

    We are all familiar with Thomas Jefferson's statement that "the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." I've written about Peter Turchin's model using elite overproduction and common immiseration to predict social unrest, which pointed at the 2020s as a key decade. (See here and here). I've written about the collapse of civilizations, including Joseph A. Tainter's The Collapse of Complex Societies noting how societies faced with a crises will reduce complexity--sometimes rapidly and permanently--when they can no longer afford the complexities that have developed and built up over time. The Bronze Age Collapse shows that it can happen nearly simultaneously to societies with close ties. 

    The point is that certain factors push a society to a point where the society must reform or break (and by break, I don't necessarily mean collapse--although that is a possibility--but can also fragment or give rise to a civil war). In 1861 the United States broke and we entered a period of civil war. In the 1920s and '30s, the elites gave way and the United States reformed. We are reaching another crises point and the shear complexity--the red tape, expenses, and shear dead weight--seems to point at something that will require the country to devolve its complexity.

    The big question is whether the coming reformation will be peaceable. We had peaceable with the Tea Party movement and the Left mocked and ridiculed and ignored it. Next we had Trump's election in 2016--still peaceable, but the elites circled their wagons in order to destroy the commoners' champion. But each time the elites kick the can down the road, the chance of violence increases. The ruling elites, I believe, are so sure that they can manage the situation--that the security state is so strong and encompassing--that they believe they can avoid the reformation needed to ease complexity and reverse the wealth pump. That is, they believe they do not need to do anything to correct the situation or change the outcomes. It is telling that other elites, such as many billionaires, appear less sure, building bolt holes and bunkers.