New York City Government Faces Armageddon as Property Owners Revolt

Summary

In this episode, host Steve Van Meter delves into the alarming surge in delinquent property taxes in New York City, framing it as a microcosm of broader economic issues in the US. He discusses how the optimism of consumers contrasts with the reality of a potential economic downturn, exacerbated by tightening bank lending standards and declining commercial real estate values. Steve predicts these challenges will lead to decreased tax revenues nationwide, impacting municipal budgets and potentially triggering a recession. Moreover, he critiques the Federal Reserve's response to these issues, suggesting that current policies may not be sufficient to prevent the impending economic difficulties.

Takeaways

• 😱 New York City faces a financial crisis as property owners increasingly default on taxes, reflecting broader economic troubles in the US.
• 📈 Delinquencies in property taxes are surging, expected to jump over 30% to $880 million, indicating a significant drop in municipal revenue.
• 🛠 The commercial real estate market downturn is a major factor, with Manhattan office vacancy rates hitting a record 22.2%.
• 🔥 A 2019 law limiting landlords' ability to raise rents has added financial stress, worsening the situation for property owners.
• 💳 The expiration of tax lien sale programs in March 2022 removed incentives for delinquent property owners to pay their taxes, exacerbating revenue losses for the city.
• 💸 Banks are tightening lending standards, which reduces the amount of money circulating in the economy, leading to higher delinquency rates.
• 🔴 The Federal Reserve's cautious stance on cutting rates reflects a complex balancing act amid fluctuating economic indicators.
• 📲 Steve promotes a 30-day free trial for a financial advisory service, claiming it offers superior returns compared to competitors.
• 💰 Consumer confidence is on the rise, buoyed by cooling inflation and strong labor market signals from the Fed, despite underlying economic vulnerabilities.
• 🚫 Manufacturing activity in the Kansas City Fed's district declined further in March, contradicting the optimism from consumer sentiment and highlighting potential recession risks.

Q & A

What is the main issue facing New York City's government according to the transcript?

New York City's government is facing a significant problem with delinquent property taxes, which are expected to soar, leading to potential financial distress as property owners are increasingly unwilling or unable to pay their taxes.

How does the transcript suggest the property tax issue in New York City is indicative of broader economic problems?

The script suggests that the rising delinquencies in property taxes in New York City reflect larger, systemic economic issues, such as declining commercial real estate prices and broader financial strain affecting municipalities across the United States.

What impact does the decline in commercial real estate prices have on local government revenues?

The decline in commercial real estate prices leads to lower property valuations, which in turn results in reduced property tax revenues for local governments. This financial strain affects their ability to fund services and operations.

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What does the transcript imply about the relationship between consumer optimism and economic reality?

The transcript suggests a disconnect between consumer optimism, which is increasing, and the economic reality of rising delinquencies and financial strains. This optimism may be misplaced if the underlying economic conditions do not improve.

How does the tightening of lending standards by banks relate to the broader economy?

Tightening lending standards by banks can lead to reduced credit availability, which may slow down economic activity. This can contribute to an increase in delinquencies and a potential slowdown in the broader economy.

What does the script indicate about the Federal Reserve's response to the economic situation?

The script indicates skepticism about the Federal Reserve's timing and effectiveness in responding to economic challenges, suggesting that the Fed might be too late in taking actions such as cutting interest rates to address the economic downturn.

How are employment and manufacturing activity related according to the transcript?

The transcript mentions that despite moderate expansion in employment levels, manufacturing activity has declined. This contradiction suggests that while some jobs are being created or maintained, overall industrial production and demand may be weakening.

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What potential future scenario is predicted in the transcript concerning the US economy?

The transcript predicts a possible rapid downturn in the US economy, with increasing unemployment claims and a potential recession, highlighting the urgency for preparedness and responsive measures.

What is the role of consumer sentiment in the economic outlook presented in the transcript?

Consumer sentiment is depicted as a key indicator that might not accurately reflect the underlying economic conditions. While currently high, it may be vulnerable to rapid changes if the economic situation worsens.

Outlines

00:00

🏙️ New York's Property Tax Rebellion: A Symptom of Wider Economic Troubles

The video script opens with a focus on a burgeoning issue in New York City, where property owners are increasingly delinquent on their taxes, seeing a significant uptick to $880 million in overdue taxes. This situation is not unique to New York but indicative of broader economic issues within the United States. The segment explains that the decline in commercial real estate prices has yet to fully impact municipal revenues but is expected to do so, leading to financial strain across various municipalities. Additionally, the video critiques the optimism in the economy, suggesting that this confidence may be misplaced as evidenced by tightening lending standards and increasing delinquencies, which could signal a forthcoming economic downturn. The host, Steve Van Meter, hints at systemic issues within the banking system and the Federal Reserve's (Fed) policies, suggesting that these may exacerbate the problem.

05:01

💸 Investment Strategies Amid Economic Uncertainty

In this section, Steve Van Meter discusses how, despite economic uncertainties, his platform offers valuable investment insights, boasting successful trades and profits for its subscribers. He introduces two services, CDA Timer Pro and Momentum Timer Pro, which leverage market positions and technical signals to guide investment decisions. The script emphasizes the simplicity and effectiveness of their approach, contrasting it with the often complicated and less successful strategies found elsewhere. The segment also touches on the broader economic narrative, suggesting that while the Federal Reserve and certain market indicators predict continued growth and stability, underlying issues, such as property tax delinquencies and a shaky commercial real estate market, hint at a less rosy reality.

10:02

📉 The Fed's Missteps and the Economy's Fragile State

The third paragraph delves deeper into the Federal Reserve's policy decisions and their impact on the economy. It critiques the Fed's understanding and handling of monetary policy, especially concerning credit creation and its influence on inflation and economic stability. The narrative suggests a disconnect between the Fed's actions and the actual needs of the economy, pointing out the potential for a significant downturn if current trends continue. It also highlights the contradiction between optimistic consumer sentiment, driven by perceived control over inflation and a strong labor market, and the reality of tightening financial conditions that threaten job security and economic growth. The segment warns of the impending consequences of these policies, particularly for the labor market and overall economic health.

15:03

🔮 Economic Indicators and the Impending Recession

The final segment paints a grim picture of the economic future, pointing out the inconsistency between consumer optimism and the actual state of manufacturing and employment. It references a report from the Kansas City Federal Reserve indicating a decline in manufacturing activity, contradicting the optimistic outlook presented by the Federal Reserve and consumer sentiment indexes. The script suggests that the labor market may soon reflect the economic downturn, affecting unemployment rates and further straining the economy. Steve Van Meter concludes by reiterating the serious implications of the current economic trends, forecasting a rapid onset of recession that could catch many by surprise, underlining the urgency and gravity of the situation.

Keywords

💡Property Taxes

Property taxes are levies imposed by local governments on real estate based on the property's value. In the video, the rise in delinquent property taxes in New York City is highlighted as a significant issue, with a forecasted jump of more than 30% to $880 million at the end of the fiscal year. This surge in delinquencies is used to illustrate broader economic challenges within the US, suggesting that the decline in commercial real estate prices and a corresponding drop in tax revenue could be symptomatic of deeper financial strains affecting municipalities across the country.

💡Delinquencies

Delinquencies refer to overdue debts or financial obligations that are not paid on time. The video emphasizes a worrying trend of increasing delinquencies, particularly in property taxes, as an indicator of broader economic distress. This increase in delinquencies is tied to the overall health of the US economy, with the suggestion that it reflects underlying issues such as reduced consumer spending power and challenges in the real estate market.

💡Commercial Real Estate

Commercial real estate involves properties used for business purposes. The video discusses the significant impact of declining commercial real estate prices on tax revenues for municipalities. The downturn in this sector is depicted as a looming crisis, particularly for major metropolitan areas like New York City, where the high vacancy rates in office spaces exemplify the struggles facing the commercial real estate market.

💡Federal Reserve (Fed)

The Federal Reserve, or the Fed, is the central bank of the United States, responsible for monetary policy. In the video, the Fed's role in the economy is scrutinized, particularly in terms of its response to the financial issues at hand. The script suggests skepticism about the Fed's ability to effectively manage the current economic downturn, highlighting concerns over its timing and decision-making regarding interest rates and the broader implications for money creation and inflation.

💡Consumer Sentiment

Consumer sentiment refers to the overall health of the economy as perceived by consumers, often measured through surveys. The video mentions an increase in consumer optimism, despite economic challenges, citing the University of Michigan's consumer sentiment index. This optimism is presented with caution, as it may not accurately reflect underlying economic vulnerabilities and the potential for a future downturn.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, eroding purchasing power. The video discusses the relationship between inflation, consumer spending, and wage growth, suggesting that while inflation may be slowing, this deceleration might not lead to improved economic conditions if it coincides with reduced employment and wage stagnation.

💡Credit Tightening

Credit tightening refers to the reduced availability of loans or stricter lending standards imposed by banks. The video highlights how credit tightening can lead to a contraction in the economy, as businesses and consumers face greater difficulties in securing loans. This contraction is linked to increased delinquencies and economic challenges, suggesting that tighter credit conditions can exacerbate financial difficulties.

💡Labor Market

The labor market encompasses the supply of and demand for labor, where employees work for wages. The video raises concerns about the strength of the labor market, challenging the notion that it remains robust amid economic turbulence. It suggests that tightening financial conditions and a slowdown in money creation could lead to job losses and higher unemployment rates, contrary to more optimistic assessments.

💡Manufacturing Activity

Manufacturing activity refers to the production of goods in an economy. The video cites a decline in manufacturing activity as reported by the Federal Reserve Bank of Kansas City, presenting it as evidence of a broader economic slowdown. This decline is positioned within a narrative of growing economic concerns, suggesting that a reduction in manufacturing could signal deeper issues within the economy.

💡Monetary Policy

Monetary policy involves the management of a country's money supply and interest rates by its central bank, in this case, the Federal Reserve. The video critically examines the Fed's monetary policy decisions, particularly its handling of interest rates in response to economic indicators such as inflation and unemployment. The discussion implies that missteps in monetary policy could have significant repercussions for economic stability and growth.

Highlights

New York City Government faces Armageddon as property owners revolt, signaling deeper US economic issues.

Delinquent property taxes in NYC soar, with no incentive for owners to pay, impacting city revenue.

Commercial real estate prices decline, yet to impact municipal tax revenues nationwide.

New York's unique laws contribute to its early experience of the broader economic issue.

Manhattan office vacancy rates hit record high, adding stress to the real estate market.

Rise in unpaid property taxes linked to struggling office market and changes in rent regulation.

Federal Reserve's role in the economic downturn highlighted amidst tightening bank lending standards.

Steve Van Meter criticizes the Fed's late response to economic signs, risking further recession.

Highlighting a debt-based economy's vulnerability when new loans don't offset paid-off loans.

Increase in consumer optimism contrasted with rising economic indicators of distress.

Critique of optimism in the labor market amidst a tightening credit environment.

Connection between bank lending practices and the broader economic health.

Predictions of deflationary trends based on historical financial crises and current economic indicators.

Contradiction between consumer sentiment and actual economic conditions, warning of an impending labor market shift.

Kansas City Fed reports decline in manufacturing activity, contradicting optimistic economic narratives.

Steve Van Meter emphasizes rapid Federal Reserve action as critical to averting deeper recession.

Transcripts

this is frightening I'm your host Steve

Van Meter and thanks for joining me

today and our lead stay New York City

Government faces Armageddon as Property

Owners Revolt but I want you to

understand this isn't an isolated issue

with New York City this is a sign and a

symptom of much broader and deeper

problems with the US economy but yet at

this time we're seeing consumers

starting to be more optimistic than ever

but are there hopes about to be dashed

well we'll make the case why they are

now it's over to Bloomberg where we

picked today's story up with a headline

of New York City's government delinquent

property taxes sore without an incentive

to pay now part of this is indeed unique

to New York City which I'll show you but

as far as the broad US economy we're

starting to see not just a small but a

large uptick in delinquencies and this

is suggesting that perhaps what's going

on here in the US is not as good as many

of the political leades want us to

believe the economy here is sliding down

in a big way as overdue property taxes

are forecast to reach the highest level

ever jumping by more than 30% to 880

million at the end of the fiscal year in

June from three years ago that means New

York could be bringing less tax revenue

since close to half of it comes from

property tax collections now this is

something we've been warning about

that's going to happen to counties and

municipalities all over the country

mainly because the big decline in

commercial real estate prices hasn't

impacted them yet in fact we haven't

even seen it really hit the books but

wait till their tax revenue goes down

problem with New York City they're going

to be one of the first areas to actually

experience what's going on here mainly

due to their own laws it's people

realizing that there quote no

consequences for not paying your

property taxes that just can't be

allowed to continue and there's

partially that is true and just to be

sure the rise in unpaid property taxes

comes as New York's office Market

continues to struggle and this is a

problem that's again going to hit every

major Metropolis every County every city

every government all over the United

States when these building values

finally get appraise down that means

they cannot charge them as much in

property tax the issue governments just

can't cut their expenses fast enough to

deal with a lack of Revenue the overall

vacancy rate for Manhattan office Bas

stood at whopping 22.2% in November the

highest ever on record in fact rent

regulated Apartments as we found with a

recent New York Bank are also facing

stress after a 2019 law sharply reduced

landlord's ability to raise rents and

since tax Lan sale programs and unpaid

property taxes get this expired in March

of 2022 and wasn't reauthorized by the

city council officials say delinquent

owners have absolutely no incentive to

pay their debts and under that plan the

city was authorized to sell leans on

single family homes and condo after 3

years of non payment and leans on other

property types could be sold after one

year to bring in some form of Revenue of

course not as much as they wanted at

least some now they can't bring in any

and the issue here isn't just with New

York City as I want you to understand

this is a broader based issue of

problems in the economy that all comes

back to the FED but is the Fed going to

do anything well not at least till it's

too late and here we can see the net

percentage of domestic Banks tightening

standards for commercial industrial

loans to firms of all sizes and this is

critical because in a debt-based economy

we have to understand that money is

created when Banks lend so when they

issue a new commercial loan money is put

into the economy now the challenge is

when you see a net destruction of money

that occurs when commercial industrial

lending contracts when there's none of

new loans being generated to offset all

the principal value of loans that are

being paid off that's what we're seeing

now and what happens is the delinquency

rate that shown in red starts to tick up

so here you can see that the banks are

tiing lending standards anytime the blue

line is above the black line that means

less money is being created and sure

enough with a lag the delinquency rate

goes up in red now this data from the

government is on a quarterly basis on

delinquencies so we haven't seen this

num Red Line go up but you can better

believe it's going to go up soon but yet

as I said don't ask fed to do anything

here as pal rerat the FED doesn't need

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intell it is in a hurry to cut R which

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they forc me to go to seven the fact

that the US economy is growing at such a

solid Pace the fact that the labor

market is still very very strong again

this is a fed's case here but you look

at New York City and what do you find

out people aren't paying the property

tax and why don't people pay it is it is

it really as simple as they sayy you

know what they can't take my property

away they can't put a lean on it no it's

because people don't have the money that

is the underlying issue here that's why

we see delinquency rates go up this

gives us a strong chance just to be a

little more confident about inflation

coming down before we take the important

step of cutting rates now the reason B

is saying this part of the reason

consumers are optimistic and at least

building in their optimism as I'll show

you in a bit is that pal believe they

went to a restrictive level of rates and

then they just pulled back a little bit

which they had planned to if the economy

will continue to Roar and take off

consumers are starting to buy into it

that's dangerous we got some new

evidence to say well that's not how it's

going to play out but let's take a look

at this you look at the yield curve we

talk about the FED making bad moves what

they did is they forced short-term rates

above what the market says they should

be priced at now that causes an

inversion so what we're looking at is

the fact

and signs of persistent price pressures

because they really are afraid that

inflation is going to come back in a big

way just like it did in the 1970s now

what's critical here is pal does not

understand how the monetary and

financial systems work in fact neither

him or his cohorts on the fomc board

because if they knew this was about

money creation and they're constricting

the creation of credit they know that

the longer this goes on well the worse

it gets we can go back now look at the

net percentage of domestic Banks

tightening standards for commercial

industrial loans to firms of all sizes

this against the Consumer Price Index in

red shown on a year-over-year rate of

change and you can see that Banks can

tighten standards for a while because

there's a lag of how long it takes for

the money that's in the system to get

filtered through it and what happens at

some point inflation comes crashing down

in fact look here during the global

financial crisis what happened Banks

were tightening standards inflation went

up then all of a sudden well turned into

deflation and look now the FED says look

we believe inflation's sticky we don't

think it's going to go down that much

and what's going to happen is history is

going to be a guide here we're likely to

see inflation just fall off an outright

cliff and that means the FED Chief said

Friday he doesn't see the possibility of

a recession as elevated at this time

still he reiterated that an unexpected

weakening in the labor market well that

could change everything and warning a

warrant a policy response from fed

officials well that's not just a small

thing it's a real thing because many

people believe the FED follows inflation

we make the case that's not true there's

virtually no relationship between the

federal fund rate and inflation at all I

mean there is one but it's so far

stretched out there and no one really

would believe it that how about this

look at what we see as far as continued

claims go these do have an impact and

the FED believes the labor of Market

strong they believe that nothing can

crack this again you come back to the

creation of money in the banking system

and this is the same issue that New York

City's facing that's only going to get

worse because if there isn't enough

money created by the system because

banks are constricting credit what that

means is that Financial conditions start

to tighten there's not enough money to

support the labor market and some people

lose their jobs then what happens they

get an unemployment they find out there

aren't more jobs and they stay there the

longer they're unemployment the less

money they spend on the discretionary

side of the economy the more people that

eventually lose their jobs because of

the lack of money in the economy which

is why when Banks tighten standards what

happens well continued unemployment

claims go up pal says this is about it

we're plateauing out the market think so

too hang tight that's going to change in

a big way but meanwhile consumers are

excited because this inflation is

helping them not just the customers but

the companies as well everyone believes

this is going to lead to a huge Boom at

Equity prices it means the economy is

strong and means a Fed for the first

time in history nailed a soft Landing or

even a no Landing depending on how you

want to call it the reality is they've

all got it completely wrong as you're

about to see because dist inflation is

the word of the quarter in retail that's

a good thing for the consumer and all

that means is the price you pay just

isn't going up as much and that means

that retailers believe that you can

continue to afford to make those higher

payments on those increased Goods of

services and as Target CEO went on to

say that they rolled out an inore

discount brand aimed at budget conscious

shoppers just to help them out the

reality is people are paying more just

not as much and the reason this is

something that government gets really

behind is when we look at the Consumer

Price Index here again in Blue on a

year-over-year rate of change against

average hourly earnings of production

and non-supervisory employees here's the

case the government's making look

inflation's coming down and your average

hourly earnings yes they're slowing down

but well they're they're making more

than the rate of inflation so this is a

good sign this means in fact inflation

could come roaring back that's the big

fear you go back to the 70s and what

happened you saw average hourly earnings

increase that actually eventually led to

the big surge of inflation it happened

again in the mid 70s and then going into

the 80s look now it's going down not up

that means of course the notion that

inflation here is going to resurge is

highly

unlikely but what the government can see

is that ours worked are slowing down and

that means total comp compens ation now

we're going to look at average hourly

earnings multiply by average weekly

hours production of nonsupervisory

employees this again in red look at that

broad deceleration in fact you now when

you take a look at what happened in the

70s you see that deceleration led to

inflation coming down deceleration

inflation came down deceleration

inflation came down and what it tells us

is that inflation is likely to come down

even more because without the credit by

the banking system what happens is

there's just not enough demand of the

economy more people get unemployment

they stay on unemployment they spend

less money ours work continues to get

trimmed but here's the problem us

consumers well they think fed nailed it

as us consumer sentiment jumps to the

highest level since July of 20121 as

University of Michigan final March index

is now up to

79.4 and that means it jumped from 76.5

earlier this month suggesting consumers

are indeed more confident reaching the

highest say mid 2021 and that matters

cuz throughout history what we know is

that if consumers are actually seeing

inflation cool off and they haven't

started losing their jobs well their

optimism that the FED nailed it goes up

problem is as you about to see isn't

going to last the 2.9% gain from the

preliminary ring was the biggest intram

month increase since August 2022 again

as consumers get excited here but here's

what I want you to look at we have

inflation we have total compensation in

blue and red resp respectively the same

chart as before but now let's look at

University of Michigan's consumer

sentiment this in green and we can note

the periods where inflation's coming

down even though wage growth and total

compensation is slowing what happens

consumers start to get optimistic

because they feel like there's a chance

they're going to get ahead of inflation

the problem here is and we can see this

happen throughout history and now is one

of the biggest increases in sentiment

against the decline inflation and total

compensation the problem something's

about to change and that my friends is a

labor market and as you're about to see

in a big way not only did inflation

expectations fall sharply as again

consumers buy into the fact that fed has

got this so did inflation uncertainty as

such consumers are now broadly in

agreement that inflation will continue

to slow both over the short term and

long term but what they also believe is

in the labor market they're listening to

the fed the fed's telling them look the

labor market is strong and robust

nothing here is going to change at all

the issue as we know it is because we

can go back and now overlay the

University of Michigan consumer

sentiment survey will show that in blue

this time against continued unemployment

claims and we can note that right now

consum are just really optimistic

because cons uh continued claims just

aren't surging but we can note that when

they do and that happens as I showed you

because lending standards are tight and

they're staying that way what happens if

eventually this consumer confidence

turns around in a big way you can see

the real link here is the fact that

consumers are more confident when they

have a job than when they're not but as

I mentioned in the beginning of the show

are there underlying signs of the US

economy is head into recession well we

got those from the Kansas City fed this

week as a 10 District manufacturing

activity declined further in March but

that doesn't make sense because

consumers are more optimistic Target

says you should be happy about this

inflation and the FED says well the

labor market super strong and here we

see the Federal Reserve Bank of Kansas

City released a March manufacturing

survey today according to them well the

survey revealed that manufacturing

activity declined further in March and

get this expectations for future

activity remain steady of course future

activity should be going off the charts

at this rate but notably it's not and

Regional Factory activity fell further

March and expectations for future

activity were again steady but here's

some of the key things employment levels

expanded modly mod which doesn't make a

lot of sense I'll make the case for that

even as production and new orders

contracted and over half of firms have

given midyear wage increases recently

but fewer plan this year so they hiring

admits a fact that there is a Slowdown

here because everyone's buying into the

narrative but when we look at the

details you can tell you the labor

market is going to come Unwound look at

this volume new orders contraction

backlog of orders in contraction and

what did we say happens when you work

through the backlogs and there aren't

that many new orders the work week goes

down so here you can see average

employee work week that is in

contraction as well that means they're

hiring people on the hopes the economy

turns around but at the rate things are

going if we continue to see a workr of

these backlogs and a decline of new

orders it's only a matter of time we

could just be months away before we

start to see a big uptick in of course

initial an employment claims a continued

increase and continued unemployment

claims in the FED not just waiting till

midye to come one or two times they're

going to be cut rapidly as the US

economy spirals into recession again we

see this in New York City with

delinquency rates going up we see that

going around the rest of the country

it's going to get worse and what's going

to happen as it always does it's going

to happen fast and with that I'm Steve

Van Meer thanks for watching thanks for

being fans bye

now