New York City Government Faces Armageddon as Property Owners Revolt
Summary
TLDRIn 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
- ๐ฑ New York City faces a financial crisis as property owners increasingly default on taxes, reflecting broader economic troubles in the US.
- ๐ Delinquencies in property taxes are surging, expected to jump over 30% to $880 million, indicating a significant drop in municipal revenue.
- ๐ The commercial real estate market downturn is a major factor, with Manhattan office vacancy rates hitting a record 22.2%.
- ๐ฅ A 2019 law limiting landlords' ability to raise rents has added financial stress, worsening the situation for property owners.
- ๐ณ 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.
- ๐ธ Banks are tightening lending standards, which reduces the amount of money circulating in the economy, leading to higher delinquency rates.
- ๐ด The Federal Reserve's cautious stance on cutting rates reflects a complex balancing act amid fluctuating economic indicators.
- ๐ฒ Steve promotes a 30-day free trial for a financial advisory service, claiming it offers superior returns compared to competitors.
- ๐ฐ Consumer confidence is on the rise, buoyed by cooling inflation and strong labor market signals from the Fed, despite underlying economic vulnerabilities.
- ๐ซ 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
๐๏ธ 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.
๐ธ 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.
๐ 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.
๐ฎ 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.
Mindmap
Keywords
๐กProperty Taxes
๐กDelinquencies
๐กCommercial Real Estate
๐กFederal Reserve (Fed)
๐กConsumer Sentiment
๐กInflation
๐กCredit Tightening
๐กLabor Market
๐กManufacturing Activity
๐กMonetary Policy
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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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
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