This is a post that underscores the inefficiency that massive monetary policy intervention has created in the United States:
Around 1990, for example, real median income was $56k per household and
now, 25 years later, it’s just $51k. Main street living standards
have plunged by about 9% during the last quarter century. But what has
not dropped is the opportunity for Americans to drop shopping: square
footage per capita during the same period more than doubled, rising from 19 square feet per capita at the earlier date to 47 at present....
When the aggregate level of shopping space is looked at during the
above longer-term time frame, the aberration is even more apparent. At
the time of the S&L fiasco around 1990, there were only about 5
billion square feet of shopping space in the nation; capacity tripled during
the subsequent a quarter century. Yet this was a period when the real
incomes of the middle class were essentially dead in the water. So what
market signals could have possibly given rise to such a disconnect?
The answer is the relentless drive for yield among fixed income
investors during a period when time and again the Fed intervened in
financial markets to prevent the benchmark rate – the 10 year Treasury
note – from finding its natural economic price/yield in what was
becoming a savings parched economy. Accordingly, a massive tidal wave
called “retail operating leases” developed that quenched this thirst for
yield – helped along by accounting loopholes which allowed trillions of
these operating leases to be kept off borrower balance sheets and which
thrived on the illusion that the proliferating chains of new retail
concepts served up by the Wall Street IPO machine were “national credit
tenants.” These overnight sensations had such solid and sustainable
“business models” as to imply blue chip credit status. They had such
attractive terms (10-15 years) and interest rate spreads over benchmark
rates that retail occupancy costs were dirt cheap relative to the true
long-run economics and risks.
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