“I wanted to be one with the tiger,” said David Villalobos on his decision to leap from a Bronx Zoo monorail car into a tiger pit. “It’s a spiritual thing.” When this story broke last fall, we may have enjoyed a slightly mean spirited, innocent chuckle.
All that ended on October 1st, when the United States government also jumped into the tiger pit. More alarming still, it stayed there for 16 days while threatening default and, with it, the possibility that each and every one of us become “one with the tiger,” before pulling off an 11th hour aversion to what threatened to be a crisis of historic proportions.
For late-night comedians, finding new material those few weeks was slightly less difficult than buying NJ Transit tickets from an automated vending machine, but some of us found congress’s 16 day lunch break less than amusing.
When the government proves itself too dysfunctional to tie its own shoelaces, cross the street without holding someone’s hand, or go to the zoo without getting mauled by a large feline, it causes what some experts in the mortgage market refer to as “a throbbing headache.”
Speaking of headaches, the kick-the-bucket-down-the-street solution which rolled out last week is about as good for the economy’s aches and pains as weak aspirin, promising to offset most symptoms until January 15 when the government heads back to the zoo.
Now that the situation is at least on hold for a few months, we can take a deep breath. And when we do, we realize this is nothing new.
Every Friday, Eastern Union employees receive a weekly newsletter containing a “by the numbers” section. Were we to restructure it for the purpose of this article it would look something like this:
By The Numbers
42 number of times the debt ceiling has been raised since 1980
6th time it will rise under Obama when raised this week, compare that to
4 times under Bill Clinton and a whopping
17 for Ronald Reagan and 7 for George W. Bush. (Numbers courtesy of J.D. Parker)
In other words, the fun will continue.
Real estate, somehow, seems to always land on its feet, as J.D. Parker writes, “Real estate is still an extremely attractive asset class. It’s a tax shelter, it’s often a hedge against inflation and it’s a tangible asset that can be improved. Government shutdown or not, people still need apartments to live in, malls to shop at and offices to sit in.“
Still, these things matter. It would seem that the people in the government don’t get what uncertainty does to the ability of mid-size business to conduct itself. Eastern Union, for example, has clients whose rent comes from government agencies such as Medicaid and Medicare. Without the ability to get rate info from the government, we can’t properly forecast their income which makes it almost impossible to finance them.
“Commercial real estate finance is interest-rate sensitive and longer-term oriented,” the Commercial Real Estate Finance Council wrote in a media statement. “Constant uncertainty emanating from Washington is not helping our industry or the nation’s economy recover from the worst recession since the Great Depression.”
To understand this better we want to define a term which you have probably heard, on average, five times more than your own name recently: the debt ceiling.
The United States of America has been spending more money than it makes for decades. The key to our government’s economic survival has been to borrow money from China and other wealthy countries. One of the things the US government does with that borrowed money is pay off the minimum on its huge credit card debt. In order for the US to borrow more money, every now and then the Congress must approve for the government to borrow more money. Thus, they vote to increase the maximal amount that the US government is allowing itself to borrow.
There you have it, a glossary to impress your friends with during the next crisis, scheduled for January 15. Bit of advice: between now and then might be a good time to close any projects you’re working on, while the legislative aspirin is still in effect.