The next step in dismantling America.

Let's see now...step 1 was to run oil prices to slow the economy, step 2 was to declare bank properties in troubled mortgages worth zero and now comes the third step: the destruction of commercial real estate.

By now the argument about whether the Obamabots induce these crises or the crises just come about as unintended consequences of their policies IS UNIMPORTANT. Commercial real estate is about to take a hit from which it may not recover for years, if ever. Here is how it is brought about:

Commercial real estate, like homes, is financed largely by credit. A company builds a shopping center on finances obtained from the bank. The company then rents the stores and receives regular monthly (or quarterly) payments of rent and makes payments to the bank. If the stores begin to go belly up, the company that owns the shopping center has a while until its income no longer covers the monthly payments it must make to the bank. When that happens, the real estate company is essentially broke. The company then needs to refinance the property, but in today's environment that is difficult. As more of these companies try to sell their property, the value of their real estate plummets. At some point, the money they own on the buildings is larger than the value of the buildings on the open market and they hand their keys to the bank. This has happened to private housing and is beginning to happen to commercial real estate.

As banks are handed back properties that developers (or operators) can no longer operate, that asset is then counted as worth zero under 'mark to market' and we have another round of bank failures. As banks are required to increase reserves, this takes their money out of circulation and we have another dip in the GDP. Furthermore, the FED has a new opportunity to destroy more private property and "replace it" as public property. Socialism is advanced.

Employment continues to deteriorate. By now the job seekers outnumber the jobs available by a factor of 6. As businesses downsize because demand is not picking up, employment will not get better anytime soon.

Is there a ray of sunshine in this? Yes. The commercial real estate is only half of the residential real estate, so the "crisis" may not be as bad as when the FED declared banks insolvent. Unfortunately, by now the banks have been weakened to the point that many will not withstand this second shock. And our economy is getting weaker, in spite the talk of green shoots.

The second wave of real estate implosion, however, will reduce inflationary pressures for a while. This will be a good opportunity to buy some gold or gold mining stocks.