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This is ridiculous, there aren't going to be trillions in losses from intentional defaults in commercial real estate. First of all, if it's done intentionally,

This is ridiculous, there aren't going to be trillions in losses from intentional defaults in commercial real estate. First of all, if it's done intentionally, it's fraud. And if two people have blabbed to random Substack guy, then this would be easy to prove. Secondly, what exactly is the strategy here? Borrow a ton of money to buy buildings, then default on them and walk away? Where's the profit exactly? Third, the firms capable of raising this level of capital also care about their reputation and ability to borrow money in the future. And finally, the buildings won't be worthless when the bank takes them over, they'll just be worth less. To lose trillions here, this would have to happen on a scale of $10 trillion or more? The entire commercial real estate market in the US is only worth like $20 trillion.

cudgy 3y ago
> Where's the profit exactly? Admin fees
gojomo 3y ago
"Trillions" may be a stretch barring larger recession & wider commercial real-estate collapse. But it's far from impossible! A 10% drop would be enough to deliver (2) "trillions" in losses to a ~$20T sector - & broad commercial-real-estate price indexes often show swings of 15% or more within a year. Since then end of 2021, major indexes already show a 15% drop with no hint of slowdown - and from 2007-2009, there was a broad ~40% drop. If there's a 2008-style crash – and it seems likely much of these losses, whether strategic no-recourse defaults, or simple inability-to-pay defaults, will pass through to banks – there could be $8T in losses.