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> I think maybe it has something to do with their financial games that they play, where if they cut the asking rent buy 75% to actually fill the space then whoe

> I think maybe it has something to do with their financial games that they play, where if they cut the asking rent buy 75% to actually fill the space then whoever holds the mortgage for the building will decide they’re insolvent and foreclose? A lot of this was low interest rates. Appreciation on the building, especially given artificial scarcity from captured zoning boards, meant you could make more than the interest on the loan just through increases in the price of the building without even renting it out. So they were asking crazy rents because if they could actually get someone to pay that it's pure profit and if not they're still making money. Now interest rates are higher and that doesn't work so well so the result should be a drastic decline in rental prices, but people are holding out in the hope that the fed is going to drop rates to zero again. Which would be stupid. > Assuming that it wouldn’t cause a Great Depression, but it probably would. Nah, we just "fixed it" the wrong way in 2008. We lowered interest rates so people would borrow money (bank loans create new money) and reinflated the housing bubble. But a bubble is bad. So what you do is you let it pop. This causes deflation, which is generally bad. But uh, maybe not actually so bad right now. And if there was too much deflation, that's all too easy to fix -- it intrinsically allows you to print money and send out stimulus checks, because in that case inflation to counteract the deflation is what you want. And since you don't need to buy a house to get a stimulus check, that stabilizes the overall economy instead of re-overheating the housing market like we did last time.

from-nibly 2y ago
We might be able to handle deflation, but the fed can not. That would cause them to default on their loans. They are already dangerously close to this happening IIRC.
- AnimalMuppet 2y ago
  The Fed was never in any danger of defaulting on their loans. (Do they even have loans?) The Fed was worried about everybody else getting wiped out in a deflationary spiral.
  - AnthonyMouse 2y ago
    The Fed is both a bank and the part of the government that prints federal reserve notes (i.e. dollar bills). If it wants to buy government bonds or something else it will just credit your account (or your bank's account) at the federal reserve bank. The Fed then owes that other bank money, but banks are also required to keep reserves on deposit with the Fed in order to make loans, so they generally don't ask for the money, and when they do they generally don't actually want dollar bills, they want to transfer the money to a different bank, and then the Fed would just credit that bank's account. Occasionally other banks actually do want printed currency (e.g. to fill their ATMs), so then the Fed debits their account and gives them physical cash it has printed. The Fed is never in any danger of defaulting. If you want to transfer money it owes you to another bank, they're just changing the numbers in their computer. If you want it as cash, they're the thing that prints the cash. The only reason it can't just create an unlimited amount of money to use for whatever the government wants is that creating money causes inflation.

from-nibly 2y ago

We might be able to handle deflation, but the fed can not. That would cause them to default on their loans. They are already dangerously close to this happening IIRC.

AnimalMuppet 2y ago
The Fed was never in any danger of defaulting on their loans. (Do they even have loans?) The Fed was worried about everybody else getting wiped out in a deflationary spiral.
- AnthonyMouse 2y ago
  The Fed is both a bank and the part of the government that prints federal reserve notes (i.e. dollar bills). If it wants to buy government bonds or something else it will just credit your account (or your bank's account) at the federal reserve bank. The Fed then owes that other bank money, but banks are also required to keep reserves on deposit with the Fed in order to make loans, so they generally don't ask for the money, and when they do they generally don't actually want dollar bills, they want to transfer the money to a different bank, and then the Fed would just credit that bank's account. Occasionally other banks actually do want printed currency (e.g. to fill their ATMs), so then the Fed debits their account and gives them physical cash it has printed. The Fed is never in any danger of defaulting. If you want to transfer money it owes you to another bank, they're just changing the numbers in their computer. If you want it as cash, they're the thing that prints the cash. The only reason it can't just create an unlimited amount of money to use for whatever the government wants is that creating money causes inflation.