Loading ...The most experienced operators are closing shop. As this article notes, the most experienced restaurateurs in Seattle are closing their doors: Seattle’s Wage Mandate Kills Restaurants: “I often hear people in Seattle lament that it’s becoming ‘more corporate.’ The truth is that the city has made it nearly impossible for many small businesses to survive.” (WSJ.com)
Here’s the dynamic: all the vested interests take a ruler and a pencil and they extend the line of higher costs and revenues into the future: so what if the rent on this cramped cafe went from $1,000 a month to $3,000 a month? We can jack it up to $4,000 and then $5,000 a month because the tenants have always managed to pay the higher costs.
Local governments act on the same delusional extension of “growth forever.” Small businesses can always pay higher taxes and fees because they’ve always managed to pay them no matter how much we jack them up.
Small businesses and property owners are viewed as tax donkeys: load them with higher taxes and fees, and they trudge onward without a complaint. The smart money is bailing as fast as they can, and the dumb money remains delusional: customers will happily pay $40 for a plate of chicken because they’ve always managed to pay the higher costs.
You see the disconnect between stagnant wages and costs that have tripled: you can only fill the widening gap with borrowed money for so long, and then even as zero interest the wage earner can no longer afford to borrow more.
At that point, defaulting on existing debt is either impossible to avoid or the wisest choice. The owners of a cafe who can no longer make the insane rent can’t default, so they just walk away. Having been stripped to the bone by sky-high costs, there’s nothing left for creditors. As the old saying has it, “you can’t get blood from a turnip.”
https://www.zerohedge.com/markets/skyrocketing-costs-will-pop-all-bubbles