Friday, April 30, 2010

A hint at recovery

Sabbath eve, April 30, 2010. Today I saw signs of real economic recovery. Not due to government stimulus or bailout programs, but instead because a wealthy landlord realized the property he owned wasn’t worth the rent he had been charging and voluntarily lowered that rent to a level that will allow a business to succeed.

The landowner in question had previously rented his building to Adrian Davila and Davila’s barbecue but the cost was so high that in spite of excellent food and a good crowd, Adrian couldn’t make a go of the business. Another family opened a similar business at the same location with much poorer quality food and even poorer service and went under within a month. The building sat empty for a number of months thereafter. Finally, the landlord called Adrian and offered to reduce the rent if he'd reopen his restaurant.

So, Davila’s once again has two locations in Seguin. The old standby on Kingsbury Street with basic barbecue fare and Adrian’s newer upscale location on the 123 bypass with a larger and more diverse menu. The food is good, fairly priced. The restaurant is clean, the service superb.

From the landlord's perspective, reduced rental income is better than no rental income.

I am glad to see this.

Unfortunately, Wall Street, those running the six big banks with all our money, and their government enablers fail to understand that they too are going to have to revise expectations, revalue and reconcile real estate holdings to their true worth, forgive debts where applicable, and start paying producers fairly instead of off-shoring jobs before we can have a real recovery.

This week also provided a slap in the face of cornucopians when an off-shore oil rig blew up and collapsed. As we speak, 5,000 barrels of oil a day are being dumped into the Gulf of Mexico. This flow is likely to continue for several months, and could possibly increase drastically if the well head on the ocean floor fails completely.

President Obama has called for a halt in offshore drilling until the cause of the blow-out is determined. The environmental damage this blow-out causes will be catastrophic. But this event should also further drive home the premise of peak oil and the precariousness of a system totally dependent on a constantly moving warehouse on wheels and the heretofore cheap and easy to access fossil fuels that run our economic engine.

The times they are a changing.

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