It’s as old as time: taking on debt to fund a sure thing. Be it houses, stocks, cryptocurrencies, tulip bulbs or taxi medallions. Winnie Hu tells the current tale of woe brilliantly for The New York Times. Big city taxi medallions were once considered to be good as gold. Ms. Hu writes,
Sohan Gill once saw his medallion as such a good investment – ‘better than a house’ – that his wife bought two more in 2001. Now they cannot find enough drivers for the cabs because business is so bad. And Mr. Gill, 63, who had retired from driving, had to go back on the road. ‘How many more years am I going to drive to take care of these medallions?’ he asked.
That sounds so much like Las Vegas 2005. Why own one house? Buy two more. Now retirement is put on hold.
A full blown medallion crash is unraveling in New York City as Ms. Hu explains.
Since 2015, a total of 85 medallions have been sold as part of foreclosure proceedings, according to city records. In August alone, 12 of the 21 medallion sales were part of foreclosures; the prices of all the sales ranged from $150,000 to $450,000 per medallion.
A medallion being essentially a license to drive a cab, $150,000 to $450,000 doesn’t seem like the bottom, however at the peak. 2014, a medallion went for $1.3 million. By the way, Uber was founded in 2009, but New York cab owners either didn’t get the memo, or didn’t understand the implications.
This post was published at Ludwig von Mises Institute on Sept 22, 2017.