Saturday, February 11, 2017

Will Private Property Disappear in Our Lifetimes?

That's the provocative title of posting of Bill Bonner's Diary yesterday.

It's not Bill's prediction; it's a question posed by Doug Casey of Casey Research at a conference they both were attending on South Miami Beach.

No private property?  Even in the old Soviet Union and Mao's China, people kept some personal property.  Trinkets from ancestors, little things they collected.  The state, of course took real estate, financial assets and anything else that wasn't protected, hidden or buried.  The Soviet Union collapsed, of course, but the most valuable thing it stole was the belief in peoples' hearts and minds that they could control their own futures and their own lives, so that when the foot was taken off their necks, most didn't know what to do.  A few became the rich oligarchs that run everything now.

Still, when you consider the abject failure of communism in the Soviet Union, Castro's Cuba, Venezuela, and anyplace it has been tried, it would be tempting to think that nobody would be foolish enough to think it would work now.  Unlike mathematics or engineering, where ideas that don't work are discarded, politicians recycle old failed ideas all the time.  Perhaps, charitably, the older generation who learned what doesn't work retires or "moves on" and the idiotic ideas like communism and socialism keep coming back.  Just look at the Bernie supporters or just about any of the rioters we see on the news since Trump took office.

Consider Bonner's analogy for the machinations of the central banks.  He uses the familiar example of a parking garage.
“You leave your car at a parking garage. You get a claim ticket. That is a form of money. It is not real wealth, but it represents real wealth – your car.

“Now, imagine that the parking lot prints up extra claim tickets. It increases the ‘money supply.’ It may even have a temporary boost to the economy, as people think they are richer and better able to spend. Now, several people may think they own your car.

“Of course, there’s only one car there. But the people in the financial industry who print the claim tickets can use them to take your car away from you.”

And they can use the same system to take your house… your stocks… and your bonds. This would be a hidden revolution. Private property would largely disappear. It would become the property of the Deep State elite who control the system.
Do you own your home?  In the sense that it's paid off and you're not making a mortgage payment?  If not, your mortgage may have been sliced and diced into one of those collateralized debt obligations, CDOs, like the ones that caused the last financial crisis.  These things get sold and traded among the big banks regularly.  They were considered low risk, very secure investment vehicles until it became apparent there were too many subprime mortgages added to them.
And the cronies in the finance sector may already have a claim on your house. But most houses are bought with mortgage financing. Banks lend you the same fake money that the Fed uses to buy stocks.

They create deposits out of thin air when they make a loan, using nothing more than keystrokes on a computer.

They never earned the money. But you have to borrow it from the bank… buy the house… and then pay back the bank. And if you don’t pay, the bank takes the house and sells it to someone else.

Years ago, people would celebrate when they paid off their mortgages. At last, they owned the house free and clear. Now they are taught to “manage” their credit… and refinance.

And with mortgage rates so low, why not?

Most homeowners never own their homes. They simply rent them from banks… paying all their lives for the roof over their heads and the flat screen in the rec room.

But wait. They also pay property taxes. In Baltimore, we now pay as much in property taxes as we paid in rent a few years ago.

Even our automobiles are now often leased or financed. We talk about “our” cars and houses. But many are no more ours than a rented bicycle.

They, too, belong to the banks – the finance arm of the Deep State.
From the purely practical standpoint, even if you have paid off your house, you still have to pay property taxes.  If you don't pay those property taxes, your house will be seized by the local government where you live and you'll lose your private property.  Anyplace you can live is subject to these taxes.  From that standpoint, perhaps it's fair to say there are no privately owned homes anymore; we think we owe them but pay a form of rent to the taxing authority.  

Rough estimates are that by running essentially zero interest rates since 2008, the Federal Reserve has transferred $8 Trillion from American savers into these banks.  That's the amount of interest that savers should have earned if real, market-determined interest rates had been paid to savers.  That money will never be gotten back.  It's part of the system that makes the Deep State able to own everything.


  1. Reminds me of the real estate agent (actually a very nice guy) who tried to get me to buy something I could afford free and clear. He said that it was safer, considering all that happened during the 2008 debacle. I reminded him that it was a simple matter for the state to take your "fully owned" property any time they wished by either raising taxes beyond what you could afford (as happened to many elderly fixed income homeowners in Seattle when Microsoft (etc.) caused property values - and subsequent taxes - to skyrocket., or through asset forfeiture, simply because some crime took place on your property, even if you were not involved in the crime.

    The folks in Seattle had to sell, because they couldn't afford the taxes, but values were high enough they were able to buy elsewhere (although they were forced to move out of the area, because of those same high prices). If a taxing agency decided to acquire your property, they could increase taxes beyond your ability (or willingness) to pay. You might be able to fight it in court, but the Deep State owns the judicial system these days (or so it appears), so you might get short shrift there.

    Finally, there is the whole "eminent domain" situation, where your property can be taken simply because the local governing agency can generate more money from selling that property to Pfizer or some other entity. You _might_ get "fair market value". Maybe. But it obviously isn't your property if it can be taken from you like that.

  2. Even if you think you have money they get you.
    If you had invested $20,000 last year in a one year Certificate of Deposit at one of the major banks, you would have earned $15 in interest.
    For an entire year.
    On Twenty Thousand dollars.
    I kid you not.

    1. It's awful. I did a piece a while back on what's called Yield Purchasing Power - the purchasing power of the interest on your savings. Basically, in 1979 if someone wanted to earn 2/3 of the national median income in retirement, they had to save $100,000. That climbed to $100,000,000 in 2014.

      In 35 years, the YPP of a 3-month CD fell more than 1,000-fold.

  3. There isn't a perfect system. Many folks want to go back to a gold standard but there isn't that much gold around to do it. I worked when our population was under 50 million people and we didn't trade much with other nations. It won't work now.
    Owning a home for most people is only possible because of mortgages. The fact that you "rent" it from the bank seems like a small price to pay for the benefit you get. Who would prefer the alternative of saving for 30 years before you could own a home?
    Property taxes can potentially be a problem but it is a good news/bad news problem. Typically high property taxes mean high home value and you always have the option to sell it and move to a lower cost of living area. My major complaint with property taxes is simply that some property gets to avoid it and some don't. IMHO everyone/every property should pay the same tax.

    As for the interest rates that is a problem. Not because your CD doesn't make you any money but because it is a huge red flag. The reason we have close to zero interest rate now and have had for 8 years is because we are in deep shit and essentially bankrupt. But technically you aren't bankrupt until you admit it or someone else forces it. That's where our country stands today. We are bankrupt waiting for the crash. If you don't have PMs buy them now. If you do have PMs keep your powder dry it's coming...

    1. You forget about supply and demand. The reason why houses can only be paid with mortgages is exactly because mortgages exist. The same for college loans and college education.

      There is a lot of money chasing a few resources. In 1965, the average annual wage was $6500, and the average cost of a new home was $13,500. About two years' wages. In 1975, a new home cost 4 years' wages. By 2015, a new home cost 5 and a half years' wages.

  4. Well that is simply not accurate. The problem you have encountered is I am old enough to have bought a home in 1965 and the cost was more then three times $6500 and it was a "cheap" or low cost starter home. My father bought a "cheap" home in 1943 and it cost him $8500.

    Your point though is that the cost of homes has risen faster than wages and that is true. But there are many reasons for this, better building standards, bureaucratic red tape, more value/profit in high end homes, etc. The same thing could be said for cars but both cars and new homes are selling well and people want them. I fail to see how the increases in price has really hurt anyone. People who can afford homes are happy with them. I myself have bought and sold many homes and made a nice profit on each of them.

  5. I shared a 12 y.o. house that the original owner (ww2 vet) bought in 1965, for $13,500 in Sunnyvale, CA. It was a cheap copy of an Eichler design. Stylish POS.
    At the same time, he bought a Marantz console stereo system (Rolls Royce speakers!), for $1500.

    In '85, he sold the house for $550,000. Two years later, an identical house a few doors down sold for $750k. Bear in mind, this was the middle of Silicon Valley, which didn't exist in '65.

    Traditionally, houses increased in cost due to growth of the community, which made the location more desirable. The second reason is due to inflation.

    Your stated reasons are not big factors in driving costs. "better building standards"-HAH! You have obviously never looked at the construction of homes prior to WW2. Since the end of that war, housing has been as cheaply built as they can be. It gets worse all the time. Nowadays, illegal Mexicans are the major labor for them, and it doesn't come any cheaper than that. Talk about junk.