Bill Bonner – Bill Bonner’s Diary (United States) –
BALTIMORE – As we told you yesterday, we were just at a meeting in Miami with some of the best “big-picture” thinkers in our business.
One of the provocative ideas came from our old friend and Casey Research founder Doug Casey:
“Private property in the U.S. will disappear in our lifetimes,” Doug announced boldly.
It sounded far-fetched at first. But let’s explore it.
Slaves to the Elites
Marxists aimed to bring all property under government control. Major assets were to be owned by the state, which meant they would be used and controlled by the people who ran the government.
This was such an awkward and unnatural situation that it took bloody revolutions and civil wars to bring it about.
The result was a disaster. Deprived of their assets, citizens became slaves to the ruling elite. They had little choice about what they did, where they lived, or what they had. They were trapped.
The appeal of communism was that it could make people materially better off. Without the costs of advertising, competition, errors, unneeded luxuries, and private caprice… the economy was supposed to be able to produce goods and services more efficiently.
It was like a machine, they thought. Watchful, expert, and civic-minded technocrats could rationalize output, making it work better.
But it didn’t work out.
Without honest price signals to guide them… and no need to satisfy customers with decent products and services… the central planners made one mess after another.
Every deal was win-lose. These benefited the elite and left the average person poorer. And after a few decades, the whole economy became a lose-lose proposition: Real output was so low and of such poor quality that the elite ran out of things to steal.
After 70 years of this in the Soviet Union and 30 years in China, governments decided to abandon the fantasy and restore private property.
These experiments took place with the whole world watching. You wouldn’t think anyone would be dopey enough to repeat them.
But although progress is cumulative in science and technology, in the world of politics and economics, it is cyclical.
One generation learns. The next forgets. The old mistakes are repeated over and over again.
What are the major categories of private property?
Families own houses, cars, a few appliances… jewelry… and some financial assets. Even in China and the Soviet Union, families kept some personal possessions. Financial assets and real estate were taken away.
Could it happen here? Maybe it already is.
We’ve seen how fake money is being used by the elites like a stickup man uses a pistol: to get their hands on other people’s property.
We explained our “claim ticket” analogy to the group in Florida:
“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.
And who would complain? The feds would be paying top price for them.
A Prediction of Our Own
Central banks and sovereign wealth funds are already buying bonds in trillion-dollar quantities.
But did you know they are buying stocks, too?
According to Bloomberg, Japan’s central bank is now a top-10 holder of 90% of stocks in the Nikkei 225 (Japan’s equivalent of the S&P 500).
Under its QE program, the Bank of Japan is buying 6 trillion yen’s ($53 billion) worth of stock market ETFs a year.
And since they are driving in other people’s cars… they can go as far as they want. No need to worry about price. Or return on investment. Or risk management.
Is a stock too expensive? Is a company mismanaged? Is the stock market going up or down? What does it matter when you’re buying with free money?
And here we offer a prediction of our own: Come the next financial crisis, central banks, including the Fed, will buy stocks and bonds on an even larger scale.
No act of Congress needed. No debate in the Senate. Not even a presidential tweet.
They will claim to be “protecting the economy.” They will say they are “saving jobs.” But the effect will be to move wealth from private hands into the slimy mitts of the feds and their cronies.
And what about real estate? Much real estate is already owned by REITs, which could be bought up, too.
[Note: A REIT is similar to a mutual fund, except that it is composed of property instead of stock.]
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 s 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.