Bernanke Proposes a Federal Land Bank

January 20th, 2012

One of the more ingenious of future authoritarian innovations imagined in the Silver Circle Movie is an agency called the Department of Housing Stability, or “HouStab,” which is a division of the Federal Reserve in the film. Just as the Federal Reserve allegedly provides stability to the market by regulating the money supply, the HouStab holds a “Strategic Housing Reserve” and purports to provide stability to home prices by managing the supply of homes. And the HouStab botches this task just as royally. Now it seems the Strategic Housing Reserve may become a reality.

Fed Chairman, Ben Bernanke recently submitted a white paper to the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee in which he made suggestions for ways the government could take control of the housing market. The problem he sees is that “Government-Sponsored Enterprises” or GSEs (There’s an ugly term. He’s talking about Fannie Mae and Freddie Mac) are holding a bloated inventory of recently foreclosed properties which he calls “Real Estate Owned” or REO properties. They can’t sell them at a price they’re happy with, so the houses sit vacant, but the GSEs are not in the property management business, so the houses deteriorate, lose value and harm the property values of their neighbors. Among Bernanke’s proposed solutions is the creation of a federal “land bank” to manage properties that are “not dealt with adequately through the private market.”

In a handful of states land banks already exist, and have increased significantly over the past few years. They are government entities that buy and sell real estate, clear titles and when necessary demolish properties. But what Bernanke is encouraging is establishing a national land bank at the federal level, which could make the Federal Government the landlord of many renters.

There is a kind of uncomfortable vindication one gets when dystopic political predictions come true. It feels a bit like nausea. This particular prediction wasn’t mine. It belongs to Pasha Roberts and the creative team that worked on the script of the Silver Circle Movie. But it doesn’t take a psychic to predict the abuses of the Federal Reserve. There were economic doomsayers back when the Federal Reserve Act passed in 1913 who predicted the mess we’re in now. In fact Thomas Jefferson predicted it long before that when he said,

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.”

Fundamentally these predictions were possible because they were made by scientific thinkers who regarded their political and economic theories as testable, even falsifiable. That is the significant difference between science and superstition, which is (let’s face it) what most political and economic theories are. But notice that Jefferson didn’t say “enslaved.” He said “homeless,” and that’s pretty significant.

At the most basic level the mechanism of economic manipulation is the same. By leveraging the supply they hold in reserve they can supposedly stabilize fluctuations in market demand. This doesn’t work of course, because they can’t be trusted to hold anything in reserve. That’s like entrusting money with a gambling addict for safe keeping. But a housing reserve presents a different set of complications than a monetary reserve. Manipulating the money supply in a fiat system is relatively easy for them. They don’t even really need a printing press anymore because it’s all digital. But you can’t create fiat housing out of nothing, which means they’ll have to actually build or demolish housing to manipulate the supply. To build housing they could create a huge bloated make work program. Politicians could brag about creating jobs, but this doesn’t satisfy their purpose because increasing the supply of something would lower the price. If they want to artificially prop up the price they’d need to decrease the supply, which would mean demolishing homes. That could mean something similar to the Cash for Clunkers program, or it could mean simply seizing houses with eminent domain and demolishing them.

I have my own prediction if this ever comes to pass. We’re already seeing instances of property damage as occupants are forced to leave their foreclosed homes. We saw a man spray paint his garage with, “B of A stole my Home!” A handful of homeowners have opted to demolish their houses rather than allow the banks to profit off them. If it ever comes to the point of a Federal Land Bank seizing people’s homes with eminent domain I predict we’ll begin to see arson like you’ll see in the Silver Circle Movie. Hopefully at that point authorities will appreciate that the film is a work of fiction, even it is a predictive fiction, and doesn’t constitute any kind of a confession.

And don’t forget to visit our official website to learn more about the Silver Circle Movie:

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