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Chapter 15: The FIRE Economy and C=M+L

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The FIRE economy is an acronym which means Finance, Insurance and Real Estate. It is a parallel to the Big History paradigm, as outlined in Chapter 11. Finance is the abstract, insurance is the social, and real estate is the physical. The FIRE economy appears to be modern finance, but its roots are in feudalism. In the past, serfs were bound to the land. They worked and gave a lion's share of the harvest to the landowners. Today, the worker is bound by their mortgage (or lease) and they pay cash. It is common for fifty percent of income to go toward housing alone, but that is just one of many housing expenses. The high nobles are banking corporations. Secondary nobles are the utilities, communications, insurance and government.

In other words, the modern world is a masquerade of a feudalistic system with the same large inequalities of wealth and structural imbalances across generations. Rigid social castes have been relaxed and a large middle-class has developed in industrialized nations, but on a both a national and global scale, feudalism continues to quietly reign. Even the habit of toll roads has endured, along with fees on strangers passing through, which are found in meal and hotel taxes. What we call capitalism and democracy has the same mathematical framework and cruelties as feudalism and parochial monarchy.

The feudalistic housing market is dominated by the thirty or forty year mortgage. People pay banking corporations for most of their working life. When they pass on, the property will transfer to someone new, who will pay again for years. Excluding brief breaks, the banks own most property in perpetuity.

Landlords are a smaller version of the banks, pressing the advantages of ownership directly. Landlords rent space, whereas banks rent money used to purchase space. The New World unconsciously followed the habits of the Old World. Modern history is a tale of global colonization and the clash of a european hybrid merchant-feudal system with indigenous sharing economies.

Banks exist to finance housing, support other banks, and to finance development through both the public and private sector. The only competition to bankers and landlords are government-provided elderly housing and subsidized rental housing. In some locales, there is an attempt at rent control, too. Housing covers a wide spectrum of prices. People are passively forced to migrate to housing that they can afford. In general, the more one earns, the more they pay for housing.

The role of government is to promote the public good. The existence of foreclosures, bankruptcy, slums and homelessness indicates a widespread systemic failure. Our land management system satisfies no one, even the wealthy, who are forced to live a guarded life full of fear, and often become victims of the volatility that allowed them to rise into riches.

Underlying the promise of democracy is the expectation of a stable sharing economy where all contribute and gain. The monarch was believed to be greedy and incompetent. Perhaps true, but we can now see that economic imbalances also stemmed from a mathematical source: the nature of how we buy and sell. The growth of homelessness is directly related to the nature of how we sell real estate, just as hunger is the result of how we sell food. The free market is grotesquely inefficient and unfair. Land and housing management is the central problem of modern society. Hunger was the result of crop failures under feudalism, whereas today it is a systemic failure of equality.

Interest: the control of land and money

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Under feudalism, land was bought and sold infrequently. Under capitalism, land gets bought and sold constantly, or so it appears. In fact, what moves is the bondage of mortgages. Modern serfs are free to roam to find housing they can afford, but must pay the banks or landlords wherever they go. Landlords are often indebted to the banks, too, so renting is generally paying a bank through proxy.

Native Americans, in contrast, never had such a problem. Land was occupied but not owned. Ownership was unnecessary, and men were naturally equal with the land and one another. The American Revolution contradictorily attempted to establish political equality with private ownership, when the central privilege of monarchy was a claim to ownership. They removed the king and kept the inequality of privileges (like slavery), which makes the financial continuation of feudalism somewhat unsurprising. They democratized the problem.

To their credit, many of the Founding Fathers wanted everyone to own land, so all could be equal. They recognized that those without land were unequal. The landless had no voting rights in the new society, but that was seen as a temporary condition. Europeans never grasped the native inhabitants understanding of land. The colonists saw the land as a resource to be exploited, rather than as a garden which provided.

The rise of industrialism destroyed the dream of a nation of yeoman farmers. With the decision to issue copyright law and patent protections, the meaning of property and privilege had changed fundamentally. Today, we have two unworkable property systems, once based on land, and another based on ideas.

The Land Bondage System

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Key to understanding our modern land bondage is the combination of interest rates and real estate appreciation. The higher the land and housing valuations, and the higher the interest rates, then the greater the mathematical duress on society. Everyone has become enslaved to this system. Exploitation is not necessarily willful, but a survival response driven by fiscal pressure.

Modern bankers have control of both the land and the money, in much the same way that the feudal lords had control over the land and the food. The interest paid on a $100,000.00 loan, at 5% for 30 years, is $93,255.78. Let's assume the $100,000.00 home then sold for $200,000.00, a 100% gain. After paying the interest, the original owner comes out almost even, and someone else is bonded for the full amount in his place. The bank took all the proceeds of his thirty years of labor. The owner got a place to sleep, the bank got everything else.

The $200,000 in proceeds from the sale then becomes his retirement fund, which he must spend. He can downsize, but he still needs housing that must be purchased at the currently inflated rate. After purchasing new housing, anything remaining from the windfall will be deposited in a bank, where it is lent to bind another buyer, including the buyer of his old property. Anything left over at death will be an inheritance, but the bank always has control of the money. Housing appreciation benefits the banks and harms the people.

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Steve grew up in a family business, was a history major in college, and has owned a small business for 25 years. Practical experience (mistakes) have led him to recognize that political rhetoric and educated analysis often falls short of reality. (more...)
 

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I am shocked to see no comments on this great arti... by Daniel Penisten on Thursday, Apr 10, 2014 at 2:15:21 PM
Thanks for reading. The final chapter (which is n... by Steve Consilvio on Friday, Apr 11, 2014 at 12:11:28 PM
This article gets a lot right, approaches the trut... by Scott Baker on Friday, Apr 11, 2014 at 11:59:45 AM
Hi Scott, There are two or three ways to think of... by Steve Consilvio on Friday, Apr 11, 2014 at 12:35:19 PM
With all due respect for your considerable researc... by Scott Baker on Friday, Apr 11, 2014 at 1:25:56 PM
The entire chapter is about the FIRE economy, so ... by Steve Consilvio on Saturday, Apr 12, 2014 at 7:05:02 AM
No, Land is NOT capital, and if you really read a... by Scott Baker on Saturday, Apr 12, 2014 at 8:35:48 AM
Scott, if the land is finite, then so is everythi... by Steve Consilvio on Saturday, Apr 12, 2014 at 12:36:05 PM
Steve states: "I think you are complacent with the... by Daniel Penisten on Saturday, Apr 12, 2014 at 1:33:54 PM
Jared Loughner (who shot Gabby Giffords) also tho... by Steve Consilvio on Monday, Apr 14, 2014 at 1:57:41 PM
It is my understanding that our dealings with the ... by Daniel Penisten on Monday, Apr 14, 2014 at 7:36:58 PM
Hi Daniel, Yea, the problem started with the crea... by Steve Consilvio on Tuesday, Apr 15, 2014 at 12:15:30 PM
What happen when someone wants more chickens (or e... by Scott Baker on Tuesday, Apr 15, 2014 at 2:42:11 PM
BTW, the Monopoly Game was originally called the L... by Scott Baker on Saturday, Apr 12, 2014 at 4:52:36 PM
Scott, It doesn't sound like the rules of the g... by Steve Consilvio on Monday, Apr 14, 2014 at 3:45:37 PM
From the second link in my original cite: ... by Scott Baker on Monday, Apr 14, 2014 at 6:54:17 PM
I've already said several times that it is not "I"... by Scott Baker on Tuesday, Apr 15, 2014 at 9:32:24 AM
Well the market setting prices is not a change. P... by Steve Consilvio on Tuesday, Apr 15, 2014 at 12:26:53 PM
The need to recollect the currency is to maintain ... by Scott Baker on Tuesday, Apr 15, 2014 at 2:32:25 PM
The need to recollect the currency is to maintain ... by Daniel Penisten on Tuesday, Apr 15, 2014 at 10:12:39 PM
 Scott reveals: "...I believe in a universal ... by Daniel Penisten on Tuesday, Apr 15, 2014 at 10:17:38 PM
"Taxes are nonsensical, since the entity that cre... by Daniel Penisten on Tuesday, Apr 15, 2014 at 9:48:47 PM
One Definition of "Capital", (Googled - Wikepedia... by Daniel Penisten on Saturday, Apr 12, 2014 at 1:14:07 PM
Investopedia explains 'Capital' :Capital is dif... by Daniel Penisten on Saturday, Apr 12, 2014 at 1:19:32 PM
Maybe "Investopedia" should have said: Besides bei... by Daniel Penisten on Saturday, Apr 12, 2014 at 1:22:29 PM
It is so morally right to tax land as Scott CLEAR... by David Chester on Saturday, Apr 12, 2014 at 11:28:09 AM
David, what you expressed is doublethink.  ... by Steve Consilvio on Saturday, Apr 12, 2014 at 12:45:11 PM
Taxing land is completely opposite from taxing tax... by Scott Baker on Saturday, Apr 12, 2014 at 4:58:11 PM
A tax is the same as another other form of specul... by Steve Consilvio on Saturday, Apr 12, 2014 at 9:46:52 PM
Maybe it would make more sense to you if we just r... by Scott Baker on Saturday, Apr 12, 2014 at 10:26:19 PM
I haven't watched the video yet, but my solution ... by Steve Consilvio on Monday, Apr 14, 2014 at 1:44:22 PM
"Your system does not address how you come up wit... by Daniel Penisten on Monday, Apr 14, 2014 at 7:50:55 PM
"The Earth Belongs to Everyone" is actually the t... by Scott Baker on Tuesday, Apr 15, 2014 at 8:49:52 AM
Sorry, for the double reply. See above somewhere.... by Steve Consilvio on Tuesday, Apr 15, 2014 at 1:14:12 PM
"Take his ideas and improve them, and argue them ... by Daniel Penisten on Tuesday, Apr 15, 2014 at 10:40:24 PM
ctd.. To me, taxing the land is the #1 problem ... by Steve Consilvio on Tuesday, Apr 15, 2014 at 1:15:58 PM
Well, here are several ways, stated previously as ... by Scott Baker on Tuesday, Apr 15, 2014 at 2:40:31 PM
Your argument on taxing by feudal lords is accura... by Paul Krumm on Saturday, Apr 12, 2014 at 11:24:39 PM
Paul, the bank of North Dakota is a public bank, ... by Steve Consilvio on Monday, Apr 14, 2014 at 1:53:48 PM
Steve, I understand that banks such as the Bank o... by Paul Krumm on Friday, Apr 18, 2014 at 11:20:18 AM
Capital is of two distinct types that must be d... by Paul Krumm on Friday, Apr 18, 2014 at 11:46:01 AM
Capital is anything physical (land, tools, apples... by Steve Consilvio on Friday, Apr 18, 2014 at 12:44:40 PM
There is a contradiction in your formula C=M+L ... by Paul Krumm on Sunday, Apr 20, 2014 at 12:14:55 AM
Hi Paul,  What you call a contradiction is t... by Steve Consilvio on Sunday, Apr 20, 2014 at 7:28:58 PM
It may be that we come out at the same place. T... by Paul Krumm on Tuesday, Apr 22, 2014 at 12:12:04 AM
Yes, I and most Georgists would agree with this to... by Scott Baker on Friday, Apr 18, 2014 at 1:33:52 PM
There are multiple ways to deal with this issue.&... by Paul Krumm on Sunday, Apr 20, 2014 at 12:23:22 AM
Another possible alternative is to develop a sch... by Paul Krumm on Tuesday, Apr 22, 2014 at 12:20:51 AM
While there is no 'right' answer to any value (ho... by Steve Consilvio on Tuesday, Apr 22, 2014 at 4:04:55 PM
The feudal lords took much of the agricultural pr... by David Chester on Monday, Apr 14, 2014 at 2:16:19 AM
David, the idea that taxes can redistribute wealth... by Steve Consilvio on Monday, Apr 14, 2014 at 1:46:35 PM
A Land Value Tax would actually LOWER prices of La... by Scott Baker on Monday, Apr 14, 2014 at 7:08:09 PM
"TAX LAND NOT PEOPLE; TAX TAKINGS NOT MAKINGS!"In... by Daniel Penisten on Saturday, Apr 12, 2014 at 1:39:36 PM
Its not a "maybe". Anybody whose land is not being... by David Chester on Monday, Apr 14, 2014 at 2:23:54 AM