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Inflated Expectations: You’ll own nothing and BlackRock will be happy

  • Wall Street is silently waging a war on the middle class.
  • First they take your home. Then they take your wealth.

Wall Street is silently waging a war on the middle class.

Profit hungry pension funds are snapping up suburban subdivisions at 30-50% above market value.

BlackRock, a multinational investment corporation with $8.67 trillion in assets under management, is buying up entire neighborhoods, only to rent homes back to the middle class at inflated prices. 

As self-proclaimed purveyors of equality, what is the real “Great Reset” BlackRock is pursuing? One where your wealth is transferred into their pockets.

But BlackRock isn’t alone in their middle class crusade. Nor is this breaking news. Wall Street has been infiltrating your neighborhood for the past decade. 

Despotism comes home

Companies like BlackStone and Fannie Mae have already purchased billions of dollars worth of housing, all while receiving billion dollar loan guarantees from the government.

These funds are directly purchasing homes and subdivisions across the nation at arbitrarily low interest rates.

What they’re really doing is wiping hundreds of thousands of homes off of the market and away from middle class families in an attempt to force them into permanent renter status and earn higher yields.

Big corporations are taking advantage of inflated money. But unlike your average homebuyer, when the bubble bursts the government will bail out Wall Street.

Perhaps the most recent attention grabber comes from Fundrise’s subdivision purchase from a developer in North Houston, at 50% higher than asking price. 

In total, Fundrise purchased 124 homes with the intent of chasing the high rental market. Houston is a hotspot for investor owned homes, with approximately 24% of houses purchased with the purpose of being rented.

An Already Strapped Housing Market

Unfortunately, it doesn’t get any better.

Aside from the daunting authoritarian nature of Wall Street’s home buying dominance, the housing market is already in deep turmoil. Restricting the supply further and driving up prices is only fanning the flames.

Housing prices have been steadily growing and are set to rise by 12% this year.

With supply shocks constraining the supply of houses and low interest rates making purchasing cheap we are undoubtedly headed for another bubble.

Throw in yield hungry pension funds purchasing homes well above market value and we’re halfway there.

Cheap mortgage financing puts homebuyers in an easier position for purchasing their first place, but with competition in the marketplace, home prices are being driven to all time highs and making this goal unattainable.

There’s a bigger reason why you should care about who’s buying your neighbor’s house.

Home equity is how many middle class Americans generate their wealth.

Forcing Americans into permanent rental situations or making home ownership a far off goal will only widen the gap between the elite and the middle class. Not just now, but in the decades to come.

Families who want to buy a house will be pushed out of the market and forced to rent back from the same companies who made the homeownership dream unattainable.

All of which leads to rental prices soaring as a result of simple supply and demand.

Again, these soaring prices aren’t a result of “money printing” inflation. They’re a result of supply constraints and home shortages.

With homes being scooped off of the market at 50% above their market value, average home buyers will not be able to afford homeownership and will be forced to rent. 

Wall Street isn’t the only pressure pushing prices up. Housing prices saw a rise at the beginning of the pandemic as remote work made many yearn for more space both indoors and outdoors.

The skyrocketing price of input goods have also contributed to increased prices.

The BoFA estimates that lumber prices and related commodities are now responsible for adding $34,000 to the cost of building a home.

High building costs mean higher prices and slowed production.

Once again, this is forcing potential homeowners into the rental market and leaving room for high dollar investors to scoop up more long-term investments.

The worst part? It’s not transitory. 

The stolen American dream is Fed-backed 

Jerome Powell won’t save you. 

BlackRock is Fed backed.

At the height of the pandemic, while fiscal policy ran rampant and the Fed bolstered the monetary base, they also wanted to bolster the corporate bond market.

Enter BlackRock.

In order to help the Fed with its corporate bond market goal, BlackRock took on the management of $750 billion in bonds on its behalf. 

And what did BlackRock have to say? The company called itself a “fiduciary to the Federal Reserve Bank of New York.”

This isn’t a result of capitalism or free markets. It is the result of the blurring lines between Wall Street and the White House.

Looking out onto the future economic horizon, there will come a time when expansionary policy must stop in order to avoid overheating. The Fed will panic, and will have to reel in loose monetary policy while attempting to solve the issue of a growing fiscal deficit. 

And when the Fed panics, they’ll turn to BlackRock once again.

Less is more

Beyond BlackRock and Fundrise, the global economic climate is shifting.

Wall Street’s home buying is just further evidence of a growing economic trend – one where property rights become a scarce luxury. 

In 2016, the World Economic Forum published a list of eight predictions for the year 2030. One of these predictions was the infamous statement “You’ll own nothing and you’ll be happy.”

While the WEF wasn’t threatening to directly strip the world of its property rights, it was alluding to tech growth and the narrative of the circular economy – which does just that. 

In 2021, wealth isn’t being redistributed from the upper class to those living in poverty. It is being taken from the pockets of the middle class and given to the elites in power.

First they take your home. Then they take your wealth.

Soon, you’ll own nothing and all of Wall Street will be happy.

Inflated Expectations is a 3x per week newsletter that explores the macroeconomic drivers of growth and the potential for the crypto-revolutionization of monetary regimes. To subscribe, click here.