Unreal Estate

You may have heard that Pope Francis recently renounced the Doctrine of Discovery, which was created through a papal bull in the 15th century. It allowed Christians to steal any land they discovered (hear the air quotes around that word) from non-Christian people, since their acquisition meant "the health of souls be cared for and that barbarous nations be overthrown and brought to the faith itself."

What you may not have known about — if you are like me — is that a 200-year-old U.S. Supreme Court case was premised on that doctrine, and continues to limit property rights of Indigenous tribes and nations to this day, with no end in sight.

The case is called Johnson v. M'Intosh (pronounced McIntosh), explained in this article on Indian Country Today. In the decision, the court found that tribes could only sell land to the U.S. government, and made it retroactive. "The court concluded on March 10, 1823, that the non-Indian who purchased land from a tribe did not hold valid title to the land because the land was not the tribe’s to sell."

And get this: "Chief Justice Marshall participated in the decision despite a clear conflict of interest, since his vast land holdings would have been adversely affected by a different decision."

This made me wonder about Peter Stuyvesant purchasing Manhattan Island, which was bought well before the U.S. was a nation. The wealth of a lot of the rich people in New York descends from that purchase, or others made by the Dutch soon after. I guess SCOTUS didn't dig into that too much.

The core of real estate and property ownership in the U.S. is rotten in more ways than that.

I've been listening to the podcast If Books Could Kill, which recently reviewed a book I'd never heard of called Rich Dad Poor Dad. It sounds even worse than the other books they've looked into previously, but one thing that came out of listening to it was having full appreciation for a Twitter thread about it by Sarah Taber.

She made a lot of great points about the book, in line with the critiques from the podcast, but on the topic of real estate she said:

Rich Dad Poor Dad lays out how the legal system makes real estate especially profitable compared to other investments.

Landlords have very little risk. Why? If your tenants don't pay, you don't even have to go through the trouble of evicting them yourself.

The sheriff does it for you!

Someone commented back to her:

Real estate depreciation schedules and the fact that you can avoid capital gains taxes by selling properties and investing the proceeds into new properties basically made real estate a massive government-subsidized scam compared to more productive investment. The government will give you a bigger tax advantage to invest money in real estate someone else has already developed than to start a business from scratch.

Taber responded:

YES. US real estate is effectively a taxpayer-subsidized pyramid scheme. That makes it so much more lucrative than anything else and helps explain why we don't invest in much else.

Why invest in manufacturing or anything else, when real estate flips are guaranteed good money?

A fund manager once straight up told me "Nobody will invest in anything unless it performs better than real estate." Which at that point was appreciating at 10-15% per year, with close to 0 risk.

Good luck finding legitimate investments that can beat that.

And when you know that all that speculation is laid on a foundation of theft, meticulously built up on piles of legal documentation to make it valid... it's even more sickening.

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Writing this made me think of The Diggers.