Earlier this week, I came across a clip from a talk Peter Thiel gave to the non-profit, Common Wealth Canada. In it, he discusses an irreversible catastrophe that we as a society are headed towards: “a Georgist real estate catastrophe.”

❓What is a Georgist real estate catastrophe?

Henry George, an American political economist and journalist in the 19th century, had an obsession with real estate and the impact on the economy. George formulated an argument that if you were not really careful, you would get runaway real estate prices. The people that hold the real estate at the time of runaway prices would make all of the gains in society as a whole. The same reason that we all love real estate is the same reason an irreversible wealth transfer would occur: the inelasticity.

❓What is inelasticity?

Inelastic is a term used in economics to describe the impact of the price changes on the quantity of a product. A good or service is said to be inelastic if the price increases or decreases and the demand remains the same. Essential items, like real estate and medicine, are said to be inelastic because their prices continue to rise, but everyone still needs a place to live.

❓How does inelasticity apply to current real estate markets & the catastrophe mentioned?

Due to strict zoning laws around development or lack of supply, the resulting equation of real estate prices would be such that a 10% increase in population of a city may lead to a 50% increase in prices of houses. Maybe peoples’ salaries increase over the same time, but they will definitely not go up by 50%. As such, the GDP continues a positive trajectory, but there is a massive wealth shift.

The homeowners or landlords receive a massive windfall, and the people not owning real estate lose out on the monumental shift. At this point in time, the people on the wrong side of the equation continue to fall further behind and are never able to enter the housing market. A cumulative disadvantage grows, and the wealth gap widens.

People talk about inflation in regards to the cost of goods like eggs and groceries, but housing expenses (rent & mortgage payments) are the true drivers of inflation. Only by adding more people to the mix do you see a massive increase in the wealth gap through real estate.

🟰 Conclusion:

The American Dream is one of hope. A hope of entering America, and through hard work, hope, and perseverance, you can achieve great success. People talk about the American Dream a lot of times in relation to a “rags to riches” story. When people discuss these stories, they are quick to point out the acquisition of real estate as a driving force of transcending the wealth gap. What happens when the initial step of buying real estate becomes out of reach?

When the “Georgist real estate catastrophe” takes hold, the impact is irreversible and the American Dream becomes even further out of reach. We are at a crucial inflection time in our country’s history where real estate prices & rents continue to run away. We can either fight back or lay down. This is the exact reason for mogul. We are fighting to take back the American Dream. To provide everyone with equal access to the world’s largest wealth generator and most crucial step in crossing the wealth gap.

Invest in real estate, fight for the American dream, click here.

In 1965, astronauts aboard NASA’s Gemini 6 mission pulled off the first prank in space! They reported seeing a "UFO" with a red light, claiming it was flying at incredible speeds. Moments later, they started playing “Jingle Bells” on a harmonica accompanied by sleigh bells, which they smuggled onboard. That harmonica is now on display at the Smithsonian!