The Land Trap: A New History of the World’s Oldest Asset

Land is the indispensable collateral that makes the modern financial system work—and often crash—according to this eye-opening debut treatise from The Economist editor Bird. He traces the 300-year rise of land as the linchpin of the modern credit system, starting with banks in colonial America that loaned bank notes to landholders using their acreage as collateral. In the 20th century, Bird explains, the advent of mass homeownership made liquid mortgages and home equity loans dominant categories of bank lending, which could then be used to fund businesses. The downside, Bird contends, is that financial systems dependent on land boom when land prices rise and collapse when they dip. Bird autopsies several such episodes, including Japan’s 1980s land bubble—at one point, a single square mile of Tokyo was worth more than all the land in California—whose bursting tanked the economy for decades; the U.S. subprime mortgage bubble that precipitated the crash of 2008; and China’s real estate boom in the 2000s and 2010s, which resulted in tens of millions of apartments that now stand empty. Bird’s shrewd analysis crackles with fresh insights that tie together material economics with financial abstractions. The result is a stimulating take on modern finance that shows investors’ fates are rooted in the dirt beneath their feet. (Nov.)