Other Voices: How Monopoly Would Be Played Today

Investors Alley colleague Dennis Miler gives us his take on how Monopoly would be played with current Fed policies

By Dennis Miller

In 1935, Parker Brothers introduced the game “Monopoly”. Wikipedia tells us: (my emphasis)

“Monopoly is a board game…. Players roll…dice to move around the game board, buying and trading properties, and developing them with houses and hotels. Players collect rent from their opponents, with the goal being to drive them into bankruptcy.

Money can also be gained or lost through Chance, Community Chest cards, and tax squares; players can end up in jail, which they cannot move from until they have met one of several conditions. …hundreds of different editions exist…. Monopoly has become a part of international popular culture….”

I remember Monopoly as a multi-generational game we played for hours. We all started with the same amount of money. The goal was to acquire property and drive your opponents bankrupt.

The bank was passive, collecting fines and paying out $200 every time you passed GO. Passive? Not anymore!

Today’s banks are active players pitted against the world.

Zerohedge reports, “The Bank of Japan Is Now A Top-10 Shareholder In 50% Of All Japanese Companies”: (my emphasis)

“Japan’s central bank is quietly nationalizing its entire market.

….The BOJ has gone from being a Top 10 holder in 40% Japanese stocks last March, to 50% just one year later.

…. Japan’s central bank will soon be the biggest individual owner of Japanese stocks.

…. Significant and potentially disastrous side effects will inevitably come from having the BOJ…as the top player in the equities market.

‘…. We know share prices likely won’t fall because of the BOJ’s purchases,’ an executive said,…explaining why global productivity has collapsed in a world where central banks have backstopped all prices.

‘If the Nikkei Stock Average falls below about 18,000, the market value of the ETF holdings would fall below their book value,’ according to Deputy Gov. Masayoshi Amamiya. …. But the bank would counter that it could just print more money at that point.

“What is most shocking, however, is that there are allegedly reputable and respected economists, who look at this absolutely insane Ponzi arrangement – which is straight out of 1960s USSR – in which money printed out of thin air is used to lift stock prices, and find nothing wrong with it.”

The Parker Brothers are likely rolling in their graves. Monopoly was supposed to teach capitalism, not communism.

While the BOJ is dealing with Japanese stocks, Zerohedge reports the Swiss National Bank is active in the US markets:

“The SNB’s latest 13-F form filings (yes, the Swiss central bank lists its US equity holdings like the hedge fund that it is) to the SEC were released this week. …. We take a closer look to see what stocks the world’s only hedge fund central bank that prints money out of thin air bought, and on rare occasions, sold.

While the chart below shows that the overall value of the SNB’s US listed long holdings rose by over $2 billion to $90 billion, most of this was due to the price appreciation….

Holdings Channel lists the top 50 holdings of the Swiss National Bank. Might the Swiss government interfere with the free market and give these companies preferential treatment in their country?

What does this mean?

Instead of the banks being passive, the banks can now print all the money they want and control and manipulate the stock market.

  • How challenging is Monopoly if you have an unlimited money supply and almost zero accountability?
  • What happens when the banks own everything?
  • What happens when the politicians can actually pick winners and losers in the market?
  • What happens when they demand seats on the board and negotiate union contracts?

Special rules for the US

Changes in US laws are creating real-life banking monopolies. Pam Martens writes, “4,823 U. S. Banks Have Disappeared Since 1999”: (my emphasis)

“At the end of 1999, the year that President Bill Clinton and his Treasury Secretary Robert Rubin brokered the deal to repeal the Glass-Steagall Act of 1933 and allow the casino investment banks on Wall Street to gobble up deposit-taking banks, there were 10,220 federally insured banks and savings institutions in the United States. Today, that number stands at 5,397, a decline of 47 percent according to the Federal Deposit Insurance Corporation (FDIC). What exactly happened to those disappeared banks?

…. We found that the vast majority of the decline resulted from banks being absorbed in mergers.

…. The loss of competition in banking services has unleashed an unprecedented concentration of the life savings of Americans…the very combination that led to the epic Wall Street banking collapses in 2008 and the 1930s.

…. The FDIC’s Deposit Insurance Fund has only $100.2 billionas of September 30, 2018. …. The paucity of the FDIC’s fund is why the Federal Reserve was secretly funneling $16 trillionin low-cost revolving loans to Wall Street banks from the end of 2007 through at least the middle of 2010.”

“…. In short, the Fed was an incompetent bank regulator that didn’t see the dangers building up prior to the 2008 collapse – and, it’s still an incompetent regulator…. This is not a bug but a feature of the Wall Street cartel that now runs the country, regardless of who’s in the Oval Office”.

“Unprecedented concentration” is an understatement. The Gold Telegraph provides a graph that shows the top ten banks control over 55% of the banking assets:

The Fed is owned by member banks. Those member banks are now aligned with major brokerage houses earning billions in fees managing mutual funds.

I chuckled when I read this CNN Business article, “Did the Fed cave to Wall Street and Washington?”:

“It is difficult to read the outcome of the January FOMC meeting as anything other than the Fed capitulating to recent market volatility,” Barclays chief US economist Michael Gapen wrote in a note to clients.

Charlie McElligott, cross-asset macro strategist at Nomura, said the Fed “utterly ‘bent the knee’ to the stock market.”

Member banks don’t want the stock market to crash causing investors to withdraw their money from their fee-based mutual funds. The fees are based on the value of the fund so keep the market high.

Fed chairman Jerome Powell strongly stated that politics did not enter the picture. That’s probably true! He’s protecting the profits of his member banks, regardless of which party is in power.

Not all profits were earned legally. The New York Times reports, “Since the financial crisis, United States banks have paid out roughly $175 billion in legal settlements.”

Bank of America, JP Morgan Chase, Citigroup, Wells Fargo and Morgan Stanley combined for $160 billion.

Another rule changed. No one went to jail. The “Too Big To Fail (TBTF)” banks all have “Get Out Of Jail Free” cards.

Can the Fed buy stocks?

With his fingers crossed behind his back, friend Chuck Butler reassured us in a 2017 Dow Theory Letter:

“Well, we don’t really know for sure if they (Fed) buy equities, but just because equities don’t show up on their balance sheet, doesn’t mean they wouldn’t/couldn’t have a secret account at say, Goldman, where the equities are held…I’m not saying that’s for real, I’m just asking, what if they did?

Here’s a snippet of Fed Chair Janet Yellen talking about this very subject…. ‘Well, the Federal Reserve is not permitted to purchase equities. We can only purchase U.S. Treasuries and agency securities. …. Accommodation may be somewhere in the future,…this is the kind of thing that Congress might consider….’

OK, that pretty much rules out my scenario, but, opens Pandora’s Box…. Did the Fed just give Congress a hint that they could keep the stock market propped up with a wink and a nod from Congress?”

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The new Monopoly rules

  • Banks are now active players in the game.
  • The monopolistic banks are deemed “too big to fail” (TBTF).
  • TBTF banks are not allowed to go bankrupt, other players and taxpayers have to pay for their mismanagement.
  • TBTF banks all possess, “Get out of Jail Free” cards.
  • The Fed (regulator) is required to look after the TBTF banks at the expense of other players.
  • Smaller banks must play by the old rules.
  • Only the TBTF banks can win.

What can be done?

We don’t know if the Fed has found secret ways to buy stocks. The Fed has never been audited in over a century. The Hill quotes former Fed Chair, “Yellen: I would ‘forcefully’ oppose Audit the Fed Efforts.” What have they got to hide?

The solution always seems to boil down to a few issues:

  • Audit the Fed
  • Get rid of the Fed if the audit proves illegal activities
  • Go back to the gold standard
  • Remove “Get out of Jail Free Cards” and prosecute criminals aggressively
  • Break up the TBTF banks, the taxpayers are tired of paying for their sins
  • Congressional Term limits

These suggestions would likely garner a great deal of support from the majority of the American people, but congress ignores them. Changes can be made in spite of a government that wishes to govern against the will of the majority.

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