(May 22 2020)
“Always two, there are” – Yoda
Today I will give a brief primer on the two-title reality and system.
Most anything of any substantial value has two titles to it. Most people are familiar with the concept of the legal-title, but there is also an equity-title or what is sometimes referred to as a use-title (pronounced “yoose-title”).
It quite often happens that a given entity will have both the legal-title and the use-title to a given thing, but we are most interested in situations known as split-titles where they are held by different entities or parties.
A good example is as with a rental car. Normally or often the rental car company will own or possess the legal-title to a given car, while the combination of the rental-agreement plus possession of the car will constitute the use-title for the renter of it. The rental company owns it – but the renter gets the use of it.
But most will be surprised to learn that the same applies to money itself in the form of what is most often called an Assignment of Rents. If you issue a mortgage on any kind of commercial property like an apartment building or a hotel, the bank will usually also demand an Assignment of Rents, and which normally includes or covers the entire cash flow of the business from any source and not just the rents, per se.
Most such business people have been mal-educated to believe that the Assignment of Rents is a default provision that allows the bank to step in and collect the rents directly from the renters or guests in the event of default. While such is true, it is only half the story.
In the case of our example $2.1 million nominal Canadian mortgage loan, the bank demanded a separate Assignment of Rents on the building and business, and which was registered separately and received a separate (sequential) registration number from the Land Title Office in Victoria.
One of the two nominal co-borrowers already owned and had near-clear-title to the residential apartment building, and the other had experience in owning managing hotel / motel properties. The plan was to use the $2.1 million to renovate and convert the (say) 40 relatively large suites in the residential apartment building, which was on the cusp of the downtown business district, into 80 smaller hotel-size suites and then operate it as an extended-stay hotel business.
As a residential apartment building it was generating about $500,000 per year in gross rents for the owner. But as an extended-stay hotel business with twice the number of suites, with even a moderate occupancy rate it would generate about $2 million per year in gross rental income.
After ten years of successful operation, the owner had a chance meeting with a former associate who now worked for a major stock broker in the London financial markets, and who informed him that as soon as the mortgage and Assignment of Rents had been registered, the bank had obtained what is called a CUSIP securities registration number on the Assignment of Rents and had securitized-it through the London and New York exchanges.
The mortgage required payments of $17,000 per month for an annual total cash-flow of just over $200,000, while the Assignment of Rents covered about a $2 million annual cash-flow so that it is entirely possible that the bank was making more additional money from the Assignment of Rents than from the mortgage itself.
So while the two businessmen had the use-title to the business cash-flow to pay the mortgage and to pay the staff and the various employer-paid taxes and fees and all of the operating expenses like lights, power, water, etc., etc., the bank had the legal-title to the same money at the same time to make much more money for itself in the financial markets to which our two businessmen do not have access.
And that, in a nutshell, is how the global system is designed. The people at the top can create an almost unlimited amount of money and accounting profits – as long as they make certain that the little people don’t get any of it.
You can print a trillion dollars a day without having to worry about price inflation as long as you give it to the richest man in the world who will not attempt to spend it on consumer goods except for the odd super-yacht or new Rolls Royce, etc.
But only for a while. It had been going on like this for almost forty years beginning in about 1980, with minor crashes in 1987 and then again in 2008, but the big one was still to come and very likely just on the edge of the abyss when this Coronavirus thing struck and saved a very significant percentage of the 1% from almost certain equally significant jail time.