The Land Trap: A Silent Force Driving Wealth, Risk, and Ruin

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• The global economy is shaped far more by land, housing, and credit structures than most people realise.
• Rising land values lock governments, banks, households, and entire regions into a system that becomes almost impossible to escape.
• This blog explains how the land trap works, why it persists, and what it means for the future of wealth and economic opportunity.

Land is the oldest asset in human history. Long before stocks or bonds existed, long before anyone thought about portfolio theory, compounding, or credit spreads, the soil beneath your feet defined wealth. Thousands of years later, that fundamental truth remains unchanged. Land is now worth about twice as much as every publicly listed company on earth. It secures the majority of credit creation. It shapes generational wealth, and it’s the starting point for many of the imbalances that dominate the global economy.

Mike Bird, author of The Land Trap, makes something clear: Land is not simply another asset class. It’s a system, a machine that affects financial stability, political behavior, household balance sheets, entrepreneurship, inequality, and even the character of cities. Once an economy is organized around land, it becomes almost impossible to reorganize it around anything else.

Many people intuitively understand pieces of this story. They know housing is expensive and they know credit is tied to property. They know young buyers struggle, and they know regional inequality has increased. But Bird’s explanation shows why this is structural and self-reinforcing. It’s a trap that countries fall into slowly but cannot escape without major upheaval.

Understanding how it works begins with three basic features of land. These features sound simple, but they create complicated outcomes.

The Three Traits That Give Land Its Power

Land has a fixed supply; it cannot move; and it doesn’t decay.

You can make more software and build new machines. You can expand manufacturing lines and grow companies. You can relocate factories. You can replace old products with new products. Land does none of these things. Because it cannot move and cannot be produced, the economic activity surrounding it determines its value. A small plot in Manhattan is worth millions. A similar plot in central Pennsylvania is worth a fraction of that. The difference is not in the land itself but the life that clusters around it.

This is where luck also plays a role. Two families who owned similar homes in Detroit and New York in the 1950s started with roughly equal assets. Their futures could not have been more different. The New York property increased in value many times over. It unlocked access to credit, and it allowed the next generation to take more risk with their careers. It doubled as collateral for business formation. Meanwhile, the Detroit property lost real value. It trapped the family in a weaker labor market and provided little credit capacity. It offered no springboard for entrepreneurship, which underscores a key point: Land magnifies regional divergence because it amplifies whatever is already happening in the local economy.

How Land Became the Backbone of Credit Creation

This brings us to the heart of the system. Modern credit creation is built on land. One hundred years ago, mortgages represented a minor share of bank lending. Now, they dominate it. Many advanced economies now have mortgage lending that represents more than 60 percent of total bank credit. Small businesses follow the same pattern. In the United States, unincorporated firms borrow more than five trillion dollars against real estate. Seventy percent of their borrowing is secured by land or housing.

This isn’t because banks are foolish. It’s because lending against collateral is easier and safer than judging the quality of an idea. Land doesn’t run away. It doesn’t evaporate. It is ideal for a lender who wants to limit downside risk. A bank has limited upside on any loan but full downside. In that world, valuing collateral is often more appealing than valuing creativity.

The result is a form of lazy banking, not because banks do less work, but because the system rewards the simplest form of risk management. The banking sector becomes a machine that pulls future land rents into the present. When home values rise, credit expands. When home values fall, credit tightens. Human capital becomes secondary. A person with a great idea but no collateral struggles to borrow, while a person with a house in a booming area can borrow easily, even without a great idea.

Human Capital That Cannot Be Unlocked

Economists like Hernando de Soto have described the problem of dead capital. People own land or assets informally and cannot use them as collateral, which traps them in poverty. Bird extends this idea. If you cannot borrow because you lack collateral, your talent cannot enter the market. Your ideas cannot be funded. Human capital itself becomes dead capital. This is one of the story's most overlooked consequences: When land becomes the foundation of credit, those who start life without it lose access to mobility.

The trap grows deeper when politics enters the scene. Homeowners want prices to rise while young families want prices to fall. Governments want stability, banks want collateral to remain valuable. None of these interests align. Policymakers become stuck between affordability and asset protection, a choice that cannot be reconciled. You cannot maintain rising home values and widespread access simultaneously. Every attempt to fix one side worsens the other.

China Shows the Land Trap at Full Scale

China provides the most extreme example of the trap. In the 1990s, a tax reform changed the fiscal structure of Chinese governance. Local governments lost revenue and turned to land sales. Households had limited investment choices due to financial repression, low interest rates, and capital controls. Property developers stepped into the gap and became the bridge between governments and households. Local officials wanted rising land prices. Families wanted returns on savings. Developers executed the transaction.

This created a bubble with unique characteristics. Chinese cities now show the symptoms of both shortage and surplus. Urban housing costs are extraordinarily high. At the same time, millions of units sit empty. Developers relied heavily on presales. Households relied heavily on appreciation. Local governments relied heavily on land revenue. Once this machine was set in motion, it became almost impossible to slow down.

A Market That Cannot Reset

Evergrande's collapse raised fears of a systemic break that would resemble Lehman Brothers. But China operates a financial system that remains tightly controlled by the state. A conventional bust requires price discovery, forced selling, and reallocation. China did not allow that. Instead, the market froze, prices stayed stable, transactions disappeared, and developers lost access to funding. Households lost confidence. Nothing reset, nothing cleared. The system entered a form of suspended animation that still persists.

That stasis may be more harmful than a downturn. A cycle that never resets prevents capital from moving toward more productive uses. It slows innovation. It slows entrepreneurship. It locks savings into a stagnant asset. Policymakers have not resolved the problem because they face the same impossible choice: either let prices fall and wipe out household wealth or keep prices high and suppress economic dynamism.

Singapore Offers a Rare Alternative

There are a few examples of countries that escaped this trap. Singapore may be the only large-scale success story. When Singapore gained independence in the 1960s, the government seized most of the land under the Land Acquisition Act. It used that land to build an affordable ownership system through the Housing and Development Board. Singapore now has one of the highest homeownership rates in the world, yet affordability remains reasonable, and speculative investment is limited. Most households can buy one home; very few can buy several. Landlords don’t dominate the system.

The catch is that Singapore achieved this during a moment of political transformation. It acted before private land ownership became widespread and altered the system before a constituency could form around rising home values. Most developed economies are long past that moment. They cannot unwind ownership without violating property rights. They cannot force down prices without political cost. They cannot replicate Singapore without changing the structure of their societies.

Why the Land Trap Persists

The land trap is a system that reinforces itself. Rising prices create political support, political support protects rising prices, and rising prices anchor credit creation. Credit creation pulls forward more demand, and once enough households have staked their futures on land, no government can afford to break the cycle.

This doesn’t mean catastrophe is inevitable. It does mean that stability comes at a cost. Credit cycles become tied to geography, and innovation becomes dependent on collateral. In many ways, wealth becomes a function of where your grandparents lived. Regions without growth fall further behind, while regions with growth become more exclusive.

The oldest asset we have still plays a massive role in our future.

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This is based on an episode of Top Traders Unplugged, a bi-weekly podcast with the most interesting and experienced investors, economists, traders and thought leaders in the world. Sign up for our Newsletteror subscribe on your preferred podcast platformso that you don't miss out on future episodes.