When I first moved to Atlanta in 1995 the city was undergoing a renaissance. The Olympic Games were coming to town and business was booming. The area was adding thousands of new residents each month and two metro counties, Cobb and Gwinnett vied for the title fastest growing county in the United States.
As soon as the Olympic Games were over our landlord told us that he was planning on selling the house which we were renting and he would give us a discounted price of $90,000. It seemed like a good deal to me, a four bedroom three bath home in a settled neighborhood directly across the street from a lake. All around us new subdivisions were being built and builders offered special financing and gimmicks. The county was building a new elementary school and doubling the size of the high school.
Just a mile or so from the house was a new shopping center with a grocery store and a video rental store. It all has a dream like quality to it now, new homes, new shops and stores and new schools. Just down the highway was a brand new shopping mall with talk of building another and it meant new jobs. My son was offered a job at the new McDonald's making $10.00 per hour.
I was in a business meeting one day when the subject first came up, a national sales reprehensive asked, "How long can Atlanta's builder's economy continue?" This was a new term to me, but I could tell from what this sales rep was saying that I didn't like it much. I felt that he was being overly negative and directing his negativity towards my adopted hometown.
In 2006 they built a new shopping center not far from where I was living and not one unit was ever rented. The colorful Grand Opening pennants waved in the breeze until they became tattered and torn then almost beyond belief a developer opened a new residential subdivision directly behind the failed shopping center and well, you know what happened next.
There is a reason that I recite this tale of recent American history, I want you to think of it as a slide under a microscope and you are the scientist. Since the days of the fall back in 2007 we have seen the collapse of America's builder's economy nationwide. An economy predicated on low interest loans and easy money credit terms. The government fix has been to tighten credit standards to consumers but to make the lending terms even easier for banks and for big business.
The reason is simple, the banks are sitting on billions if not trillions of dollars in bad paper and the banking system can only digest so much of it at a time. The banks through the Federal Reserve are given free money, yes free money. Zero to .25 percent free, this is done so that the banks can generate huge profits to cover their huge losses. Now how can the banks generate huge profits with the consumer economy in the tank? What other Avenue is available to the banks but Wall Street?
Buyers outnumber sellers and everyone is looking for the next big wave. Wall Street soars from below 10,000 points in July to nearly 13,000 a thirty percent rise in the stock market in ten months! Home prices continue to fall, car sales are at record lows, actual unemployment has fallen just one percent in two years yet, Wall Street behaves as if we've cured cancer and just invented a car that run on water.
Ben Bernanke gets a hair cut or Warren Buffet buys new shoes and the markets soar! Consumer confidence falls and is explained as, "Well, it always falls in the fourth quarter." As long as free money pours into the market there will continue to be more buyers than sellers but on that sunny summer morn when the experts figure out that the little engine that could can't, then you will see the mother of all melt downs, yet strangely, this will be only the side show and not the main event.
This financial orgy through which Wall Street and the banks gratify themselves is only a masturbatory fantasy and not sex with a real partner. Across the Western world governments have been forced into austerity plans foisted upon them by international banking institutions. No austerity plan, no new loans is their motto as bank funded bonding agencies quiver and threaten to lower credit ratings. Financial extortion or better known on the street as loan sharking. "I want my money Vinny and since you didn't do what I said, next week it's three bills you owe me."
Traditionally banks like lending money, that's the business they're in. Lending to nations is a particularly safe practice since so few nations have ever defaulted on their loans. So why the strong arming, why the sudden push and why three percent?
Growth rates of the European Union countries are as follows Germany, 3.5 percent, France, 1.486 Austria, 1.98 Portugal, 1.398, Italy, 1.296, United Kingdom, 1.251, Norway, 0.447, Spain, -0.147 Ireland, -1.041, Iceland, -3.473 Greece, - 4.535 percent.