It was the mid 1990's when I moved to Atlanta, the town was booming and the Olympics were coming. Business was expanding; jobs were plentiful with new homes being built everywhere. It was a builder's economy, where growth is dependent and fueled on more growth. If these remorseless hammers ever pause, the economy stumbles. But with corporate America's love of outsourcing has come, the biggest builder's economy of them all.
Call them rising economies, new economies, big money flowing in places where it didn't used to flow. In China, growth has been 10% per year for over ten years. It is a wedge expanding exponentially and quite impossibly. Immersed in such sudden prosperity, a gold fever takes over. The stories have circulated for years about Chinese borrowers, using the same collateral on different properties at separate banks, spurred on by bonus dependant bankers.
They've called this a jobless recovery, but it's not so, it's a jobs somewhere else recovery. The Fed's been adding $85 billion per month and while most of this cash missed the US economy, it found a home in the emerging economies. The money was let out to fuel growth, which in turn fueled growth in a redux of 2008, the day the music died. Goldman Sachs, JP Morgan Chase have called for calm after currency losses in Turkey and Argentina. When bankers call for calm, I get nervous. Over the past two weeks, more than $3 trillion dollars has been erased from world stock exchanges.
Russia cancelled a bond auction for a second week and the Japanese Topix index fell 4.8%. Adding to the fear is weak growth in China and a purchasing manager's report of slowing orders. If China doesn't buy, then raw materials producers don't sell. If the raw material producers don't sell, the local economy falters. If the local economy falters, the investors go away. If the investors go away, the music stops and everyone runs for a chair. Five month lows in Russia, India, Brazil and Mexico, gosh this globalization was a wonderful idea. To turn the world's economy into a computerized, self-regulating crap game.
The Fed money poured into the money
sieve pours out the biggest holes for the largest returns to generate bonuses,
half a world away. Paper profits which have witnessed 160% rise on the S&P
500 since 2009 with a corresponding zero percent rise on Main Street. In the
worst economic down turn since the last Great Depression, Wall Street has
simply moved on to the next bubble, repeating the same mistakes, feigning the same
excuses because that way, you make a lot of money. To steal a phrase, it is
economic fracking. Pumping money into low-wage economies, then racking off the top
as the profits bubble up.