The Martins use to live in a lovely house in Pleasantville. The town was unusual in that it was situated on top of a body of water.
It was an enormous lake that was designed to be in the center of the town. The homes were built around the lake so all the citizens could enjoy the majesty and all of the benefits the lake had to offer.
People came from all over the country to live here because it was so spectacular. And because of this, the local business community flourished. The local bankers and the housing sector benefited the most because of the great demand to buy homes there.
As people continued to move to the town, loans were made to home buyers and in turn the builders employed thousands of workers to make these homes. The municipal employees that lived and worked there also benefited from the steady work and excellent benefits that the town offered.
Pleasantville was one of the nicest places to live in the world.
There was, however, one small problem. The lake was man made. It always needed an influx of water to sustain itself. Without the water, the lake would dry up, become barren and, in essence, destroy the community. The townspeople knew their livelihood and the value of their homes depended upon the lake being full for if it were to dry up, property values would plummet, the banks would go bust, and Pleasantville would be no more
The municipality, knowing this, bought water by the truckloads and filled the lake each week. But over time, this got to be a prohibitively expensive and they had to raise taxes on the homeowners to cover this cost. At first it worked but then the homeowners couldn’t keep paying higher and higher taxes necessary to purchase and transport the water.
So, the municipality decided to print money called Pleasantville dollars. The town started to use this “extra” money to truck in the water, and for a while it worked because the water suppliers knew that Pleasantville was good for the money. Afterall, it was wealthy, had the best economy and now, a seemingly endless supply of dollars.
Then something happened. The town became addicted to the new money and started to spend it like crazy. Eventually it ran up enormous debts. Plus,with so many new dollars in circulation, the value of the Pleasantville dollars started to decline. So, the all its creditors stopped taking the dollars for payment.
When that happened, the suppliers of water stopped bringing water to fill the lake.
Without water, the lake began to evaporate and its level recede. In short order, the beautiful waterfront homes sat on top of a bowl of dry land. A dust bowl. Because of this, home prices started to decline. People who were overextended on their home loans walked just away from their houses. Banks went bust. People were laid off. In a few short years Pleasantville became a ghost town.
Sounds like a fairy tale gone wrong right? Well it isn’t. In the last 10 years, this fairy tale gone bad has happened here in the U.S and overseas.
In 2003, Nakheel properties embarked on an ambitious real estate project in Dubai. They literally began pouring sand and concrete into the sea to create a series of islands called “The World”. It was meant to encompass 300 islands covering anywhere form 14,000 to 42,000 square meters. The result? The project defaulted in 2008 (estimated at over 10 billion dollars) and the islands are slowly sinking back into the sea. Like Pleasantville, “The World” was meant to be an oasis of sorts for the world’s wealthy; but, in the end the financial ruin of that project caused devastation in Dubai.
Then there is China. Flush with cash and wanting to take part in the global economic boom, it created hundreds of ghost cities. These are actual cities with high rises and shopping malls. Some of them are the size of Madrid and Hong Kong yet nobody lives in them. They remain totally uninhabited. Economists believe that given the amount of people in China, Communist Party planners created theses cities thinking they would provide jobs and head off the civil unrest that massive unemployment can bring.
So you think the U.S is immune to these types of shenanigans?
The U.S just went through one of its worst recessions in history when the housing bubble burst because of mass hysteria surrounding the belief that the road to wealth was paved through home ownership…not responsible home ownership. Just ownership.
In our tale, the Martin family from Pleasantville went bankrupt. They were unable to pay the mortgage and forced to move to a new city where they are starting over. If it were just a fairy tale gone wrong, we could shrug it off and not retell the story. But the story is being acted out every days as countless Americans have been forced to move and start over. Its so easy to understand the confusion, followed by the anger and mistrust, at those whose solution had been to print more money and create more irresponsible home ownership.
You see, so many of these now wandering Americans thought they had already arrived in Pleasantville… and the view of the lake was just lovely and, of course, would remain that way.