Detroit Emergency Manager Kevyn Orr has submitted a proposal that would pay unsecured creditors about 10 cents on the dollar. Similar haircuts would be made to underfunded pension and health benefits for retirees. Orr is hoping that the creditors and the unions that he will be negotiating with will accept this package, but he concedes that there is still a “50-50 chance” that the city of Detroit will be forced to formally file for bankruptcy.
But what Detroit is facing is not really that unique. In fact, Detroit is a perfect example of what the future of America is going to look like. We live in a nation that is rotting, decaying, drowning in debt and racing toward insolvency. Already there are dozens of other cities across the nation that are poverty-ridden, crime-infested hellholes just like Detroit is, and hundreds of other communities are rapidly heading in that direction. So don’t look down on Detroit. They just got there before the rest of us.
h/t RFB
Detroit’s Democrat politicians ran out of Other People’s Money.
In 2003, a number of us were forced off the highway in Detroit to avoid an accident. It was interesting to see that even the ice cream truck needed bars on it’s windows.
Hard to understand why they’re having difficulties. Staunch Democrats all.
http://bit.ly/16Gka4U
Go to stuffblackpeopledontlike.blogspot, and all will be made clear.
….and on the day of the bankruptcy hearing Obama flew to Hawaii on Air Forve One for a round of golf with Joe Biden who was on another government plane (after all one had flown from Washington the other from Maryland. At the same time King Obamas wife flew to LA to do some shopping, on a separate government plane of course because she was flying to Chicago after her one day shooping trip. The American royals deserved a break they’d just spent the last two weeks working in Washington.
When asked if this waste of tax payer money at a time when major cities were going broke King Obama gave a quizzical look to the reporter which could be translated as, huh, why would you come to that conclusion. And ordinary Americans watched their civilization crumble.
There is a simple solution for these ills – downsize government, cut taxes drastically and encourage Americans to make things in their own country – only 2 things thrive in poverty/austerity – communism and crime and the US has both right now.
It’s going to be bankruptcy. Then it will be broken-up and who knows what will happen then?
Maybe private towns.
Detroit has always been on the cutting edge. It’s a bellweather city for future trends.
I well remember being in Windsor in the “Black Days in July”. People there were literally
leaving the city, afraid that the carnage would spill over the border.
rd, exactly.
Didn’t Ayn Rand talk about this? If only there was only one “Detroit”. It seems to be spreading like the plague.
Ten cents on the dollar is no haircut! It’s a decapitation!
Deeetroit, the canary in the fool’s gold mine
see what happens this time, and then see what happens on a BIG scale when californicate goes tits up!!!
I believe you were looking for the term known as; DECIMATION.
Cheers
Hans Rupprecht, Commander in Chief
1st Saint Nicolaas Army
Army Group “True North”
A key point this article misses is that Detroit cannot print money, but the Feds can.
Hans Rupprecht – No, you are wrong. Decimation means one-out-of ten, not nine out of ten. People misuse that term often in these uneducated times. Caesar described it as standing all the men of a century, manaple, or cohort on a bridge, and the centurion or legate would push every tenth one off. The result was sort of like the “haircut” simile.
The Detroit situation is more like a Canae defeat, 90% perish.
http://www.merriam-webster.com/dictionary/decimate
Definition of DECIMATE
Depends on the meaning you wish to ascribe:
1: to select by lot and kill every tenth man
2: to exact a tax of 10 percent from
3a : to reduce drastically especially in number
3b : to cause great destruction or harm to
Alternatively, we can coin a new term NONAMATION…which would work equally well.
Cheers
Hans Rupprecht, Commander in Chief
1st Saint Nicolaas Army
Army Group “True North”
Poor Michigan… HA!
Here in Texas, we just point and laugh.
10% isn’t a “haircut”, it’s a scalping.
Decimation was the term for a practice used by the Roman army when every tenth soldier would be executed as punishment and example. That’s a reduction of 10%. What Detroit is facing is a reduction of 90%, far, far beyond decimation.
Oops. Should have read all the comments before posting. Then I would have seen other similar corrections.
But this:
3a : to reduce drastically especially in number
3b : to cause great destruction or harm to
seems to me to be a recent addition to the definition.
“It’s going to be bankruptcy. Then it will be broken-up and who knows what will happen then?
Maybe private towns.”
Nope. Wind farms growing solar panels.
The real question is who was daft enough to lend money to Detroit these last few years at all, or insure Detroit bonds.
Answer: speculators in municipal bonds who, like Jezebel herself, were counting on Barry to bail out the Detroit branch of the “community,” while enjoying fat yields in the meantime. Not a tear need be shed for any of them on the day they finally have to explain to their shareholders what in God’s name possessed them to lend a thin dime to Jezebel to spend at the hair salon, and do nothing for it but make trouble for the whites who hadn’t yet fled the city.
As for Jezebel, forcibly retired by the complications of morbid obesity from her make-work desk job and dependent on a City of Detroit pension, she can address her financial problems to whichever of the six pups she had by six fathers has managed to stay alive and out of jail, if any.
A day when both Jezebel and the usurers are forced to endure anything close to what they truly deserve is truly a day worthy of rejoicing.
Elected officials appear to be wilfully blind. Nanaimo just published the names and salaries of all civic workers earning more than $75k. The number has increased to 197 with the City Manager taking home $238,000 – for a city of 86,000. Entry level firefighters get $81K with their bosses earning up to $120K.
This in a very ‘blue collar’ town that relies heavily on retail, with a smattering of small industry and resource income. We’re largely becoming a population of retirees on fixed incomes, but that matters little to city hall.
It’a basically a Ponzi scheme. Nanaimo looks to see what other jurisdictions of similar size are paying (the Hay Principle) and pays that or more. Find the municipality with the weakest, in-the-union-pocket council and they become the new ‘standard’. Never mind that the median income for Nanaimoites is $10K less than Kelowna – they’re roughly the same size, so what the heck, let’s pay our workers what the more wealthy Kelowna folks pay.
Good thing our Councillors can’t sell municipal bonds or we’d surely be down the same road as Compton et al.
My point was that if you remove 90% of a man’s head there isn’t much left!
The term “haircut” was devised to make light of a significant loss, which none the less left most of the fund intact. Extending it to 90% is an abuse of an abuse of words.
One of Detroit’s problems is that they can’t get people to pay their property tax. Some people haven’t paid property tax in decades. You can’t run a city if you aren’t collecting taxes.
An Open Letter to the Good Citizens of Motor City
Well, here you all are, the 25% of you that’s left from the heydays of the 1960s, the rest having fled the coop, so to speak. Your city is falling down around you, a victim of all the bad choices you’ve made over the past years and decades.
I find it difficult to have much sympathy. Your absolute last chance was the last Presidential election. What, you thought Obama was going to bail you out AGAIN? He’s a second termer; he doesn’t owe anybody anything. But you represented most of the margin of victory over Romney. As a first term Prez, he would have owed you everything, especially if he wanted a second term. Bailout money for Detroit would have flowed like the Ohio in a century flood.
But no, you had to go and vote for that hopey-changey thing. Congratulations. You are getting what you voted for. And very good and hard at that. You will now join the other long, long list of cities in the world which are now nothing but a heap of ruins. Their excuse was that they were sacked by barbarians. Detroit’s failure was that its citizens WERE barbarians.
You used too many big words. They wouldn’t understand.
“You can’t run a city if you aren’t collecting taxes.” that is a fallacy that all socialists would have you believe. Of course you can run anything without the extortion of taxes. Its called paying for what you use. Paying real costs and real wages. Municipal unions and politicians are the ones who cannot survive without unaccountable tax collection and unaccountable spending.
Detroit’s sad story was conceived in the 60’s under LBJ and the Socialist nightmare is being birthed now. What we are seeing is the fruits of Socialism and another failed “Le Grande Design” failure of Socialism. It is the same all through the west. The profligate money printing and handouts will no longer work. It is the same in Canada. The dam is bursting. The Total Public Debt of Canada’s governments is around 4 Trillion for a population of around 33M. Free Healthcare for all, many grand schemes are hitting the Rocks of Realism. The Free Lunch is over for Socialism. Still as the ship goes down the passengers call out for more. This article from 2009 warning of this outcome for Detroit. http://www.thedailycrux.com/Post/32941/stansberry-detroit-s-socialist-nightmare-is-america-s-future
RFB, your points are accurate, but need perspective. Canada’s total debt to GDP ratio (federal debt) is half what it was in 1997 at about 30%. And the federal government is reducing its deficit steadily. The problem lies with the provinces, particularly Ontario and Quebec.
cgh;
It goes beyond the provinces as crown corporations, municipalities and regional districts take on debt for capital projects. Some of these projects have a referendum to authorize the spending, others do not.
For an accurate figure I do believe one must calculate a per capita debt figure. I remember reading an article that indicated the average Canadian per capita debt actually exceeds the American number. Combine that with the inherently weaker position the Canadian economy faces and the debt risk is far greater in Canada. I consider the Canadian economy weaker as a hugh portion is dependent on resource revenue. The USA economy, ran properly, has a hugh capacity to create wealth.
That’s not enough, CT. You also need to subtract the value of the assets. This particularly applies in the case of crown corps and municipalities. And you can’t add in the future liabilities unless you also add in the offsetting revenues. This is why I dislike the analyses of the Fraser Institute. They include the former but refuse to include the latter. Future liabilities do not actually exist. They can be changed by government action on both the revenue and expenditure sides.
I agree with you about per capita debt. This is indeed probably the most accurate way to look at it.
You are wrong I think about the respective positions of Canada and US. Canadian government structures if they wish can form majority governments to deal decisively with net government debt and deficit. The US cannot. Ask yourself this, which of the two countries is going in the right direction and which one is not?
Anybody dumb enough to loan money to the thieves that run Detroit deserves to be pauperized.
CGH, you are confusing Deficit with Sovereign Debt. Municipal Debt rolls up to the Province when a Municipality collapses, the Provincial Debt rolls up to Ottawa when a Province fails. The total Sovereign Debt of Ottawa is close to 4T alone, then when you add in all of the Municipal Debt along with Provincial Debt that is about another 2 Trillion. Quebec is over 1T underwater themselves with what, 8m people. Sovereign Debt calculations also include the Operating Deficit which you referred to as well. Canada when you add all of the Sovereign Debt plus the Deficits of all of the 3 levels of government together it is close to 6T now. Sovereign Debt also includes all of the debts of all of the Crown Corporations. Such as Ontario Hydro around 40B in debt alone. Not a pretty picture. So Canada with a total GDP of 1.8T owes 5-6T. Canada only has about 16M taxpayers, out of that 33M citizens, and huge entitlement programs that are simply unsustainable. And a huge government workforce something around 30% of all workers in Canada work for some level of government, just sucking up the Gravy like Gravy Sucking Pigs….Totally unsustainable.
No, I’m not confusing debt and deficit. The latter indicates whether the former is going up or down.
However, even leaving all that out, I agree with you that the current debt load is unsustainable. Not with close to one-third of the population living off of and at a higher standard of living than the remainder. Moreover, the current debt load is supported at extremely low interest rates. Should those rise, the impact on government finances will be severe.
However, you also need to acknowledge another key distinction. There is a significant difference between debt incurred to build capital projects and debt incurred to fund consumption. The former produces assets; the latter does not.
Hi CGH, most of Canada’s debt has been to fund social projects and underwrite socialist schemes. As to Capital Projects good! That depends on the project. Was it good spending tax dollars to fund the Olympics in Montreal? They only just paid that debt off from 1967. Was it good using tax dollars to build SkyDome in Toronto 600M spent, and it was just sold off for 50M to a private interest. I think that kind of spending of scarce tax dollars when we are so far in debt is criminal. Is it good to borrow and spend billions to provide free entitlements to non citizens? Much of Canada’s debts are directly related to vote buying entitlement scams. Growing the size of government is not a wise investment of tax dollars. Especially since taxes have increased by 1700% since the 1960’s and Taxes now consume more of the average Canadian families annual income than Food, Clothing and Housing combined.