We freely admit we haven't been following Detroit's economic demise as much as other topics-- we suppose if you want to see the origins of this collapse of a once bustling city, rent a film Michael Moore made in the mid 1980s called 'Roger and Me'
The 'Roger' in question was Roger Smith, President of GM at the time...
First, lets go back to that Chapter 9 bankruptcy filing.. Detroit is seeking protection from creditors in Federal court rather than state court. A judge last week issued a delay in their request...
Why? What does it matter?
If the bankruptcy is filed in Michigan, then by law pensioners are fully protected. If the bankruptcy can be implemented in Federal court, there are no laws on the books protecting them..
"Detroit residents pay the highest property and income taxes in the state. Last year its business tax doubled. About 40% of revenues go toward retirement benefits and debt, much of which was issued in the last 10 years to finance pension contributions.
Payments on $1.6 billion of pension-related certificates of participation consume nearly every dollar of property tax revenue.
Investors jumped at the high yields on Detroit's debt because they expected the city to borrow and raise taxes to the hilt to avoid default.
If Motown risked defaulting, creditors bet that the state or federal government would swoop in like Superman and save the city in the nick of time.
But no state bailout was forthcoming..."
Now the goal is to take from retirement pensions.
And the unions like all other creditors would have to take it or leave it..
Do you know how many creditors are owed money by Detroit?
More than 100,000.
The entire population right now is short of 700k so that's like one creditor per seven individuals...
A trial balloon.
In case you forgot Cyprus, when they were collapsing they closed the banks for over 2 full weeks while ATMs ran out of money, then once it was agreed they would raid the deposits of savers, the small island nation issued capital controls..
This meant you could not wire money abroad nor take it upon your person when leaving the country.. Every individual at the airport searched... Not for guns or explosives or drugs...
And while everyone was sleeping, other western European nations implemented the same policies for banking emergencies..
It's called a 'bail-in' when well-to-do individuals have their private accounts siphoned to keep the banks afloat..
The notion of your money truly being safe and sound in a bank forever now a lie.. its only now whether you the individual accept the new world or still wish to live in illusions of the old..
So back to Detroit..
It would also decimate the unions once and for all..
If they're powerless to protect pensions, what use would they serve??
And you better believe once Detroit shafts all its creditors, it will go to Washington and ask for and receive a Federal bailout..
Precedent was already set in the 1970s with New York (Pres. Ford had a PR nightmare change of heart after originally telling them to famously 'Drop Dead'..
So other cities will follow Detroit..
Because really, what is money when its just pieces of printed pictures of Presidents backed by nothing...
This money goes to banks and the stock market.
And the break down based on a 30 day month is this:
$2.83 billion a Day
Take the $2.83B and divide by 24 hours =
$118 million per Hour
$1.96 million every minute
Take $1.96m and divide by 60 seconds =
$32,777 spent on QE every second of the day...
Their total debt is $20 billion which is under 1/4th of one month of QE
And don't think for a moment others won't follow.. Maybe even whole states will get in on the act... California has been needing one for a decade but just refuse to be the first to ask...
And while all this is going on, the stock market keeps rising, people are flocking to the movies to watch cartoons and other crap to escape their lives in 90 min intervals...
'Don't galvanize and march because of Detroit... or the utter bleakness of this economy.. or even all the black on black crime gripping the nation...'
Nope.. March for a thug who tried to kill a Hispanic man who was following him too closely.. After all, 35yrs ago that could have been our President..
Ask about Detroit and other than identifying their sports teams, you get collective blanks....
We end with a few stats and an overall warning that your local metropolitan area could very well be next...
** About one-third of Detroit's 140 square miles is either vacant or derelict.
** Over 60% of Detroit's children live in poverty
** Detroit was once the fourth-largest city in the United States, but over the past 60 years the population of Detroit has fallen by 63 percent.