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Michigan Governor Rick Snyder declared Detroit to be in a state of emergency on Friday and said...

Michigan Governor Rick Snyder declared Detroit to be in a state of emergency on Friday and said he would appoint an outside manager to help turn around its dire finances, which include $14B in long-term liabilities. City officials have ten days to persuade Snyder to change his mind. Should he uphold his decision, it would be the latest step in attempts to prevent Detroit filing what would be the biggest municipal bankruptcy in U.S. history.
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Comments (26)
  • Ray Lopez
    , contributor
    Comments (1542) | Send Message
     
    Thar she blows! There goes the bondholders money! Detroit has fallen, woe unto ye, bondholder.
    3 Mar 2013, 06:14 AM Reply Like
  • mix
    , contributor
    Comments (92) | Send Message
     
    Part of the reason for the takeover is to prevent bonds from being defaulted on.
    3 Mar 2013, 01:28 PM Reply Like
  • fourchan
    , contributor
    Comments (80) | Send Message
     
    there is no tax base. 3 bdrm brick houses sell for 10,000 dollars if you can find a buyer. the bond holders are going to take one for the team. and it still wont fix the problem because the problem is a certain demographic.
    3 Mar 2013, 05:53 PM Reply Like
  • jrpowell01
    , contributor
    Comments (27) | Send Message
     
    How is it demographic? How about economic.
    3 Mar 2013, 06:24 PM Reply Like
  • kenney1037
    , contributor
    Comments (34) | Send Message
     
    How naive! Bondholders will take a back seat to unions in any potential bankruptcy, perhaps you will get some of your investment back. I get a kick out of bondholders who think they have a superior claim to all of this. Greece should be a lesson, you will be directed to either take a mandatory haircut or to lose your investment altogether. I would expect Detroit's yields to be shooting up, I sure wouldn't feel too good about my chances to get repaid in full if I held Detroit bonds. And since it is politics and government, they can legislate this away if they choose. Once they have your money (bond purchases, taxes), you are in a bad position until some other member in the Ponzi takes you off the hook.

     

    Naturally, it only takes a few dominos like Detroit to rattle the entire financial system, with hyperspeed in reporting with online sources and fear running rampant at times with skittish investors. There are not many governments who are solvent in western civilization, they are afraid of contagion for a very good reason. Derivatives continue to be a house of cards that can blow away fast, as they did in 2008.
    3 Mar 2013, 11:46 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2170) | Send Message
     
    2013 will be a year of government budget cuts. (3-levels + associated local agencies and other non-profit organizations). It will also be a year of corporate consolidation through mergers, acquisitions, LBO's, PEI's.

     

    The chief had bootstrapped himself into renewing his tenure with a dose of $5T added to the deficit. Where do we go from here? Add another $5T till his term's up by 2016, just to stay the same course to maintaining the same standard of living? That won't work, rating agencies will downgrade US debt at least 2 to 3 notches.

     

    It doesn't take a Nobel to figure out that we are in deep trouble.
    3 Mar 2013, 11:58 PM Reply Like
  • divinecomedy
    , contributor
    Comments (466) | Send Message
     
    I'd suggest people put their live savings into the stock market now!!! The Fed's gonna print even more money soon.
    3 Mar 2013, 07:10 AM Reply Like
  • nightfly
    , contributor
    Comments (1017) | Send Message
     
    $14B, that's barely 1 week's worth of POMO. Ben just needs to take his helicopter west for a week on vacation. Problem solved!

     

    Ben has come up with the perfect solution to all problems! Transfer of all risk and debt to the public! Winning!
    3 Mar 2013, 12:04 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    I love it. Shorts getting lunatic.....feels good making money while guys like nightly whine....
    3 Mar 2013, 12:42 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Good for Detroit.
    3 Mar 2013, 01:04 PM Reply Like
  • AgAuMoney
    , contributor
    Comments (4442) | Send Message
     
    Probably the big 3 (or what's left of them) should just form a joint venture and buy out the city. Not that 2/3 of them are immune from bailout, but hey, there's a chance! And detroit could be the first U.S. city with partial ownership explicitly by a foreign corp...
    3 Mar 2013, 02:14 PM Reply Like
  • BruceInKY
    , contributor
    Comments (435) | Send Message
     
    Remember the first Robocop? It was set in Detroit and the cops all had Ford Taurus's. In 2014 they will have Volts.
    3 Mar 2013, 11:35 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1542) | Send Message
     
    There is a 'free city' proposal to put a city inbetween the USA and Canada on a river. Sadly, the Detroit government is against it. I think it would be cool. The free city would not pay taxes to anybody, and be like the Honduras proposal by Paul Romer that collapsed a short time ago.
    4 Mar 2013, 09:01 AM Reply Like
  • FWS
    , contributor
    Comments (136) | Send Message
     
    1. Big unions
    2. Democtaric governance
    3. Bastion of Liberalism
    4. 1-3 = FAILURE
    3 Mar 2013, 03:28 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (21433) | Send Message
     
    Liberalism once meant quite a different thing.
    3 Mar 2013, 04:22 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2170) | Send Message
     
    Our country, the USA, had been becoming increasing socialistic and liberal in recent decades.

     

    Everything is becoming okay: gay marriage, elimination of capital punishment, marijuana, pre-marital sex, illegal immigration, name it. The specter of rising tide of liberalism and socialism is now spreading unchecked like a wildfire, engulfing, decimating, devastating.

     

    The latest crave thing is divorce.

     

    So who ignited this wildfire of late and installing an epic socialist activist in the nation's highest pinnacle of power?

     

    Answer: None other than the Republican Party and its follies.

     

    Amen and Amen. So Help us God.
    3 Mar 2013, 05:44 PM Reply Like
  • jrpowell01
    , contributor
    Comments (27) | Send Message
     
    I assure you, liberalism is doing fine in most of the country. In fact, liberalism saved the my hometown of PIttsburgh from becoming a Cleveland or Detroit or other run down rust belt city.

     

    Detroit is simply a broken urban rust belt city.

     

    Here is the real reasons:

     

    1. Economy is dead
    2. Jobs went to Mexico and Asia
    3. Terrible public education
    4. Unaffordable secondary education
    5. Severily aged infrastructure
    3 Mar 2013, 06:42 PM Reply Like
  • BruceInKY
    , contributor
    Comments (435) | Send Message
     
    "saved the my" "Here is...reasons" ""Economy is dead" Severily"

     

    I assure you jr, editing and proofreading are your friends. They will make your progressive "best and brightest" arguments more persuasive. Just a hint from the dark side.
    3 Mar 2013, 11:42 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1542) | Send Message
     
    Do the math Lone Star: 1-3 = -2. negative Two is the opposite of "Democtaric governance" (sic), that would be 'borrow-and-spend' Republicans of the kind that helped bankrupt this country. That is real failure, not Obamacare which is trivial.
    4 Mar 2013, 09:03 AM Reply Like
  • Ghosts of Kariela
    , contributor
    Comments (152) | Send Message
     
    Detriot was in a systemic decay situation due to a overall decline in the industry namely steel and automobiles. What's more the cities inability to successfully diversify its economy away from a few select industries led to a house of cards style economic set up where all economic activities were essentially funded by industrial production leading to economic collapse as jobs essentially dried up. This process along with the following urban blight, drug epidemics, crime, poor education, poor city zoning, and the cities inability to effectively combat these events has led to this. This overall economic decline has led to those being able to find greener pastures leaving, and many of the extremely poor turning to crime.

     

    Thus the city received a double whammy of falling tax revenues and the need for more spending to combat crime, unemployment and attempt to make the city more attractive. This is primarily why Detroit has gone to $#!%. Not because of unions, or Democrats or Republicans or Liberalism or gay marriage or pre-marital sex or what ever the hell else people want to blame it on.

     

    It is simply because the city is from a bygone era of Industrialism and couldn't keep up with the time and soon will pass into a miserable existence, relegated to be lamented in History books as an example of a fallen giant, just as other formerly powerful economic cities of history, from Timbuktu to Bukhara and Tyre as examples of a once great city felled by the winds of economic change. A sad old city that will soon will be blown away in the rough sands of time.
    3 Mar 2013, 10:29 PM Reply Like
  • BruceInKY
    , contributor
    Comments (435) | Send Message
     
    Couldn't have anything to do with the government the voters chose running it into the ground, nope it was inevitable, a by-product of history. Is this the new meme you and jr are here to advance?
    3 Mar 2013, 11:48 PM Reply Like
  • Ghosts of Kariela
    , contributor
    Comments (152) | Send Message
     
    It might have a little to do with that, but primarily it is economic as Detroit's population has been in secular decline for over half a century. Now the reasons for this vary, and I'd rather not argue over the sociological aspect of racism in the context White flight/Black race riots/ urban rot and it's effects or lack thereof on the rapid decline in population and economic activity over much of the mid to late 20th Century. This is obviously a rather controversial topic and discussions of it's merits and demerits on the internet often goes nowhere and degrades into an incomprehensible babble. Thus I'd like to skip over why the city itself was doomed by it's own citizenry's lack of ability to vote for the right people to run the city.

     

    The reason for this is that such debates are inherently politically linked, and such often devolve into an economic theory debate which is rather useless for the point of this particular discussion.

     

    Thus, I'd rather like to give examples of various historical cities/towns that entered secular decline due to an economy that is essentially built up through the production of a single product, which suddenly has either cheaper foreign competition, resource depletion, or marginalization by increases in technology. The purpose of these examples is to illustrate that various societies decline due to this, across all sorts of cultures, governments and economic systems. Hopefully this will show that these trends tend to be almost universal, and can crush even the most well prepared government due what I call the " self-perpetuating cycle."

     

    Gold Boom Towns- Many of these now dilapidated ghost towns (if they exist at all now days) from the various mining rushes in the U.S. during the 19th Century, had drastic population increases due to the miners that came to get rich. As long as miners were able to find gold the town boomed, with a strong service industry that supported the miners spending, and opened many veritable dens of prostitution, gambling and drinking. Now this precarious one commodity based economy went well until there was a sudden dearth of further precious metals to extract from the Earth and the entire economy collapsed very quickly, as the service industry fell apart due to a lack of clients.

     

    A slightly different event happened in Bukhara as the city got immensely wealthy over Silk Road trade between Europe, Africa the Muslim world and India, SE Asia and China. This came to a screeching halt with the disintegration of the Mongol Empire, the Ottoman's capture of Constantinople and the collapse of the Byzantine (Eastern Roman) Empire.Soon these silk road cities lacked goods to raise prices on and essentially lost most of it's glory as the now cheaper Indian Ocean trade between Africa, the Middle East, India, and China reigned supreme.

     

    This pattern is seen in Tyre, Timbuktu, the Swahili City States, Srivijaya Empire, etc... Many of these take forever to come back as any sort of powerful economy, if at all.

     

    This essentially happened on a much larger scale in Detroit, a singular industry fueled every other aspect of Detroit's economy, when that industry went to Korea and Japan the jobs vanished and the city loses revenue and as more people pack up and leave they lose more and more revenue, and this is the end result. I highly doubt any Mayor whether Rep or Dem could fix that. Detroit is a Classic example of a Boom and Bust economy. Not very easy to predict when the current industry will just die out, and even if it were predictable, there isn't much anyone could do about it.
    4 Mar 2013, 12:58 AM Reply Like
  • BruceInKY
    , contributor
    Comments (435) | Send Message
     
    Interesting history lessons there--does Detroit's classic example also adequately explain the blight in Providence, RI, Philadelphia, PA, Chicago's South Side, East St. Louis, Stockton and Oakland, CA?

     

    But thanks for answering my question with "Thus I'd like to skip over why the city itself was doomed by it's own citizenry's lack of ability to vote for the right people to run the city." I also like the close "even if it were predictable, there isn't much anyone could do about it." Got it.
    4 Mar 2013, 07:49 AM Reply Like
  • Ray Lopez
    , contributor
    Comments (1542) | Send Message
     
    Very poetic, you should consider doing a popular history book along the lines of Howard Zinn's "A People's History..." Another factor working against Detroit: too much open space, which is true in the entire Midwest (and Canada too--slightly bigger than the size of the USA but only 35M people; ditto Australia). If it was Europe, the land itself would be valuable.
    4 Mar 2013, 09:07 AM Reply Like
  • Ray Lopez
    , contributor
    Comments (1542) | Send Message
     
    Very good. Consider also every single summer vacation city in the USA (be it Santa Cruz or Atlantic City, or your favorite here): they expand in the summer, and are ghost towns in the winter.
    4 Mar 2013, 09:10 AM Reply Like
  • solojif
    , contributor
    Comments (111) | Send Message
     
    1. Print "Detroit Dollars" Borrow The Fed's Printing Press it could easly be converted to replace Ben Franklins picture with Obamas or Ben's.
    2. Raise taxes to pay for the printing.
    3. Hand out the Welfare Checks..umm I mean Detroit Dollars.
    4. Take the Guns away from those you want to tax.
    5. How many votes will those Detroit Dollars get you.... With someone elses taxes...... And no fear of being overthorwn by the People you taxed.
    Disclosure: I'm Long, Beans, Bullets, & Bullion.
    4 Mar 2013, 07:14 AM Reply Like
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