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Elliott's Singer Sees More Detroit-Style Municipal Insolvencies
Via Paul Singer of Elliott Management,
In the U.S., states cannot file for bankruptcy. Cities can, however, and there is a special provision in federal bankruptcy law reserved for cities. Furthermore, unlike countries, states and cities cannot print their own currency. When they overspend or overpromise, they beg for money from the federal government (or state government, in the case of cities), reduce their spending and/or default on their obligations. When the cash register is empty, it is lights out – literally. By contrast, the ability to print money allows countries to get away with long-term insolvency (at least until markets wake up and force them to restructure their obligations).
What is happening in Detroit – a combination of poor and corrupt civic leadership, shortsighted business leaders and overreaching labor unions – is interesting because it was 40 years in the making, but just months in the denouement. It turns out that Chapter 9 of the Bankruptcy Code gives judges tremendous leeway to chop obligations quickly and severely, regardless of the expectations of pension-holders and bondholders.
We see Detroit as the “coming attraction” to a significant number of municipal insolvencies in the months and years to come. Perhaps the pain of the restructurings will improve the behavior of city governments, labor groups and businesses, and perhaps it won’t.
But there is no question that this episode is a precursor to what will happen on the federal level as national promises prove to be empty.
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USA R.I.P.
I've been there too. I keep expecting SHTF, and I keep being surprised at what lengths these fuckers will go to in order to keep the music playing. I've got my chair for when SHTF, but I keep trying to get one more project in. And then another. And I've been doing it with urgency. It would be nice to know if I have two weeks or two years...but then again what would prepping be if you aren't prepared at any time?
As we have learned from the Eurocrisis, Housng Bubble 1.0, Japan and other disasters, these creaky systems can endure a lot longer than we can remain solvent. There will be many more municipal bankruptcies, but which cities will they be and when? Shorting is hazardous as long as the printing press is running.
http://dareconomics.wordpress.com/2013/10/31/around-the-globe-10-31-2013/
For those interested in seeing more pictures of the disaster that is Detroit, here's a set of pictures I've personally taken. And no, I'm not trying to sell anything. http://www.flickr.com/photos/treycampbell/sets/72157624911059374/
cool!
Beautiful pictures or at least the sky colors and snow framing the decay are beautiful.
It should all be bulldozed and turned into prarie.
"It should all be bulldozed and turned into prarie."
some wigwams would be nice too .
These are great pictures! There is still a lot of beauty in Detroit.
Nice images, Thunderkiss.
Guess there isn't enough pixels to capture the tragedy that is Detroit.
I visit downtown Detroit a couple of times a year.
What people should understand is that most of the damage and destruction is caused by the two-legged animals running around in the city.
"here's a set of pictures I've personally taken"
Impressive work and presentation! Same for your "Urban" and "Landscape" sets.
Good pictures... Got lost in Detroit about 10yrs ago I was scared shitless as I had no weapon, can't imagen that place now...
+1000. exceptional.
those pictures are excellent - well done and thanks - i'd say they could be worth a lot but unfortunately in a decade or so (or less) there will be many more cities worth of pictures....
Sure, but exponential equations are indeed a bitch...
http://research.stlouisfed.org/fred2/series/BASE/
One thing is certain, the liabilities of the human population are increasing exponentially. Not really that surprising that the paper promises are as well.
Unfortunately, when fraud is the status quo, possession is the law.
Due to the ability of the gov to print, I have theorized that it will be a long, slow decay with lots of sufferring/job losses along the way. I doubt we will have another 2008 style plug, but I can't rule it out. My motto is "survive."
i can't wait for the day when retired government employees, who retired at 45-50 and receive 80% of thier final 3 year average salary (which was fudged to due to overtime the last few years) take a 50-80% haircut. fuckin corruption and nepatism drives me insane
Obamaville's...shovel ready communities for shovel-ready people.
Sad, but true.
Democreeps and Obama. And save me the red team blue team. Conservatives and libertarians are pounding the RINOs and Dems while Dem voters just love Obama,
I despise collectivists.
Any flavor, any color.
Short, succinct, no dependency on fancy videos(that many readers cannot view) and whatnot.
A+.
Over.
what about the poor California state workers who retired at 42 & have a six figure pension? who will look after them?
Starving to death has a long and honorable lineage.
I see no problem: promises made by the Federal Government are not legally enforceable.
The ultimate outcome of every single monetary system throughout history that has allowed moral hazard to go unchecked. Once your median of exchange is no longer attached to physical laws (the same laws that dictate what is required to actually produce something of real value) and manipulated by a relative few, of course they will enrich themselves. This is especially true when all of the real consequences for bad behavior have been removed (where is John Corzine?).
Perhaps I can interest you in a financial "product" of mass destruction?
Tick tock motherfuckers...
Paging Meridith Whitney...
Uh, yeah, you're a little late to the party.
Meredith Whitney predicted it in December, 2010 on "60 Minutes."
I'd like to know the source for this "states can't file bankruptcy."
If anything, it would make the needed restructuring of debt that much more difficult.
They would have to sacrifice what's left of their sovereign immunity in order to...
I'm assuming there is no tricker-treating in that hood...so they got that going for them...
plenty of tricks being turned
In exchange for treats.
Trick for Treat..!
No worries, the Fed can just monetize all muni debt! </sarc>
aaaannd its gone
Bankruptcy?! That's funny. One day they they will just quit paying--no bankruptcy needed. It will most likely come about when the sheeple show up at city hall with AK and AR 'pitchforks' and say "no more."
I think if I was a betting man Chicago is next on the list. There are certain commonalities to all these muncipalities teetering on the edge and Chicago meets the mostest of the criteria. Don't believe me just look to O don't know nuttin'.
Exactly. Illinois has among the lowest test scores in their schools and have one of the largest budget deficits in the country.
Coincidence? LOL, no. The public sector unions continue to suck the life out of the state.
Who would of thought this article would have listed a city or 2 with some facts to back. Sounds like bthf. Just say it's so.
Detroit - the socialist utopia brought to life.
I live in pomona, where we give new meaning to "cashless society"
This will simply result in the continued growth in the shadow economy, which is already a huge part of the economies in countries like Greece.
No don't bulldoze it. It has a quiet beauty of decay that should be preserved for future generations. similar in feeling and beauty to that of East Saint Louis!
Start charging for tours Detroit!
It should be preserved for future archeology graduate studies.
Careful or he Singer will be lambasted like Whitney.
Corruption? There's CORRUPTION!!?? When did this happen?? I'm shocked...SHOCKED!!! Does anyone KNOW anything about this???
But I thought the housing market was recovering? Whaaa happened? Detroit has so many lovely fixer uppers. They could have a new show "Flip That Tenement" Or "Flip that Crack Den"
When they eventually have to evacuate Tokyo, those fixer uppers in Detroit will look pretty good.
What are these "markets" you and Paul Singer have talked about?
I was watching the owner of Hardcore Pawn on FOX and he said something that really hit me.
He said that the thing that he saw that "troubled" him the most was the short line for people to buy back their stuff.
He had never seen it that short.
Wait for Detroit to sell all that art to some dealer at a very good discount (who just happens to be a relative).
Plow all those areas over and turn it into farm land. Detriot suburbs look like a war zone. No one is going to buy that stuff they want the new owners to pay the back taxes lol! At least they could produce food. Oh I forgot you would need a small army to guard the fields as well. Detroit is doomed!
I didn't realize the suburbs had been urbanized. You mean that Gross (sic) Point Woods, Shores etc is all trashed like a broken gold tooth?
What is the status on Dearbornistan? or is it some other godforsaken place near Deetroit?
So basically, any city politician can do one of two things:
1. Promise people the sky and the moon, spend like crazy, and it might be in 20 years the true effects are known - and be praised in the meantime for his "civic spirit" and of course, have the local papers do everything they can to help him get re-elected.
2. Tell people about the true nature of spending, urge restraint, and get accused in the local papers of wanting to starve children and throw kittens down the well.
Exactly right!
And don't forget about the next step for anyone (local, state or federal) who chooses door number 2: they stand no chance of winning. And if they somehow do gain some small sort of foothold (cough, Ron Paul, cough) the establishment will ridicule and belittle them into obscurity or change the rules to prevent any outcome other than keeping the party going.
At the end of the day, it really isn't TPTB or the tribe or the banksters or The Fed or anyone else but us dumb as shit folk who let people piss on us all day long and tell us it is only rain. We, in aggregate, are to blame for where we are. That it has taken this long to get to this edge of the coming chaos is a testament to the dumb luck resource lottery we won several centuries ago and the shoulders of the giants we once stood upon. It's been a long fall coming, but say goodnight, Gracie.
Is it just me or do most of the problems seem to be cities and areas overpopulated with a certain dusky hued race that also causes a lot of crime?!?