Motown goes bust!

[The Natural Philosopher]

Detroit has filed for chapter 9!

(heard on the news just now)

[The Medway Handyman]

I heard it on the grapevine...

[Brian Gaff]

What the whole town, surely somebody has stolen the dosh then.

Brian

[The Natural Philosopher]

as in the city administration.

[The Natural Philosopher]

More here

[tim.....]

yep, the whole town

(I assumed from the OP that he was talking about the record company and I guess that's what you thought too)

probably caused by legacy pension payments that now far exceed its income.

[Mark]

+1

And Motown records relocated ages ago, IIRC.

[Nightjar]

While there have been accusations of corruption and mismanagement, I rather doubt anybody has managed to squirrel away $18bn. The city has suffered very badly in the recession. Despite the population falling by

25% between 2008 and 2012, unemployment has risen from 15% to 18% in the same time.

Filing for bankruptcy means that the city can liquidate assets to pay off its debts and has more freedom to get rid of inefficient operational practices. The unions, who defend many of those practices, say it is simply an attempt to break their power.

Colin Bignell

[The Natural Philosopher]

the problem is they have a social and government policy built to support the largest car manufacturing town in the USA, that no longer makes cars. It is largely a ghost town, except for millions of unemployed ex car workers on welfare.

Successive governments considered GM was 'too big to fail' so instead of winding it down, they pumped cash into it. Now its gone bust, sold off the worst, destroyed its workers pensionvalues and is slowly becoming slightly sane.

gives some more info. .

[Huge]

I expect they've simply been following the example set by national Governments; spending more money than they have collected in taxes and covering the shortfall with borrowing. The economics of the madhouse.

[Tim Streater]

GM was probably the worst example of what happens when a company manages workers' pensions *itself*. Falling sales and an increasing pension liability, and head-in-the-sand unions. The same may well be true for Detroit itself and similar issues in public-sector California.

The *only* way it should be legal for pensions to be managed is via entirely separate entities [1] so that when times are bad, they pay out less, and when times are better, they pay out more. This "defined benefits" stuff is just for the birds.

[The Natural Philosopher]

Rather its the economics of perpetual growth.

I.e. if you have a business - and a country resembles a business - and you expect that in future it will grow, and need a bigger premises and more infrastructure, and have more people working in it, it will make total sense to gear te pension plans and indeed the borrowing requirements of that business towards that expectation.

But if sales flatten out, and costs rise, that means you have heavily committed to a flawed model.

Worse, if you have been running the business mostly to have a cushy life for the management, and to provide for the staff, with no thought about productivity or competitiveness, you will be in even deeper shit.

And that, in a nutshell, is where socialist governments have been taking us. Actual book balanceing and productivity has never been in the frame at all. Only social policy, and taxing anything that produced wealth to pay for it.

Naturally as soon as growth stops, because at some level or another a limit has been reached, the whole growth based economic model is in tatters, and most Western governments are essentially now bankrupt, only being kept alive because no one dares actually face up to it.

The underlying economic reality is however there for all to see. Growth in the world economy has overall slowed down or even stalled completely. Loans made to fund growth that isn't happening are at risk of being worthless in terms of interest rates returns: worse the prinviple is at risk of severe haircuts. Or even total default.,

We have billions sloshing around in the global financial markets, the pensions funds of us all, that cant make any money, because there is very little worth investing in. Gilt edged? don't make me laugh. Government bonds are looking less attractive than equities.

Detroit is merely a symptom of the whole system that is fundamentally having to decouple from the debt/growth model towards a steady state maintenance of some vestige of civilisation, and with the debt model, will go socialism, which has never paid for itself. And probably the EU as well, at least in its current incarnation.

Around about 2002 I forecast there would be no growth for at least 15 years, because, I then reasoned, it would take a whole generation to learn that the world had irrevocably chganged gear, and was no longer in 'perpetual growth' mode. 11 years later, I see no reason to change that view. Indeed I suspect that it will take even longer.

Japan has had nearly two lost decades now, with permanent QE and a declining population. The delusion here is that this is a recession and we are bumping along the bottom. The reality is that this is as good as it gets, and we are actually banging our heads on the ceiling, and all that increased debt will do is make us bang our heads ever harder.

All the powers that be can do, given this mindset, is damage limitation. Detroit creditors will take whatever they can get. They have little choice.

Pension promises will be reneged on, socialist governments will be forced to renege on social promises, and will get voted out, in favour of more honest political forces that promise a lot less, but actually deliver at least some of it.

Renewable energy will whimper and die, as the real cost of delivering nothing of value, becomes apparent. Meanwhile politicains will trump the success of green policies as fossil energy use falls as a increasingly impoverished populations finds it simply can't afford it. Before they are re[placed by pragmatic ones who accept that global wwarming never was a serious threat anyway.

[Mike Tomlinson]

In article , The Natural Philosopher writes

Wonderful pics here:

[Mike Tomlinson]

In article , Mike Tomlinson writes

Sorry, second link should have been:

[harryagain]

Lot of people's dreams and lives destroyed there.

[John Rumm]

[orion.osiris]

Quality!

Seriously though, there are loads more waiting in the wings to suffer the s ame humiliation - among them, New York, no less! And as usual, European ban ks are exposed to these worthless municipal bonds, so it looks like once ag ain, we are all on the hook for this madness. How come it's always *us* tha t ends up forking out for someone else's greed and incompetence? :(

[Matty F]

I had a look at Detroit with Google Maps and Streetview and I suggest you a ll do the same. I looked at half a dozen randomly chosen parts of Detroit. I think it looks quite nice and well laid out. It looks much nicer than say Croydon. Where's a nice place to live in the UK that's a reasonable price? I'll have a look at your suggestions.

[stuart noble]

bankrupt-in-pictures>

detroit#/>

If UK is a guide, anything that's next to water will be re-generated eventually.

[stuart noble]

bankrupt-in-pictures>

detroit#/>

A HELL of a lot nicer than most of suburban Britain by the look of it. Shame about the social problems