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Michigan Town Is Left Pleading For Bankruptcy

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http://www.nytimes.com/2010/12/28/us/28city.html?ref=business

HAMTRAMCK, Mich. — Leaders of this city met for more than seven hours on a Saturday not long ago, searching for something to cut from a budget that has already been cut, over and over.

This time they slashed money for boarding up abandoned houses — aside from circumstances like vagrants or obvious rats, said William J. Cooper, the city manager. They shrank money for trimming trees and cutting grass on hundreds of lots that have been left to the city. And Mr. Cooper is hoping that predictions of a ferocious snow season prove false; once state road money runs out, the city has set nothing aside to plow streets.

“We can make it until March 1 — maybe,” Mr. Cooper said of Hamtramck’s ability to pay its bills. Beyond that? The political leaders of this old working-class city almost surrounded by Detroit are pleading with the state to let them declare bankruptcy, a desperate move the state is not even willing to admit as an option under the current circumstances.

“The state is concerned that if they say yes to one, if that door is opened, they’ll have 30 more cities right behind us,” Mr. Cooper said, as flurries fell outside his City Hall window. “But anything else is just a stop gap. We’re going to continue to pursue bankruptcy until the door is shut, locked, barricaded, bolted.”

Bankruptcy, increasingly common among corporations and individuals, remains rare for municipalities. Local leaders who want to win elections find it unappealing and often have other choices for solving financial woes. Besides, states have a say in whether a municipality may pursue bankruptcy at all, and they have every reason to avoid such an outcome, not least of all for fear of a creating a ripple effect that could cripple the municipal bond market and drive up the cost of borrowing.

Yet with anemic property tax revenues and forecasts of more dire financial times ahead, some experts and elected leaders fear that more localities may have to at least consider bankruptcy.

“There could be many cities in this position next year,” said Summer Hallwood Minnick, director of state affairs for the Michigan Municipal League, who added that in this state, cities had already struggled with billions less than expected in state revenue sharing. “All our communities have done is cut, cut, cut. They’re down to four-day workweeks and the elimination of parks, senior centers, all of that. So if there’s anything else that happens, they will be over the edge.”

This recovery is getting better and better.

Perhaps we should run a HPC sweepstake on the first US city to declare bankruptcy or will the Ben Bernanke drop cash on the walking dead to stop that from happening.

Part of the problems in the Weimar was that tax revenues didn't match expenditure, something has to give and it appears unlikely that US cities are going to find the end of the rainbow. Globalisation has clearly destroyed small time America still at least the big corporations have done OK.

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What a load of ********. This is what comes of thinking money is a tangible thing that is finite. It is not. Keynesian economics is clearly the remedy here.

Instead of not having the work done they should have the work done and give their own municipal IOUs to the workers. Even if there is no gold or national fiat currency to back up their promises eventually they will be able to redeem them from their own internal revenues or they can be swapped between their own citizens. After all this is what money is for; a way of bartering your own efforts in return for goods and services supplied by others.

I'm sure there are sufficient resources in and around their borders that can go a long way to sustain the local population. Maybe this may be the way that nationalism starts but it seems a pretty logical way to proceed.

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vallejo,california went bust some time ago.as soon as they cancel fat public sector pensions and collective bargaining they'll be fineish.Some serious renegotiation of the rest of the detbs is inevitable,but if I was on a state funded pension,I'd be saving like mad.

read about a place the otehr day-think it was on Mish-where 70% of town tax revenues went to pay the pensions of retired firemen/police.

Yes, Mish it is.

Typical of small US towns who have sought out senior types from the big cities - Fire Chiefs, Police Chiefs, etc - who are looking to downsize. Problem is, under many US States' law the small town often then becomes responsible for a sizeable chunk of the pension that the person has already built up in 'the big city'.

Nuts!

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http://www.nytimes.com/2010/12/28/us/28city.html?ref=business

This recovery is getting better and better.

Perhaps we should run a HPC sweepstake on the first US city to declare bankruptcy or will the Ben Bernanke drop cash on the walking dead to stop that from happening.

Part of the problems in the Weimar was that tax revenues didn't match expenditure, something has to give and it appears unlikely that US cities are going to find the end of the rainbow. Globalisation has clearly destroyed small time America still at least the big corporations have done OK.

Here local authorities cannot go broke as they get their dosh from central government when council tax and speed cameras do not bring in enough.* In the US it works mucgh the same way with the Fed ebing the last port of call. Bottom line: governmenst don't go broke--they print or raise the taxes.

______________

LA "bonuses" are based on the amount of expenditure so it makes no difference to chief executive and his family whether money is in the plus or minus column. :D

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Yes, Mish it is.

Typical of small US towns who have sought out senior types from the big cities - Fire Chiefs, Police Chiefs, etc - who are looking to downsize. Problem is, under many US States' law the small town often then becomes responsible for a sizeable chunk of the pension that the person has already built up in 'the big city'.

Nuts!

Genius!

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What a load of ********. This is what comes of thinking money is a tangible thing that is finite. It is not. Keynesian economics is clearly the remedy here.

Instead of not having the work done they should have the work done and give their own municipal IOUs to the workers. Even if there is no gold or national fiat currency to back up their promises eventually they will be able to redeem them from their own internal revenues or they can be swapped between their own citizens. After all this is what money is for; a way of bartering your own efforts in return for goods and services supplied by others.

I'm sure there are sufficient resources in and around their borders that can go a long way to sustain the local population. Maybe this may be the way that nationalism starts but it seems a pretty logical way to proceed.

This gives me an idea... HPCers should issue our own currency. It could be backed up by all the Gold that some people here have been buying :rolleyes:

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This gives me an idea... HPCers should issue our own currency. It could be backed up by all the Gold that some people here have been buying :rolleyes:

I don't know - I just read this:

Bumpy Road Ahead for Gold and Blue Chip Stocks

http://www.marketoracle.co.uk/Article25279.html

Never read any of this guy's stuff before but from reading through it he appears to be a gold bull who, whilst he is stil bullish on gold and silver, is very bearish about the global economy, sees shares mainly as a short option, says to stay in cash if you aren't prepared to short the markets... and sees gold and silver have more downs before longer-term ups.

He could be the World's greatest financial guru or not. Just another guy on the Internet perhaps? Anyhow, interesting read for HPCers as he is very bearish about the global economy in the coming months.

TGR: But if it's perfectly hedged, doesn't one offset the other and you have not then increased wealth?

PS: True, you're just treading water. But in periods of a crisis just treading water is actually a very good return. It's easy to say, "Oh, I'll just go all to gold." But the government can't allow gold prices to continue to escalate without losing credibility for their paper, so what if the government decides to shake up the gold market? What if they do something to influence the price of gold negatively in a very severe way? I'm not saying they would confiscate all the gold, although they could. They could change margin requirements or launch an investigation of the gold ETF. They could do all kinds of things to undermine the gold market that could send gold prices down 20% or 30% in the short term. If that happened and you had all of your savings in gold it would be extremely uncomfortable. In the meantime, if you were long 50% dollars and 50% gold you still would have made more than 10% this year. So you're actually doing just fine. You're just doing so in a way that recognizes we're in a very dangerous and unstable period of time.

Unfortunately, I believe it's going to be tougher to make money 2011. I expect the government to strike back. I don't think they're going to let commodity prices continue to soar. I'm very concerned about the repercussions of that on investors. So if I was very conservative in 2010 I've become downright scared in 2011. I don't yet know how we're going to hide, but I can tell you it's going to be a very large combination of hedges. We're going to have to continue to be very, very conservative in our allocations and make sure that we're prepared for any potential eventuality.

I really do think we'll have a huge correction, particularly in the silver market. I'm a major silver bull, and I believe silver is inherently worth $120 an ounce already and it's going higher. But markets just don't go straight up the way silver has in the last couple of months. So I'm concerned that my subscribers may think that we can buy agriculture and energy with impunity and that we can buy as much silver and leverage it as much as we want without getting destroyed by the market volatility, just because we're in the middle of an inflationary crisis. I think we're going to see some of that volatility next year. I don't have a crystal ball, but it seems as if there needs to be a shakeout in the market because the investors have gotten so bullish on these ideas about sound money and energy and agriculture.

TGR: You expect it to be tougher to make money 2011 because the government will strike back. What tools do they have to strike back at investors?

PS: They have all the tools in the world. They could do all kinds of things. They could pass huge new withholding taxes on any kind of investment in bullion, for example. They could change the rules on the commodity exchanges. They could make rules about prices and windfall profit taxes. There's any number of things they can do to distort the markets and punish speculators, and there's no doubt in my mind that they will do some of them. There's no doubt in my mind that at some point next year Obama is going to come out, point the finger at the camera and say, "An international group of speculators is destroying our bond markets. We're going to stop them."

I'm expecting some big volatility next year. You have to be willing to be careful with the size of the positions that you're putting on and with your expectations about volatility. Things are going to get really volatile.

TGR: Does that mean investors need to be more fluid in and out of the market? Not day trading, but more actively trading in and out?

PS: My recommendation is just to be more conservative. Hold larger cash positions than you otherwise might. When you do go to buy a security or take a position in a commodity, make sure the price seems relatively good. It's very difficult to do that when it comes to commodities because it's impossible to determine a real true intrinsic value. I mean, what's gold really worth? It's an impossible question.

But I would just use common sense. Silver, for example, has gone from let's say $15 an ounce to almost $30 an ounce just in the last six months. Buying a commodity after it's doubled in six months is probably not such a good idea. The same goes for buying a stock such as Tesla Motors, Inc. (NASDAQ:TSLA). This electric sports car company has borrowed a tremendous amount of money and can't possibly make a profit, so it's probably not a good idea for next year—unless you're shorting it.

As interest rates go up, as the U.S. bond market begins to look a little more attractive to investors, the long bond might break through the 6% barrier next year. That would have a huge impact on equity valuation because if you have theoretically a risk-free rate of 6%, oh man, equities are going to be worth a lot less than people think they are.

Edited by The Masked Tulip

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What a load of ********. This is what comes of thinking money is a tangible thing that is finite. It is not. Keynesian economics is clearly the remedy here.

Instead of not having the work done they should have the work done and give their own municipal IOUs to the workers. Even if there is no gold or national fiat currency to back up their promises eventually they will be able to redeem them from their own internal revenues or they can be swapped between their own citizens. After all this is what money is for; a way of bartering your own efforts in return for goods and services supplied by others.

I'm sure there are sufficient resources in and around their borders that can go a long way to sustain the local population. Maybe this may be the way that nationalism starts but it seems a pretty logical way to proceed.

Good point and how you make the IOU's currency is accept them for tax payments. Then citizens can trade them to people who need to pay their property taxes or other municipal taxes. The market would figure out the discount rate.

At some point the federal government is going to have to step in with huge stimulus money.. or else it seems virually every city and state in America will go bankrupt over the coming decade. Obviously we are just seeing the first few who are in the worst situation going first.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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