Detroit Files for Bankruptcy

July 19, 2013

One of my predictions for 2013 was that three major U.S. cities would file for bankruptcy, beginning with Detroit.  Now it’s begun.  As reported in this article, Detroit filed yesterday. 

Detroit was once synonymous with U.S. manufacturing prowess. Its automotive giants switched production to planes, tanks and munitions during World War Two, earning the city the nickname of the “Arsenal of Democracy.”

Now a third of Detroit’s 700,000 residents live in poverty and about a fifth are unemployed.

Truth be told, everyone in Detroit is living in poverty.  If not actually poor themselves, they’re living among the effects – the blight highlighted in the article. 

In its heyday, Detroit had over 2 million residents.  The population has since shrunk by nearly two thirds.  The reason is no secret; in its heyday, the domestic auto manufacturers had nearly 100% of the share of the domestic auto market.  Today they have barely half, without picking up any foreign market share.  The blind application of flawed free trade theory has brought Detroit to its knees and, indeed, has hobbled the economy of the entire country. 

Where has all of this auto manufacturing gone?  To high wage nations like Germany, Japan and South Korea.  The problem isn’t low wages or currency manipulation.  The problem is that these nations come to the trading table with nothing to offer but badly bloated labor forces hungry to manufacture for export.  They are so densely populated that their own per capita consumption of automobiles is emaciated by severe overcrowding.  With a population density seven times that of the U.S., Germany is actually the least densely populated of the three.  South Korea is fifteen times as densely populated as the U.S.  Wherever you live in the U.S., just imagine fifteen times as many people trying to crowd onto the roadways and you begin to understand how a rising population density erodes per capita consumption. 

So we blindly give away free access to our market, never thinking about whether we’re getting access to an equivalent market in return.  Free trade with badly overpopulated nations is nothing more than a poverty-sharing program, with the U.S. taking on the poverty that those nations would otherwise have to endure.  Nowhere is it felt more in the U.S. than in Detroit. 

That’s Detroit.  Amongst all the media hubbub about Detroit, little notice was paid to the fact that Moody’s also slashed the city of Chicago’s credit rating yesterday and gave the city a negative outlook.  Chicago’s problems are much the same as Detroit’s – pension obligations – obligations that, when they were made, seemed reasonable but now can’t be met from a tax base that has had so much manufacturing removed from it. 

Our trade deficit in manufactured goods continues to drain away a half trillion dollars from our economy each year – now a cumulative $12 trillion since our last trade surplus in 1975.  It’s no wonder that pension obligations can’t be met.  If the federal government isn’t willing to acknowledge that backstopping and bailing out such key aspects of our economy is part of the price of pursuing failed trade policy, then more bankruptcies are sure to follow.


Government Accuses Auto Industry of “Mismanagement?!?!”

November 19, 2008

As I watched the leaders of the domestic auto industry take their beating from the Senate Banking Committee on Tuesday, I couldn’t help being struck by the absurdity of these senators accusing the Big Three of mismanagement. These senators who chided the Detroit execs for making bad decisions are the same people who voted for the Iraq war. These very same senators who accuse the CEOs of mismanaging shareholder funds are the very ones whose policies have ruined America’s economy. These same senators who charge the Big Three with caving in too easily to the demands of the UAW are the same ones who rolled over like submissive puppies when the financial industry came looking for $700 billion and AIG needed $150 billion. They who complain that Detroit doesn’t build cars that people want are the same people who showed callous disregard for the people of New Orleans as they wallowed in muck for months on end following Katrina. These same senators who deride executive compensation packages are themselves lavished with lobbyist gifts and favors while they shrug off single-digit approval ratings. Never has such a level of hypocrisy been on such public display. I wonder how fast these same Senators would be on their knees before China, begging for money were it not for their ability to crank out new money on their own printing press to cover up their screw-ups.

Certainly, the Big Three are not without their faults. But considering that the American car market is sliced and diced into ever-tinier pieces and passed out to every foreign car-maker who comes along, for nothing in return, it’s really quite remarkable that they haven’t lost even more market share and that they’ve survived for as long as they have. If Congress insists on continuing to pursue such destructive, idiotic trade policy, then the least they can do is give the domestic car makers a helping hand.

Frankly, when you look at the performance of the Detroit automakers vs. the performance of Congress, we all may be much better off if we placed the operation of the federal government under the management of the Big Three.


Yesterday’s Immigration Rallies Fizzle

May 2, 2008

http://www.reuters.com/article/newsOne/idUSN0146621520080502?sp=true

Here’s an article about the immigration rallies across the U.S. yesterday.  There was a little bit of local news coverage of the rally held in Detroit.  It appeared that there were about 300 people involved.  I saw one American flag and three or four Mexican flags displayed prominently. 

I’d like to comment on some excerpts from the Reuters article:

“Thousands of immigrants marched through cities across the United States on Thursday, but smaller crowds suggested their cause had lost momentum in this election year.”

Perhaps the crowds were smaller because the pool of available participants has shrunk.  Although the issue has thankfully been pushed to the back burner of Congress, it’s still very much alive on the state and local levels, with many, many laws being passed to make it ever more difficult for illegal aliens to function in our society.  Here in Michigan, the law was recently changed to prevent them from obtaining drivers’ licenses, as an example.  Other locales have passed laws to crack down on employers who hire them and on landlords who rent to them. 

“‘This is a very young country built off immigrants. The immigrants of yesterday are citizens today, so immigrants of today should become citizens tomorrow,’ said Jose Rodriguez, who came to the United States from Mexico illegally in 1989 and has since gained permanent residency.”

First of all, this guy is a criminal and should be deported.  Secondly, his logic makes no sense whatsoever.  Just because a nation is built of (not “off”) immigrants, it’s not a rationale for continuing to import more people forever.  It’s like saying that a building made of concrete, once it is finished, should continue to have concrete poured in through the windows just because the building has a history of using concrete.  The guy has no concept of overpopulation (except perhaps the overpopulation in Mexico that he ran from in ‘89).

“‘The police are deporting immigrants because they have broken the law but I think there is a higher law and that is to treat someone in a humane way,’ said Rodriguez, 42.”

Agreed.  All illegal immigrants should be treated humanely during the deportation process.  Did Mr. Rodriguez really come here to champion this “higher law” or did he come here, ignoring our laws, for purely economic reasons?  Then isn’t it really poverty that he considers more inhumane?  If so, then why didn’t he stay at home and champion this “higher law” of humane treatment of the poor in his own country where the need is greater? 

“In Phoenix, no one turned out to march, in contrast to past years when central thoroughfares were packed with protesters.

In Tucson, Arizona, a few hundred pro-immigration supporters walked through the streets carrying placards with messages such as ‘Citizenship Yes! Deportation No!’ That fell short of organizers’ hopes that several thousand would attend.”

I suspect that, not only is the pool of available marchers smaller, but the remainder are laying low out of fear of being identified and deported. 

Activists said the low turnout stemmed from the failure to push a bill through Congress last year that would have given illegal immigrants a chance to legalize their status. An estimated 12 million illegal immigrants, mainly from Mexico, live in the United States.

In one major raid last month, U.S. immigration agents arrested about 400 employees at five Pilgrim’s Pride Corp chicken plants from West Virginia to Texas in connection with immigration-related crimes, including identity theft.

So there’s 11,999,600 to go.  Sounds like the immigration authorities better get busy!

Rampant population growth threatens our economy and quality of life. Immigration, both legal and illegal, are fueling this growth.  I’m not talking just about the obvious problems that we see in the news – growing dependence on foreign oil, carbon emissions, soaring commodity prices, environmental degradation, etc. I’m talking about the effect upon rising unemployment and poverty in America.

Our policies of encouraging high rates of immigration are rooted in the belief of economists that population growth is a good thing, fueling economic growth. Through most of human history, the interests of the common good and business (corporations) were both well-served by continuing population growth. For the common good, we needed more workers to man our factories, producing the goods needed for a high standard of living. This population growth translated into sales volume growth for corporations. Both were happy.

But, once an optimum population density is breached, their interests diverge. It is in the best interest of the common good to stabilize the population, avoiding an erosion of our quality of life through high unemployment and poverty. However, it is still in the interest of corporations to fuel population growth because, even though per capita consumption goes into decline, total consumption still increases. We now find ourselves in the position of having corporations and economists influencing public policy in a direction that is not in the best interest of the common good.

The U.N. ranks the U.S. with eight other countries – India, Pakistan, Nigeria, Democratic Republic of Congo, Bangladesh, Uganda, Ethiopia and China – as accounting for fully half of the world’s population growth by 2050. The U.S. is the only developed country still experiencing third world-like population growth, most of which is due to immigration. It’s absolutely imperative that our population be stabilized, and that’s impossible without dramatically reining in immigration, both legal and illegal.  If we don’t, soon rampant population growth won’t be the only thing we have in common with the third world.

Pete