How to Save Detroit - etc.

Posted by OffThePeak 9 yrs ago

- and other troubled American cities


Image :


"What is the solution for Detroit, in your opinion?"


The is obvious, isn't it? Only blindness and bureacracy is holding it back:

Writedown the debt by 90-98%, and then, What?

+ Build a new light rail system along Woodward Avenue, using private funds

+ Change the zoning laws and building codes to encourage mixed use and densification near the light rail stations

+ Make it cheap and easy to design and re-purpose buildings

+ Build Smaller homes (and offices), closer together, with better design (cf Sarah Susanka )

+ Less parking, and few cars, but more "community spaces", where people can meet

+ Police near the stations and where it is dense and easier to provide policing efficiently

+ Encourage start-up companies, and keep the red-tape at a minimum

+ Keep taxes for business at levels which are competitive with the areas around


Removing the shackles of red tape, building codes, and excessive taxes is very important

MORE charts and images:

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OffThePeak 9 yrs ago
Duany : "LEAN" - It's Time to kill off the Building Codes !

The Founder of CNU wants to kill off expensive and restrictive Building Codes,

which make it impossible to design and build small projects

(about 42 mins in):

"We want to deliver a world where the young can operate"


He proposes the establishment of "Pink" Codes - with lighter restrictions

This is a wonderful REVOLUTIONARY statement - Much needed.

Duany doesn't want to "nudge" Architectural schools (since they are dying*); he wants to Bypass them

*Dying, because they are too expensive, and loaded with Code-heavy thinking

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OffThePeak 9 yrs ago
Remembering when...

Detroit once saw itself as a Great City, enjoying a Renaissance


Listening to NPR: Planet Money Podcast (#475: What Happened To Detroit's Big Plans?)

MP3 :

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Lucane01 9 yrs ago
How to fix Detroit? Simple.

- remove all business regulation

- remove all occupational licensing

- dramatically reduce all government operations (only courthouses and police are vital)

- remove public education system (privatize it all)

- decriminalize drugs so as to drop the price and remove the lure of the underground economy

- ban government unionization, ban public pensions / healthcare plans

- remove most all zoning laws

- default on all current pension plans

Even with all of that Detroit would still struggle because of the crushing weight of the Federal Government and their regulations. So the final step is of course:

- secede from the United States

Will they do any of that? Nope. 99.999999% chance that Detroit will forever be a wasteland, and 99.9% chance that other major US cities are soon to become like Detroit.

Central planning, it always gives the same results.

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Lucane01 9 yrs ago
Privatize everything which lead to its downfall? What are you talking about? The US has been in a continuous process of socializing its economy since FDR. Please inform me on which areas of the US were historically in the public domain, then switched to the private domain, and how this lead to the US's downfall.

Previously you mentioned that Detroit failed because of capitalism and that it needs socialism. Unadulterated ignorance at its worst. Please explain to me how the government of Detroit's bankruptcy was caused by free markets and not by the government itself? Please give me your explanation for why Detroit collapsed since 1960 - explain how it was free markets that did Detroit in. I suppose you think that stifling public union salaries and pensions along with maximum income tax rates as well as continuous subsidies for failed industries (auto) did not cause Detroit's downfall.

Perhaps you are unaware that the vast majority of Detroit's bankruptcy is due to pensions owed to government employees and that the government pensioners only number 30,000 in a city of 700,000. That's right, a small select minority of anointed government bureaucrats are the ones that have bankrupted a city of 700,000.

70%+ of Detroit's debts are to government employee pensioners.

Its easy to talk the talk but so few walk the walk - I moved my family and my business across the world to escape fascist and socialist policies because I wanted to live in a free society (which Hong Kong provides). If you love socialism so much then please leave Hong Kong and go reside in any socialist country in the world - 99% of the world is socialist or fascist so you have your pick, there are so many choices. Why reside in the freest market in the world if capitalism and free markets are, as you insinuate, so bad?

Instead of jabber on about things you know less than zero about, why do you not just move to Detroit Brendon? Please go there and try to start up an icecream shop and report back to us in one year on your progress. I'd wager that you cannot even become operational within a year due to the business licensing requirements, zoning laws, property inspections, employment wage requirements, food regulatory schemes, and innumerable other cock-blocks that you would find in your way.

Its not Detroit but here is what you have to look forward to:

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punter 9 yrs ago
Brendon, do you actually understand what "unfunded pension liabilities" are?

If you don't, they basically say that the funds you paid for your retirement (Pension Fund) are used now that there's a big possibility that you will not receive your pension when you're old and gray like many in Detroit...

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traineeinvestor 9 yrs ago
From the definition of facisim:

"fascist movements share certain common features, including the veneration of the state, a devotion to a strong leader, and an emphasis on ultranationalism and militarism. Fascism views political violence, war, and imperialism as a means to achieve national rejuvenation and asserts that stronger nations have the right to obtain land and resources by displacing weaker nations."

The nearest we get to this in HK is the Kuk bullying the HKSAR govt to hand over land for village housing.

Lucane01's comments on Detroit are spot on. The only material point to add would be the impact of the rise of Japan's automakers on the US car industry - which certainly contributed to Detroit's decline (of course, at least part of that pain was the direct result of uncompetitive employment costs).

Once a city (or a country) gets to that sort of financial condition, absent a handout from someone else, you get down to ugly questions like cutting pensions on people who need the income and will struggle to replace it, raising taxes on struggling businesses and families which will further shrink the tax base and accelerate a deflationary spiral and defaulting on debt obligations (most of which are ultimately due to pension funds and retail investors who will end up wearing the losses). Whatever you do, people are going to get hurt which is why I believe it is important to make sure a country/city does not get into that position in the first place.

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traineeinvestor 9 yrs ago
@ Brendon - apologies for missing the sarcasm. The definition I posted is a pretty standard one for "facisim" and I was not suggesting that the US is a fascist state. That said, a lot of the terms like fascisism, socialisim etc that people throw around are often hard to apply in the real world because most countries have a blend of characteristics.

We'll have to agree to disagree on everything else.

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Ed 9 yrs ago
I prefer the term 'soft totalitarianism' to refer to the US these days...

That comes courtesy of the great John Pilger

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traineeinvestor 9 yrs ago
@ Ed - that's a very good way of putting it and a good article. Thanks for the link (although I am shocked that you are endorcing something appearing in a MSM publication) :-)

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OffThePeak 9 yrs ago
Just One Question, B.

You say:

"Hong Kong the freest society? For your information:

Public transport is subsidised,"

How - Please explain how Public Transport in HK is subsidised.

(I think I know what you may say, but I want your answer.)

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Ed 9 yrs ago
Any media that publishes Pilger and/or Chomsky is arguably not really MSM...

Interestingly when I wanted to run the Snowden interview the only place I could find it was on The Guardian - no embed option though - so I had to go to youtube... amusingly that interview had only 16,000 views... Gangam Style had 1.7B...

That is a pretty good indication of just how lost we are... can't have anybody listen to what Snowden has to say... and in any event... it would seem few care...

As for MSM in general... I don't completely dismiss it... as Chomsky says in Manufacturing Consent... the MSM will mix in some accurate articles with their massive propaganda... because if they don't they lose all credibility... they need to be able to say 'see - we ran that expose - we are balanced'...

This is one of my new favourites

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OffThePeak 9 yrs ago
It is not too late to treat these Banksters as they deserve -- they need a Haircut

Detroit: Pensions or Derivatives? Glass-Steagall Would Have Made the Choice

The 250-year-old "arsenal" city of Detroit was brought into extreme impoverishment by the collapse of the auto/machine-tool industry in size and wage levels, and the national refusal to reverse that collapse, under the Bush and Obama presidencies. Lyndon LaRouche first put forward the policy to revive that industrial base in November 2004; Bush and Felix Rohatyn blocked it; Obama fixed the wage collapse in stone in the 2009 auto bankruptcy/bailout.

But now the most immediate choice in Detroit involves the impact of the repeal of the Glass-Steagall Act in 1998.

That choice is as follows: The city emergency manager, bankruptcy lawyer Kevyn Orr, has made an agreement to pay three banks — UBS, Bank of America, and SBS — approximately $$225 million by Nov. 1. This amount equals 15% of Detroit's total annual all-source revenues estimated at $1.49 billion this year, and Orr agreed to do it while defaulting on pension bonds.

This $225 million is not a debt; rather it represents 75% of the "current negative value" (to Detroit) of swaps agreements with those banks on $1.4 billion in 2005 city borrowing. That is, it is a payoff on a LIBOR-rigged derivatives bet that Detroit was conned into making in 2005 by those banks, after borrowing from them. And if the payment is delayed beyond Nov. 1 to a second payment deadline of Mar. 1, 2014, under Orr's agreement it will be 85% of the "current negative value" of the bet, or likely $250 million.

Orr agreed to this derivatives payoff two days before declaring bankruptcy against pensions, retiree health funds, and other general creditors, giving it first priority outside the bankruptcy court.

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OffThePeak 9 yrs ago
Norquist blames government for Sprawl:

+ Highways split neighborhoods

+ Prohibiting Mixed use, forces people to travel long distances, rather that walk




Fortunately, "Main Streets" are now returning, as New Urbanist architects have revived this idea. And many Americans really want them, since they want to live in Walkable Neighborhoods.


Thank Goodness: America's long love affair with the car may be over. (Previously, if you were a walker, you had to walk in the gutter of many US highways.)


Henry Ford was an industrial pioneer. But he was also a Demon !

(I say that, even though I was born in Henry Ford Hospital in downtown Detroit.)

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OffThePeak 9 yrs ago
"Land Grant" is a very sensible way to encourage building rail, without an ongoing public subsidy.

That's how the US Transcontinental railways were built.

The idea is brilliantly simple:

Building a rail line will INCREASE the value of the land around it, and especially near the stations. So "give" some land, to allow the railway developer to benefit from the uplift in value, and that can cover most of the capital cost of building the line. The MTR has worked that way, and bravo to the HK government for using that method of subsidy.

Rail works in HK because of the great density here*. And the MTR is the most profitable public transport operator in the world (last time I checked.)

*As you may know, "Mongkok" in Cantonese means: "crowded corner" - and is it!

Mongkok is the most dense human habitation on the planet. (Macau is more dense than HK as a whole, but much of HK is hills and mountains, while Macau is flat.)

Density is the second secret of non-subsidised public transport, and that is what Detroit will need to embrace, if it is to have a successful light rail system.

Much it must be intelligent density, like you see in HK, NYC, London, Tokyo etc - served by good transport - not something like Bombay

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Loyd Grossman is Miss Venezuela 9 yrs ago
Why save Detroit?

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punter 9 yrs ago
If something like that happens to HK, are you going to ask too "why save HK"?

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OffThePeak 9 yrs ago

The suburbs outside Detroit are thriving - but in need of change.

That's where the jobs are. And Nearby Oakland County (where my parents still live), has a Triple-A credit rating, I believe.

But it is oh-so-boring to live there, and there's nothing to do, unless you like golf and some tennis. When it comes to a genuine intelligent conversation, there's no where to go, so people turn to the web, it they have any thirst for that kind of thing.

The main problem now, is the future of the suburbs is being undermined by rising oil prices, but the people are to stuck in their motoring habits to understand the problem. The young who go away to college elsewhere, and "get it" that life can be better move away and never return. (As I did, back in my day.)

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Lucane01 9 yrs ago

I am talking of economic fascism, which is an economic system in which businesses and goods are privately owned but controlled by the government via strict regulation and other means like cronyism. This is precisely the type of economic system that the US has practiced for many generations.

Terms like capitalism, socialism and fascism are somewhat poorly defined and often fully misunderstood and inappropriately associated (many think capitalism = doing business, socialism = helping others and fascism = nazis... all of those are obviously incorrect associations but that is what most people actually think). I prefer to instead think of economic systems just on a scale ranging from free to not free. On this scale Hong Kong is by far the most free and most every other country on the planet is far away towards the "not free" range. The US economy is deep in the "not free" range.


No country falls perfectly into a category of "capitalist" "socialist" "fascist" or "communist."

Hong Kong indeed has aspects of fascism in its property development and utilities, socialism in parts of its medical care and housing and very many aspects of capitalism throughout the rest of the economy. Hong Kong is so much more free than any other economy on this planet that it is laughable to think that it is not - it is pure ignorance and dearth of international business experience to think that HK is not leaps and bounds above other economies in terms of freedom.

"Yes, the US started to privatise everything in the 1980s, including prisons. How privatisation leads to downfall: It's very simple. Public corporations make a profit, the profit goes to the government which can then invest in various things (including social security). Privatisation: no more income to the government, but still need for expenditures (e.g. social security), but people don't want to pay more taxes, so the government has to borrow to pay for these things. Conclusion: privatisation is the problem."


"P.S.: In case you don't get it, it says "Unfunded pension liabilities" because things like "policing, street lighting, etc." have been funded! And this is why they have debts. Because they funded all these things already. So you need to look at expenditure over the year, not "unfunded" stuff. This is just number twisting!!"


Why is it that people who have no deep understanding of physics do not debate the validity of string theory, but people who have no deep understanding of economics / finance / governance feel that they are masters of the subjects? A layman does not approach Stephen Hawking and say "that theory on gravity... its totally wrong... balloons float up" but laymen all think they are masters of economics.

Why don't you noodle over this Brendon, compare the following private vs public economic systems:

South Korea / North Korea

Hong Kong & Taiwan / Maoist China

Western Europe / Eastern Europe

West Germany / East Germany

North America / South America

Modern China / Maoist China

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Lucane01 9 yrs ago

You grew up in Detroit? Interesting.

I know you have logical reasons for disliking cars but I do wonder if coming from Detroit has also influenced your thinking about that subject, hah.

There are obvious benefits from living in dense urban areas but that does not mean that things will be better if we all move out of suburbs into walkable cities; there are also benefits to living in rural areas.

I do not see why any private corporation would want to build a train or rail network in Detroit - I sincerely doubt it could provide any decent return on investment, if even be profitable at all. Buses can be far more profitable and service the needs of people better then rail can.

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OffThePeak 9 yrs ago

I saw how cars destroyed Detroit, and how the suburbs were a wasteland (compared with Boston, New York, Chicago, London, and HK were I lived subsequently - and each of which has a good public transport system.)

Believe it or not, a PRIVATELY managed, and partly privately financed Light Rail seems to be moving ahead, but with some help from the Federal govt. I hope they will get the needed Zoning changes right. Perhaps I am not the only one who has seen the light.


Feds Approve $140M Woodward Light Rail Project « CBS Detroit

Apr 22, 2013 - The U.S. Department of Transportation has given final clearance to developers of a privately managed Detroit streetcar line.


Light rail | Crain's Detroit Business

M1 Rail work expected to begin this year despite delays. 06/19/13 Organizers of the $137 million Woodward Avenue streetcar project say a nearly monthlong ...

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Ed 9 yrs ago
Good question Loyd... and I agree - why save Detroit?

What should the US do - bail out another failure? Should the US tax payers stump up like they did for the big banks and bail out failing cities?

Actually that's a rhetorical question - they are already bailing out literally hundreds of cities in the US as per this IMF leak...

The government share of the United States economy has been growing for many decades now, fundamentally transforming the country as a result. And by 2007, the United States economy had reached the extraordinary point (outside of a major war) where the government was consuming a full 35% of the economy. That is, government spending amounted to 35% of the economy, and 65% was the private sector.

Then something remarkable happened. At the height of the Financial Crisis of 2008, the private economy imploded by $1.3 trillion per year when it came to the real private production of goods and services. This was a catastrophic decline that if left untouched, would have pushed the United States straight into an overt Depression.

But this implosion, while confirmed in the government's own statistics and very real, is not what the government's surface level reporting of GDP shows at all. Instead, what the official statistics indicate on that top level is that there was "only" a $300 billion contraction in the economy, with the recession officially having ended in June 2009.

Wait, what? How could it be that if the private sector within the economy plummeted by $1.3 trillion, that the total economy only fell by $300 billion?

Well, when it comes to desperate governments in a time of economic collapse, there turns out to be a bit of a loophole. And that is that when GDP is reported by the media, what is reported is almost always total GDP - which is the sum of economic activity by the private sector and the public sector. So in looking only at total GDP then, any catastrophic declines in private economic activity can be effectively masked by equally extraordinary increases in public spending - at least temporarily.

That obscure little loophole is the hidden-but-real story behind 2009, and every year since. In practice, the difference between the actual government-reported $1.3 trillion collapse in the private sector, and the officially reported $300 billion decline in the total economy, came from federal, state and local governments increasing their spending by a staggering $1 trillion between 2008 and 2009.

This resulted in a massive and unprecedented shift in spending as the government soared in size, even as simultaneously the private sector was collapsing in size. So the economy nearly instantly shifted from being 35% government and 65% private, to being 43% government and 57% private – a level which remains in approximate terms true today.

So when we look at these fantastic levels of deficits that have been consistently coming in at well over $1 trillion per year, what we have in fact been seeing is the increase in the size of the government from 35% to 43% of the overall economy, in order to maintain the facade of an intact economy.

In other words, since the fall of 2008, a substantial chunk of the US economy has been "artificial". The private-sector imploded. It has not recovered to this day. And the great majority of damage containment has been dependent on the United States government running unsustainable deficits, of which it lacks the ability to pay back under ordinary circumstances.

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Lucane01 9 yrs ago

You grew up in a city whose economy was facing steep competition from the South and from overseas. On top of that it's government was throwing up regulations, protections and huge spending - Detroit's economy was naturally shrinking due to competition but it was prevented from reorganizing itself due to a controlling government.

Compare that to Boston, Chicago, NYC and London which are all cities of finance - and unless you are geriatric then you lived in these cities during times of their biggest economic booms (courtesy of the runaway finance train thanks to fiat currency post-71). Yes all of those cities also have overly controlling governments but their economies were booming so much that they were able to support the weight of government. But wait a few years until after the finance bubble blows once and for all and then revisit these cities a decade after - NYC was a slum in the mid-1900s and it will once again be a slum. Chicago is already a slum in most parts of the city. Boston might be protected because of its large academic economy, but college has been in a bubble since the 60s too so it won't surprise me if Boston is wiped away too when that bubble eventually ends. I do not know much about London so I will not comment on London.

My point is the physical difference between these cities may appear to be urban sprawl vs dense living, and because of the times you lived there you might see a connection between economic growth and city planning, but I'd argue that is purely coincidental. Besides, the American south and Midwest are kings of urban sprawl and have boomed at the same time that Detroit collapsed.

Anyhow, I know you have other reasons for your thoughts so I'm not pretending that the above refutes you, I'm just commenting on that anecdotal evidence.

A hypothetical question : if oil was infinite and costless, would you still think that urban sprawl was a net-harm to the economy?

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Lucane01 9 yrs ago

Since 2008 I've been of the opinion that the US has been in a real depression. I still believe that the depression continues to this day (and will continue for perhaps another decade).

Debt based spending is included in the GDP and never should be in the first place. There are also innumerable other games the government plays to show GDP growth when there really is none.

And all of this ignores the question - why do we even use GDP as a measure of our economy anyways?

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Ed 9 yrs ago
We've dis-invited Mr Brendon from the discussions... one too many insults...

Lucane - agree completely ... and I have disagreed with Bernanke's (and Paulson's) actions since day of this crisis.

Bernanke the genius Princeton PHD believed the Great Depression happened because the money spigots were not opened wide... so what has he done? Opened them up full throttle and cut rates to zirp....

Surely after 5 years of no recovery Ben must be having a few doubts about his PHD thesis? Oh right - that's why he'd retiring at the end of the year... perhaps he can go back to Princeton and hunker down with Paul Krugman to write about how they were so woefully wrong...

Of course if Alan Greenspan (who looks like the dead guy in Weekend at Bernies) is still kicking he should get an invite as well... 'Three Blind Mice'

So what do we have now - an economy that is completely addicted to money printing and zirp - big banks who KNOW that they will get bailed out so they are taking on mega risks ...

All Bernanke has done is set the table for the next blow out... and this one is going to be the mother of all blowouts... it will make the dotcom bust look like a pop gun... the subprime fiasco a big fat water balloon ...

What needed to happen in 08 was the pain needed to be taken - the banks should have been nationalized with taxpayer cash - bond holders and stock holders WIPED OUT.... then when a proper recovery was in place you refloat these entities...

But of course the bond and stock holders would have none of that... they prefer that savers and pensioners bail them out... and Mr Obama agrees with them (or maybe he's afraid of them?)

Now on the surface my proposed solution may make sense - but it would have come with some big pain ....

But if you did deeper... there may be no solution... because if we are past peak oil - there really is no solution... see What Happens when the Cheap Oil Runs Out:

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OffThePeak 9 yrs ago
Two Questions were asked:


1: why save Detroit?

Well, it wasn't saved - it was NOT bailed out by taxpayers - Thank goodness.

If you read my list in the OP, it outlines how those who live there can renew the city, and make it into a place with a future. And I think at least some of the points (like the Light Rail on Woodward Ave) will actually get done. If they follow all the suggestions, I think they can really make it. If people in Detroit can "pull themselves up by their bootstraps", it would be a real inspiration for the Midwest, and the US as a whole. I don't like to see people suffer, and working one's way out of a hole is healthy, while bailouts and dependency are nought but a trap.

2: If oil was infinite and costless, would you still think that urban sprawl was a net-harm to the economy?

Do you mean suburban sprawl?

The suburbs are an unhealthy environment for living and raising children, despite all the green lawns. Why? It produces braindead sheeple, who are easily controlled by a corrupt elite - and maybe the explains the current situation in America. Get people back in walkable neighborhoods, talking to their neighbors, and "conspiring" to get rid of corrupt elites, and you will have a fighting chance of restoring Democracy and a middle class in America.

Also, we do not have unlimited oil or unlimited water, and wasting both of those on a spiritually bankrupt suburban existence should be right off the menu IMHO. I know others may have a different point of view - and that's okay, but I feel strongly about a need for a different and better way of life, and will argue strenuously for my point of view. If you disagree, why not do the same? But keep it logical and avoid ad hominums, and I will welcome the discussion. I might even learn something.

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Lucane01 9 yrs ago

I was not attempting to use ad hominem attacks, if it came across as so that was not my intent.

I fully agree that no bailouts should be given, ever.

Of your suggestions, removing red tape and relaxing zoning laws are the ones that will have the greatest impact on Detroit's economy. Let's remember that Detroit's bankruptcy was over 70% due to pension liabilities to former public employees - I don't see how city planning (or lack thereof) caused Detroit to over-promise (defraud) to its employees.

The primary key to fixing Detroit is to remove what caused the bankruptcy in the first place - an overly expensive government. Remove the parasitical bureaucracy and you not only cut costs (which are the immediate cause of the bankruptcy) but also the ability of the regulators to enforce useless and cost prohibitive regulations. No longer will a new shop owners be tied up in tens of thousands of dollars of legal fees related to licensing and zoning applications. No longer could building inspectors fine you thousands for having electrical sockets spaced too far apart. No longer would entrepreneurs and consumers need to pay monopoly prices for low-skill licensed industries like hair styling, real estate selling or home repair work.

Think of all the productive businesses young people could startup if they weren't forever bogged down in red tape, regulatory compliance and tax accounting protocol.

Now of course even if all of that was done Detroit citizens would still be faced with all the even more heinous and aggressive regulations like those stemming from the EPA, ADA or FDA. The ADA alone has approximately 2,400 regulations regarding the renovation of an average retail space, over 100 of which are purely measurements related to bathroom fixtures. How much more could a person produce if they did not have to read through and comply with thousands of arbitrary ADA rules, or worse hire expensive lawyers to do so for you and contract with specialty crony contractors to build-out your space in a way to minimize ADA lawsuits. Alas arbitrary and predatory regulations from these laws and agencies will likely never disappear, so I'm about 99% confident Detroit can never turn itself around (and similarly confident that other American cities will eventually turn into Detroit).

Peter Schiff calculates that your average US corporation pays 60-75% of its gross profits to the US Federal Government (corporate tax rate, salaries tax, Medicare tax, social security tax, and sales tax) - and this does not even include extraneous costs associated with compliance and IRS tax accounting. How can any new business thrive when so much is being confiscated from them? Only the established large corporations can survive this environment because they have the economies of scale to afford leagues of compliance officers - and besides, they often themselves are the ones who write the regulations that regulate their industry (Congress brings in industry leaders and their lawyers to write the regulations).

So with all of this weighing down on new entrepreneurs in Detroit (and anywhere else in the US), I don't see how Detroit can be expected to turn itself around. Perhaps at best it can not look like a hell hole, but I don't see the economic possibility for its return as an economic powerhouse.

Detroit has a per capita debt of just under 300k. Since probably only 1/3 of Detroit citizens actually work, that means the debt per worker is about 900k USD. Dividing by a very conservative 30 year debt schedule (realistically it should be much less than that, but I'll be ultra conservative on my estimate) that leaves your average Detroit worker with $30k of debt due each year. Compared with the annual costs of transporting a car from suburbia to downtown, the government inflicted debts are many orders of magnitude greater. [that of course does not even take into account the lower land values of a suburban home and thus cost savings from living out there (there are reasons why Manhattan is 1k per sqft but Brooklyn is only 200).]


I've lived in both suburban and dense city neighborhoods. I knew every neighbor by name in the different suburban neighborhoods whereas I typically only know one apartment neighbor. Even today when I rarely revisit my old towns I still bump into people I know who still remember me by name. Doubt I can fly back to Manhattan or Shanghai and do the same.

I don't know what Detroit neighborhoods were like. If they were anything like they are today then I can understand why they would be such unfriendly places.

You know that Americans have the term "inner city" and that it is not a positive term - the "inner city" is always the most dangerous and worst parts of any American town. Living in urban dense areas is not always a great thing. I'm not saying nor implying that suburbia or city life is superior or inferior to the other, just that in different places in different times each has their own benefits that should not be ignored. For decades Manhattan in the 60s-70s Manhattan was a dangerous no-mans land that no one wanted to live in, but now it is a thriving metropolis of business and culture once again. However it'd be a mistake to look at it as a snapshot and conclude that it will always be this way - cities go in cycles just like anything else in business & life.

I'd also like to note that a metropolis requires vast amounts of energy in order to supply it with such quantities of food, vegetables and water all from distant locations. If energy were to become expensive I would not expect people to flock to cities to live - food might become prohibitively expensive. I would expect people to separate themselves out and relocate to areas closer to sources of water and food. It would probably involve changes to both suburbia and cities.

Keep in mind that in the days before oil people generally did not live in large cities, they lived out in rural areas. It was the industrial revolution and massive productivity of factories that drew people out of the farms and into the cities. Today's factories, excluding Foxxcon, don't require such dense living in order to function productively.

There are benefits and costs to both suburban life and city life, I don't see how either is superior to another.

I'd also like to state that I don't think that long term energy will ever be expensive. If oil supply steeply declined tomorrow then you might get a decade or two of high prices, but the incentives created to develop an enery storage device as efficient as fossil fuels would be immense and I'd hazard to guess that something would be invented to solve that problem. There could be a long hiccup but the very long term, centuries and beyond, humanity should have cheap and cheaper energy. Fission and fusion provide immense amounts of energy from simple matter courtesy of e=mc2. And since any element can be fused or fissioned, even if uranium and plutonium run out we could begin work on sustainable reactions with more common elements like hydrogen. That we don't do it today does not mean it is not physically possible (which it obviously is).

In general, the destruction brought about by big government policies is orders of magnitude greater than those brought about by energy prices.

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OffThePeak 9 yrs ago
Sorry, L.

That was a general comment, and not directed at you.

I am enjoying the discussion here, and will respond to your long comment, when I have had a chance to absorb it.

For the news today, there was a comment that some troubled American cities are now looking to China for cash, to close their budget gaps. Good luck to them, since they seem not to realise that China is having its own debt crisis.

This is really time for American cities to fall back on their own resources, and save themselves through genuine restructuring, and creative ideas to help new businesses start-up. Some brave mayor is going to figure that out, and find a way to cut red tape.

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Ed 9 yrs ago
Billionaire Gets New Sports Arena in Bankrupt Detroit

The headline juxtaposition boggles the mind. You have, on one day, “Detroit Files Largest Municipal Bankruptcy in History.” Then on the next, you have “Detroit Plans to Pay For New Red Wings Hockey Arena Despite Bankruptcy.”

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Ed 9 yrs ago
Here's one interesting suggestion that could help Detroit :

This is the path that US economic policy is on. What is the solution?

Capitalism could be allowed to work and the banks to fail. It is cheaper to bail out depositors than to bail out the banks.

Corporations could be taxed on the basis of the geographical location at which value is added to their product. If corporations create the goods abroad that they market to Americans, they would have a high tax rate. If they create value domestically with US labor, they would have a low tax rate. The tax difference could be used to offset the labor cost advantage of offshored production.

It would take time, but jobs would come back to the US. Cities, states, and the federal government would slowly see their tax bases rebuilt. Consumer incomes would again rise with productivity, and the economy could be put back together.


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Lucane01 9 yrs ago
Just because PCR calls it capitalism does not make it capitalism. His two suggestions are both heavy statist policies. Bailing out depositors is big government intrusion into the market as is taxation in general (particularly taxation that purposefully intends to change market actions by forcing labor back onshore).

Depositors should not be bailed out just like the banks and corporations should not be bailed out. To bail out the depositors is to continue the moral hazard that was created ages ago when the FDIC came into existence. Prior to the FDIC and its bogus claim of deposit insurance, people actually cared about where they deposited their money. They did a least moderate research on the stability of the bank, if not only by word-of-mouth or talking with the local bank manager about his business operations.

But with the creation of the FDIC no one anymore had to care where they put their money. In fact loaning to the riskiest bank was the best option because they gave the highest deposit rates - and if the bank went bankrupt who cares, the government will steal money from others to make you whole again. Back before the FDIC banks had to actually manage themselves in a safe manner, not only to initially attract deposits but to actually keep them - if a bank ever made several large bad deals it risked losing all of its deposits overnight.

The moral hazard that government creates, in this instance via deposit insurance / deposit bailouts, needs to stop.

As for PCR's comment on taxation to punish offshoring... sigh. That is just a populist statement with no level of economic background supporting it. For centuries economists have theoretically proven the win-win benefits of trade and for centuries traders and businessmen have proven those theories completely correct. Onshoring fraudsters rely upon the classic seen-vs-unseen in trying to argue that we need to prevent offshoring - it is easy to see the jobs created by forcing jobs back onshore, but it is difficult to see the additional ~5% price increase of all goods that consumers must now pay. The new factory and its 100 workers make the nightly news story, but that half the items in the store slowly crept up by some percentage over a year's time does not make the news.

But the overall loss to society from blocking trade via forced onshoring policies is far greater in magnitude than that gained via the new jobs. Another specious claim people make is that "but we are sending our wealth and dollars overseas never to come back again." What nonsense. The foreigners send us goods of real value and we send them green pieces of paper that can only be spent on US shores. That is not wealth for them, that is wealth for us (we got a real item of utility). Either the dollars eventually must come back to the US and that is where the US gets its "jobs", or the dollars permanently stay overseas and we got free washing machines from the foreigners. Either way Americans win from this proposition, we either got something 100% free or we got something in trade that we value to be more than what we produced to give them to get our dollars back.

I've read a few PCR things and I don't think much of him. He bashes the government but then deceptively proposes his own statist policies that are similarly flawed. He is also deceptive in his wording like any normal politician, the above being a good example "Capitalism should be allowed to work... we should bail out the depositors and tax corporations to manage their job practices (paraphrasing)." It is all a direct contradiction. Obama plays these word games in nearly every speech he gives "I believe in the free market but we gotta put constraints on it" - hello, how is it a free market then?

Anyways, just saying he definitely seems to just be another deceptive statist - he doesn't like Obama or Bush's statistic policies so he advocates his own statist policies instead. How about not advocating statism instead?

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Ed 9 yrs ago
I don't see the FDC guarantees as moral hazard ... any more than taking out home fire insurance would be moral hazard...

It is my understanding that these were put in place to stop runs on banks... if you believe you will get paid back if your bank collapses you are less likely to pull cash out....

I am not familiar with who pays for this insurance (the banks? the depositor?) but at the end of the day it is pretty much useless if there is a massive crisis...

It's ok if just your bank crashes and burns ... but you ain't getting nothing back on your deposits if the financial system falls... or if you do it's almost guaranteed that your cash is not going to have the same buying power that it had before (see devaluation of currencies)...

So for PRC or anyone to even discuss a bail out for depositors in such a situation is a moot point... it would not and could not happen.... 'here's your 250k + a pack of free matches - feel free to start a fire with it to warm your dog food over'...

Re: offshoring... this is a very complex problem... but at the end of the day millions of jobs have been sent to China and other countries... one of the reasons China is able to compete and win is because China has basically zero regulation...

They pour untreated toxic waste into the environment.... they burn the dirtiest coal which causes massive air pollution (which also causes mercury pollution in the oceans)

Also workers are often treated like slaves getting just enough salary to feed themselves ... and often worse than dogs (see Bangladesh)...

If I were an American I would not be so keen with a situation where my fellow citizens would have to compete on equal terms with people working in such conditions...

This is what very little regulation gets you.... I don't see it as the solution either... again - a complex issue

End of the day I do not believe there is a solution because I've got this wacko theory that:

1. Capitalism requires infinite growth

2. Infinite growth is not possible in a finite ecosystem

3. I think we are approaching the 'Limits to Growth'

4. I think what we are experiencing now are the symptoms of the limits to growth

5. I do not believe that any changes we can make to the current system will make any differences to the ultimate outcome - this system is burning itself out - and something will replace it - regardless of whether or not we fight it with reformist polices here and there... I have no idea what that will be .... but I am to some extent confident it will result in a world that is completely different from one we live in now...

This is kinda like going back in time and asking a feudal lord 'what sort of world do you think will replace the one you live in?'

'May You Live in Interesting Times'

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Lucane01 9 yrs ago

First I must note that when discussing economics / politics, intentions are useless, only the incentives matter. Whatever the intention of deposit insurance may be is entirely irrelevant, only the incentives that deposit insurance creates are what will determine how it will affect the economy years later. This critical difference between intentions & incentives is a key point that few people think of when examining regulatory policies. It is how terrible policy after terrible policy is passed because people judge the policy on its intentions rather than what incentives, and thus what effects, it actually creates.

It's kind of like judging Federal Reserve policy by what Bernanke says he wants to do rather than examining what his options are and what the consequences of each option is, and then making logical conclusions as to what he will actually do. Intentions vs incentives.

With that being said, deposit insurance is one of the greater moral hazards that there is. It is not at all similar to fire insurance except that it shares the name insurance - which deposit insurance is not even insurance anyways.

In insurance policies people pool their risk together to share the burden of statistically calculable independent risks. The premiums paid along with the reasonable investments made by the insurance managers must cover not only outlays but also management profit. Insurance is a valid and sustainable system through which people can manage catastrophic risks.

Deposit insurance does not share those attributes. The failure of a bank is not statistically calculable and a bank failure is also not an independent event. Unlike a house fire which might only burn down a few adjacent homes (but leaves the rest of the country's home stock unharmed), a bank failure can immediately cause bank collapses across the entire country. Furthermore the FDIC never has and never will have a sustainable method to actually make good on the liabilities it holds - the FDIC has ~20 billion in assets to cover the 10,000 billion of deposit liabilities it insures. And of those few assets the FDIC has, none of it is cash and all of it are some form of US Government Treasury Bonds.

In reality deposit insurance is nothing more than a scam because its premiums never come close to covering the liabilities it holds. If banks were to begin failing the only way the FDIC can make good on its insurance claims is by having the Treasury send the FDIC money - of which the Treasury of course can only get money from the Fed's printing press - of which printing money is simply inflation which is confiscation of wealth.

Another problem with deposit insurance is that it grossly undervalues the price of the risk of bank deposits. If a truly sustainable private sector deposit insurance system were created it would be forced to charge higher premiums in order to always have enough assets to cover its future liabilities. This higher cost would likely be several percent per year and would cause depositors to actually think and consider how risky their banks are.

People have great misconceptions over what a bank deposit is. A bank deposit is not "your money in the bank" but rather purely a loan to a bank. When a person "deposits" his money in a bank he is actually loaning his money to the bank. The person no longer legally owns that money but rather owns a note from the bank that is made payable in cash (with interest... the savings rate). Money in the bank is not like allocated treasure placed in a safe deposit box, it is purely a loan a person has made to a bank. And just like any other loan out there, it is critical that a creditor properly evaluates the credibility of his debtor - which is to say that a depositor (creditor) needs to critically evaluate how stable and sustainable his bank (debtor) is. I know it seems odd to think of ourselves as creditor and the bank as a debtor, but that is what the transaction is with a bank "deposit."

Think of the moral hazard this "deposit" insurance creates - really I should call it loan insurance instead because that is what it really is. If a loan shark had government FDIC loan insurance then what would happen? Depositors would "deposit" (loan) the loan shark lots of money because the loan shark will pay them a high savings rate. The loan shark would then loan it out to the riskiest of borrowers because they would pay an even higher loan rate. Neither of these people would care about the credibility of the borrower because the government has guaranteed to cover any losses made. The result is that the riskiest and least credible people get the loans thus creating great risk in the financial system.

Deposit insurance is nothing more than a scam which allows bad actors to continue doing their bad operations. It kicks the can down the road until one day not even the government can bailout the epic losses that had been allowed to pile up. It is like the famous wildfire anecdote (park service used to prevent all small wildfires, but then that allowed the dry underbrush to build up so high that eventually the infernos were so powerful that no one could stop them - the park service then realized that frequent small fires were a cleansing and safe way to protect the forest system and that prevention of every small wild fire only acted to increase systemic risk to the point that it lead to complete destruction).

What is key is to minimize moral hazard hence deposit insurance should be fully removed. The incentives this will create are the following: depositors will actually take care to think about which bank they deposit their money with. Those banks will then be forced to act prudently and carefully in their loan operations as to always protect wealth and minimize losses.

No longer would NY Times headlines read "JP Morgan loses 7 billion on one trading loss" without people pulling their money out of the bank. You might at first think its great that there was no panic created, but what you really should be thinking is how was a loss like this tolerated in the first place? It was tolerated because no depositors (creditors) cared about their money - they know that no matter what idiotic thing JP Morgan does, they (the depositors) will still always get paid back in full by the government (and the government will just take money from other people and reallocate it to those who were careless enough to deposit money with JP Morgan).

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Lucane01 9 yrs ago
Regarding offshoring, I will be far more brief.

What people want is leisure, not labor. The whole point of the economy is to maximize the amount of stuff we can get while performing the least amount of labor, thus leaving us with maximum amounts of leisure. This constant statist chatter in the MSM and from political leaders about jobs is insanity - no one wants to work, we simply want the things that work can provide us with. The critical thing though is that right now countries like China and Bangladesh are providing us with all of those things we want and demanding very little from us in return - this is the best result for us - they work and give us stuff while we do almost nothing in return. They are not getting wealthy because they have all the jobs - who wants to labor all day long? - we are getting wealthy because we are getting tons of fabulous things without having to labor much at all, leaving us with exorbitant amounts of leisure time. This is why the West has seemed so prosperous for the past few decades - we've had over a billion Asians laboring away to provide us with all the necessities of life and requiring us to perform no labor in exchange for the goods they gave us. This has left the West with copious amounts of time to do more frivolous ventures like writing rap lyrics and taking multiple vacations a year.

Of course this system is not at all sustainable - the Asians are not stupid and will not continue this unbalanced trade regime for much longer. The unbalanced trade system exists not because of differences in regulation, differences in cost of labor or anything like that - it exists purely because 1) the Chinese Government wants to loan us money and 2) the US Government wants to borrow money. When either of those two requirements breaks (definitely will be #1 not #2) then the trade system must balance itself out almost immediately. That of course means the dollars will be sent back to the USA making claims on things we produce. This means that we'll get lots of "great" jobs back and everyone will be busy toiling away producing things to sell to the Chinese - of course the real effect of this will be that there will be far less for Westerners to buy and we'll be working far harder than we ever did before.

Under the MSM / Statist economic theories this will be a great life - everyone is working hard and getting little, but under any rational analysis this will be a decrease in the quality of our living.

If the Asians want to keep toiling away and polluting their lands to send free goods to Americans then we should not only allow them to continue to do so but encourage it. We never wanted the jobs anyways, we simply wanted the production that a job creates - but if they will produce it for free why not just bypass the work and go straight to the goal?

If you are still on the fence on understanding this then just think of the extreme example: the giving tree. Imagine there was a tree which created everything imaginable for free. A statist politician would say "we must burn this tree down because it has taken away all of our jobs!" but a logical rational person would say "this is heaven, I get everything I want and do nothing to obtain it." The Asians are like a minor giving tree - they will soon stop being a giving tree but for the past 3 decades they have acted as one.

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Ed 9 yrs ago
A couple of things...

Isn't the outflow of jobs one of the main reasons the US is collapsing?

Globalization was supposed to result in thesh*tty jobs going overseas and being replaced by high paying jobs in the US. That has not happened - and in fact now even high paying jobs are started to head overseas... Saw an article in the NYT where 250k paying radiologists jobs were sent to India where they pay 30k...

No doubt this meme was all about propaganda to get the masses to be ok with tearing down the trade barriers (you get a cheap garbage can - and you get a 150k per year job!)

But ultimately you need a middle class to buy stuff - if they are all working part time or at jobs paying 20k per year - ya they have lots of leisure ... but they are broke... so they don't buy more stuff...

Being a consumer society doesn't that guarantee the US fails?

But then so what if America fails - many would ask why does a GM worker deserve 80k per year with all the bells and whistles? When a Thai worker gets 10k per year full package say...

I suppose an American might say too bad for the Thai worker... that's their problem - but I am not about to agree to compete with that person if I can help it...

Let me make a book recommendation at this point

The great kurt vonnegut has an excellent take on a society where engineers and machines rule - and people sit around well fed but with nothing of purpose to do ... however keep in mind there was no Dancing with Stars and American Idol when Kurt was writing so this concept might work today :)

Now as for Asians polluting their lands lets keep in mind that we live in a closed ecosystem ... when China pours toxins into its rivers those rivers end up in the sea.... the toxins get into the food chain ... so we all suffer...

Likewise with burning bunker fuel and coal... that doesn't remain local ... one of the biggest sources of mercury in fish is coal (note that we are supposed to limit our intake of fish because of this or we grow two heads and a beak)

China and India alone are

Then of course there is the issue of climate change... these new coal plants are throwing gasoline onto that fire...

(and if anyone is going to disagree with the climate change thing - I recently was trekking in Ethiopia and had the pleasure of enjoying a beer - or two - with a very senior guy from a very big US oil company who works in Nigeria and he emphatically said to me - yes we are causing climate change by burning fossil fuels)

So exactly how does this Brave New Non-Statist World work exactly?

Do we pull off all the rules and just let capitalism run amok? Isn't that what we had in Dickensonian England... and what we have in China today?

In many respects I think the US is already there - yes there are rules but is anyone following them? Regulators are captured and they let the wolf into the chicken coop across every major industry in the US from Big Pharma to Banking to Defence...

The US to me looks like a complete free for all where crime pays - rules don't matter

On the other hand I do agree that there are plenty of insane regulations in the US and elsewhere... but calling for dismantling of everything is akin to throwing the baby out with the bathwater no?

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Ed 9 yrs ago
RE: Deposit Insurance.... I see your point now - I was thinking moral hazard primarily with respect to the depositers - I can see how this creates a moral hazard for the bankers... most definitely

Not so sure about depositors being more prudent if there were no FDI - how is the average person to know which bank is safe and which isn't? Even a savvy person would not likely know....

And I agree this mostly about optics... the public feels secure ... but in reality this programme (like most other programmes) is not funded... and this is why the US has trillions of off book liabilities...

An American accountant was explaining this to me recently... legally the US govt is doesn't have to count all these liabilities in their ledger (i forget the term for it...) Sounds like Greece - but legal :)

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OffThePeak 9 yrs ago
Ed, your:

I think what we are experiencing now are the symptoms of the limits to growth

5. I do not believe that any changes we can make to the current system will make any differences to the ultimate outcome - this system is burning itself out - and something will replace it - regardless of whether or not we fight it with reformist polices here and there... I have no idea what that will be .... but I am to some extent confident it will result in a world that is completely different from one we live in now...

=== ===

Big changes that may work - Cut the wasteful use of limited resources:

+ Reduce dramatically use of fossil fuels - an end to suburban living

+ Grow food locally

+ Build products to last, rather than to be replaced

+ Learn how to repair and recycle

+ Stop advertising products that do not fit these ideals

+ No more Wars ! They waste too much energy

+ Escalate research on free energy technologies

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Ed 9 yrs ago
Yes I agree with those suggestions ... an engineer friend of mine in Bali was suggesting same the other day...

Rather than run the planet right into the ground and have nothing remaining we should be attempting to adapt... unfortunately I do not believe that will happen - see Fracking as a perfect example - we got on the this treadmill 150 years ago with the industrial revolution and there is no getting off ... more people, more growth, more shopping, more strip malls, more freeways, more LV bags, more 'progress'...

The beat MUST be fed... or it will die...

The word enough does not exist because it cannot exist in the system we have... it would be like asking a cancer to stop voluntarily...

(meanwhile - ironically/hypocritically? - the ads keep rolling into AX wanting to sell to the nearly million eyeballs per month on here... we're all locked into this beast one way or another unless of course we want to go live in a shack in the bush...)

I guess my point earlier was that I don't think any changes of policy will allow us to maintain the world as it currently works...

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Ed 9 yrs ago
Shifted the Globalization discussion to here (and copied the comments)

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OffThePeak 9 yrs ago
(Picking up on an older comment)

- From Lucane:

"Boston, Chicago, NYC and London which are all cities of finance - and unless you are geriatric then you lived in these cities during times of their biggest economic booms (courtesy of the runaway finance train thanks to fiat currency post-71). Yes all of those cities also have overly controlling governments but their economies were booming so much that they were able to support the weight of government. But wait a few years until after the finance bubble blows once and for all and then revisit these cities a decade after - NYC was a slum in the mid-1900s and it will once again be a slum...."

== unquote ==

I mostly agree - These cycles are important, and the pulling of power and wealth to financial centers has been an important trend. That has benefited NYC, London, and Hong Kong too.

These cycles do not go on forever. And I think another and more severe financial crash is coming, probably from a stock high in Q1-2014 (my current guess). After that, the financial centers may be suffering - and that may include Hong Kong.

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Lucane01 9 yrs ago

I agree that the financial centers will be suffering a lot - and since the impending crash might be more of a financial collapse than a simple crash, it is questionable if the major finance hubs will ever return to their current state of glory.

That being said, can anyone give me some on-the-ground color on what HK was like during the Asian Financial Crisis? I know that HK has loads of banking / asset management / speculative investment, but it also does have a strong underlying economy in trade, business, food, retail, etc. It'll be interesting to me to see what changes occur in HK when the crisis hits - maybe lots of real estate agencies and LV / Gucci shops will close up, but I don't sense that your average mom'n'pop store is going to struggle (they might even thrive because of the lower rent).

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Ed 9 yrs ago
I was in HK during the crash... the property market took a big hit of course... and I distinctly recall the fear that HK was next on the list for the 'vultures' who were ripping apart the carcasses of thailand and indonesia...

HK was nowhere near as exposed as those countries so in reality should not have been considered an easy target... but when the smell of blood is in the air momentum can rule the day...

I recall Tsang making a bold move to counter the shorts by buying up the market (that move resulted in the trakker fund) ... he was hailed as a hero for that...

I suppose if you felt that HK was being unfairly targeted you could agree with government intervention in a market on that occasion. If he had not acted then perhaps HK would have collapsed in the same manner as Thailand/Indo...

Overall there was a recession and things were weak ... but the rest of the world remained mostly buoyant so HK/China were able to weather the storm reasonably well because they could continue to do business with the US/EU....

I also recall the punters who had bought HK property during that bubble moaning and wailing for years afterwards 'please donald please suh... you must do something ... you must intervene and make property prices rise... you MUST help us Donald!!!'

Probably the same people who complain when the govt steps in to put cooling measures on the bubble now...

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OffThePeak 9 yrs ago
Relevant here...

DETROIT can learn from the model that the MTR is using:

Overseas rail projects will generate more revenue than MTR's domestic operations by 2020 as the city's sole rail operator gears up for international expansion....

(I will pull some extracts from the article later)

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OffThePeak 9 yrs ago
(Okay - here are the NOTES from the article):

Some Bulletpoints


+ MTR wants more overseas projects, especially on the mainland

+ MTR's Rail-and-Property model could be a solution for cities overburdened by debts

+ RR building costs would be subsidised by developments along the route

+ MTR's opportunity to expand this model in HK is limited, because of the lack of availability of land for development

+ Consequently: In HK, MTR will be mainly a franchise operator on new lines

+ In the mainland, most of the space above rail stations is empty, because it is not easy to put a building there without expertise and knowhow

+ The land is wasted, if it is not used - And if it can be used to subsidise building costs, then it is better still

Separating the rail and property business may makes sense, but it is important to do that in a way where a big part of the uplift in property values can help to subsidise building the rail line.

MTR Corp already has rail operations in: London, Stockholm, Melbourne, along with Mainland China.

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OffThePeak 9 yrs ago
TOWN PLANNING is important:

We need revenue-contributing Infrastructure, Not just dumb infrastructure which provides negative returns (like highways)

This is a great talk - very clear - from Chuck Marohn of Strong Towns about the Braindead Town planning, which is all-too-common in the USA


MP3 :


"We have to change a way that we are building our cities.".

/Website :

(Put a fork in it!. Or move away, and stay away, as I and others have done, so the braindead will be left to swim in the murky swap they are creating by being so incredibly thoughtless.)


Sadly, major magazines, like Time, are totally clueless about this, and so by misusing their "bully pulpit", and are therefore contributing to the problem.

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Lucane01 9 yrs ago
Are there any large commuter rail projects in the entire world besides MTR that are profitable (excluding subsidies)? Not a rhetorical question - I am honestly curious and am uninformed (although I have a hypothesis of course).

Plenty of private tollroads, highways, tunnels, bridges which are privately built and owned and are profitable, yet I am unaware of any commuter rail that is privately profitable (and MTR is questionable given that it is 75% owned by HK Gov). Plenty of bus lines, both long and short range, which are also profitable (but of course are indirectly subsidized by public roads - although roads could easily be privatized as the entire US was a system of private roads before the 1900s).

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OffThePeak 9 yrs ago
The MTR is profitable (check the Annual Report), and their model works.

+ They reduce the net capital cost of building the raliway, through property development profits

+ They generate sufficient income from ticket sales to cover their costs, thanks to the density around the stations, and consequent heavy use.

The Gonzo-Idiot-Fools (GIFs) in the US when told this, nearly ALWAYS ABUSE ME, when I tell them that they can learn from something useful from Hong Kong's approach to mass transit. Their knee-jerk reaction seems to be: They start talking about human rights violations IN MAINLAND CHINA, as if that was somehow relevant to their argument.

The American GIFs are so arrogant and stupid, that they will learn nothing from the rest of the world, even as their living standard slides and slides. They are getting what they deserve from their self-imposed blindness, and their determination to do little but go on watching sports and Dancing-with-the-Stars, while their country is economically abused, and freedoms are stolen by the corporate gangsters who now control the US Congress and the Presidency.

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OffThePeak 9 yrs ago
MTR's Rail-property developmeny model,

is "not for all", says Jake Van Der Kamp, in today's SCMP




+ In HK, "only short spur lines in already built up areas" are left to develop

+ The model was "never anything but a delusion... traded on the odd notion that you cannot assign a value to a property until you actually dispose of it"

+ "Ain't magic wonderful": Land above stations acquires value, and the proceeds can "cover the cost of building railway lines"

+ Didn't it occur to our mandarins that this land had value, and they could make more money by disposing of it in auction

+ HK got HK$100 Billion for the MTR Corp float, only by putting a big piece of land in the company, and JV-ing development rights

. . .

+ The R-P development model only "sufficed for a high-growth period, while the city was rapidly expanding"

+ These conditions do not apply in the future for HK, and may not work in many cities where the MTR may want to apply them :

For officials in other cities, "Does he (Mr Leong) really expect them to be ignorant of their prime inner city development sites."


(My comments will follow in another post)

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OffThePeak 9 yrs ago
THIS ARTICLE fits the discussion here:

=== ===

Here's an EXCERPT that I liked:

II. Dearth of Economic Activity

The poorest city of its size in California; second poorest in the entire United States, next to Detroit. Wow, notoriety in a big way. Almost as poor as Detroit. That is a major understatement. Both filed for Chapter 9 federal bankruptcy protection; yet, both Detroit and San Bernardino are as different as night and day from an economic perspective, and still different from a demographic perspective as well. Not even their states are remotely similar in climate, population, or any of the traditional demographic comparison points. But, still, both are bankrupt. Why these two cities, at this point, now, and not others? Or, are these two cities just harbingers of things to come?

Let's try to unravel the puzzle...

. . .

Then what HAS been constant for 40 years?

What is a solid indicator, then, showing why economic activity has declined steadily over the past 40 years?

Simple: government intrusion (lack of freedom to pursue and engage in productive economic opportunities) coupled with rampant corruption, which has lead rational decision-makers like the normal middle class family to leave the area in search of a better existence. Left behind are those who either cannot leave for economic reasons, who chose to stay for the free govt transfer payments, or others who perhaps just do not think much about it. What is obvious, beyond argument, and that the government intrusion coupled with the corruption leads to decline. There is no other argument that is possible. And what do we know about government intrusion.

Government intrusion is far-reaching and never, ever pulls back save for revolution. Government red-tape and mind-numbing regulations and ordinances have killed business creation. Private business and private jobs create tax revenues. Government jobs and government regulations kill private business and decrease government revenues. Why is that so impossible to articulate or understand by those in power? Umm, simple. Admitting it means that those in charge are hopelessly corrupt. So here we are.

Corruption has poisoned the system from top to bottom, for a generation or more. Corruption has killed a once thriving, vital city like San Bernardino. I have seen this with my own eyes.

== ==

How to kill government corruption?

Make government much smaller, I suppose

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Lucane01 9 yrs ago

I agree with your excerpt - big government and the corruption it brings are the cause of the fall of Detroit. Even without corruption, if it were even possible, the simple fact that the economy is centrally planned in these cities by their governments would still lead to an eventual collapse. Corruption just accelerates the pace and also makes people a lot more angry (although in the case of the USSA, people seem to believe there is no corruption and if they do believe there is, they are quite tolerant of it. Chinese hold vastly different opinions of their government).

I also agree with the excerpts belief that revolution is the only way that government intrusion is decreased. There is not historical evidence for government to peacefully recede in size.

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OffThePeak 9 yrs ago
"in the case of the USSA, people seem to believe there is no corruption and if they do believe there is, they are quite tolerant of it...."

I think this is changing:

+ Cities are going bust

+ The wealth of the middle class is declining

+ The grip of the police state is tightening

+ The Corporate controlled press and politics are clearly acting against the interests of the average man

These changes are becoming more and more obvious, and people are finally waking up. I just hope that it is not too late.

Sadly, I think some people are still asleep, even some reading this thread.

The unfair thing is that the sleepers do not get the "reward" they deserve, but rather leave the hard work (of waking others up, and cleaning up the mess) to a small but growing handful who really do give a d@mn about these matters.

If enough people were awake and activated, we could fix things. But it will be more and more difficult as time goes on.

In a fair world, the repairs would begin for those awake, and the sleepers could slide down (faster) into the "mud and salamanders" that they so richly deserve.

Living in HK now is one way awake people can feel like they are on the "fixing" side of reality.

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Lucane01 9 yrs ago
Detroit's Train to No Where:

Seems completely dead on arrival - no one is going to ride a train in a straight shot that they could drive twice as fast.

More excellent city planning by our central planner academics. Did you see that lady has a masters degree? Wow, a masters degree, she must be so smart.

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Ed 9 yrs ago
Why stop there - the Federal government should announce that this try actually 'goes somewhere'...

All the way to Shanghai!

Imagine the jobs you could generate by digging a tunnel from Detroit to Shanghai - 10's of thousands of former auto workers could be hired at 50 bucks an hour to dig the tunnel... it would take YEARS!!!

This could be the stimulus that the city needs to get back on it's feet.

Then think of the jobs generated maintaining the tunnel - and don't forget all the tourists who would come to Detroit to take the Shanghai Express... and of course so many PRC tourists would reciprocate...

Hotels, restaurants, ... Detroit could quickly regain it's position as a leading US city.

All that is needed is a few hundred billion USD - Bernanke can print that off in a few hours...

I await the announcement!

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Lucane01 9 yrs ago

And why use heavy machinery when we could use teaspoons instead? That'll really provide us with lots of jobs.

Modern economic theory at work.

And let's turn this light rail into a hypertube from Elon Musk. Anyone else notice how Elon Musk is the newest greatest thing that will "save America"? Americans attach themselves onto these bogus fantasies like a fly on horse crap. Facebook going to revolutionize the world, then Groupon will change the way we shop, then Steve Jobs going to change the way we market and use goods, and now its Elon Musk and his uneconomical government-subsidized statist electric cars & floating trains. Flavor of the week, will be gone in about ~6 months once Tesla stock bubble blows back down to $30 a share.

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OffThePeak 9 yrs ago

Seems completely dead on arrival - no one is going to ride a train in a straight shot that they could drive twice as fast.

Have you been to Detroit?

I was born there, and grew up in the suburbs. Once up a time, I had a job working at the second largest bank in downtown Detroit, and used to commute sometimes by rail, taking a (very slow) commuter train from Birmingham to a station downtown, where I used to walk to my job in the Guardian building.

I think a train straight down Woodward Avenue makes senss, provided:

+ They remove the shackles from business and encourage new businesses to start-up and old ones to expand,

+ That they have a clear plan to DENSIFY along the rail, at the stations, so that people can live Carfree lives (as they do in HK),

+ That the trains runs fast, efficiently, and is safe (as in HK). That will be a challenge in a city with Detroit's weather and crime rate

The worst thing would be to build another People Mover. I reckon the name was meant ironically, since it moves very few people, and it is quicker to walk the short distance it "services."

Detroit needs catalyst to bring itself back to health. The Tarin can be part of that, but without the right policies and planning around it, the project will be a Dead White Elephant.

I believe this project is being privately developed and managed, and so it ghas a chance. The woman from Royal Oak represents a viable (and even thriving) city on the outskirts of Detroit. This could really help here community, and ifd her community uses it, then it has a chnace for success. I wonder if she is ready to allow high rise apartment house to be built in Royal Oak close to the station? That is the sort of thing that will bring success.

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Ed 9 yrs ago
What Will Future Historians Think Of Our Time?

It wasn’t too long ago that renowned scholars invested their entire professional lives studying the “ethnic sciences”.

They’d take cranial measurements of various peoples and pen textbooks to suggest that one race was superior or inferior to another.

Such faux science is generally attributed to Nazi Germany, however these conclusions were commonly accepted facts by most of western civilization at the time.

Ethnic science formed the moral foundations of imperialistic expansion - no one could feel bad conquering and enslaving an entire race if the prevailing science of the day conclusively showed them to be inferior.

Today we are a bit more enlightened. Humanity has progressed, and we can look back on those days with utter incredulity wondering how anyone could have possibly believed such nonsense… how anyone could pass off such ridiculous assertions as real science.

Well guess what... in the future, they’ll probably look back and say the same thing about us. Only this time, our ‘faux science’ is economics.

They’ll wonder with the same incredulity how these ridiculous ideas about reckless spending and conjuring money out of thin air could possibly be considered science… so much so that we actually AWARD PRIZES to these faux-scientists that come up with equations that reinforce their assertions.

They’ll wonder how our political leaders could have been so stupid that they actually allowed these faux-scientists to dictate policy, to control the money supplies of nations, to establish trade and capital controls.

They’ll wonder... and they won’t understand at all... just in the same way that we wonder about the faux racial sciences from two centuries ago.

I’m hopeful that people will wake up one day and understand that it’s a really dumb idea to award such enormous power to a very small group of people. Unfortunately, I think it will be too late.

You see, politics is really the art and science of managing scarcity. At its very core, politics is built on the premise that resources are scarce and need to be redistributed for maximal ‘social benefit’ (as defined in the sole discretion of the politicians, of course.)

Rather than say, “let’s just make this pie bigger,” politics is based on slicing and re-slicing a small pie across constituents and special interests.

In almost all cases, conflict is the logical conclusion to scarcity when more than one party is involved.

Now we have an entire civilization going bankrupt, and a small minority becoming more wealthy. Haves and Have Nots.

Given the scarcity of wealth, the potential for conflict is very, very real... especially when you consider that the United States military is really the largest derivative contract on the planet, giving Uncle Sam a bit of insurance to support any claim he sees fit.

Hey, maybe I’m wrong. Maybe the skies clear up and the sun starts shining and the unicorns come out to play. Maybe nothing bad ever happens. Maybe.

But in either case... doesn’t it still make sense to have some gold and silver stored overseas? Doesn’t it still make sense to have a foreign bank account, a second passport, and some agricultural land somewhere nice?

You bet.

And... in the far more likely event that western civilization takes a very bad turn, or at least grinds out painfully, slowly for decades, the dividends paid on your efforts will be enormous.

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Lucane01 9 yrs ago

I like that post by Simon.

Back in the days we had mystics and witch doctors who could tell the future. Today we have modern economists like Krugman who are truly nothing more than glorified jungle witchdoctors. Economics as it is practiced in modern times is pure voodoo.

Real economics on the other hand is a true subject that is worthwhile to understand. Of course it was "solved" ages ago by the likes of Adam Smith and Ludwig von Mises, so since then the modern economists have had nothing to do but sit around and come up with truly voodoo-like practices.

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Ed 9 yrs ago
What amuses me is that Central Banks are printing literally trillions of dollars ... yet most people think that is nothing to be concerned about...

When in reality is the most desperate of desperate acts trying to fend off the collapse of the economic system.

It will of course not work - anymore than money printing worked in Zimbabwe, Weimar, etc...

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OffThePeak 9 yrs ago
In this interview of John Norquist by JHK,

You will learn more about how Cars and Freeways killed Detroit.

Although there is poetic justice in that, it is sad for those of us who grew up there, and might have wanted to build a future in a better city.

Was this Karma in action? Have those responsible yet paid their full karmic price, or did they make an escape to Bloomfield Hills, where it still needs to be visited on theme?

(If you think I am angry about this still: You are right.)

MP3 :

"Freeways kill Real Estate values, and kill the life of a city."

In the act of killing off 3 freeway projects, and dismantling an old one, Norquist saved Madison, and made it a good walkable place to live. Let's load-him-for-Bear, and send him to Washington.

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Ed 9 yrs ago

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OffThePeak 9 yrs ago
“With these large open expanses with vacant homes, it’s as if you designed a situation that causes dog problems,” said Harry Ward, head of animal control.

. . .

Arrington said when she visited Detroit in October, “It was almost post-apocalyptic, where there are no businesses, nothing except people in houses and dogs running around.”

== ==


But this is certainly not the case for all parts of the City.

Some pockets in Detroit and in surrounding areas are thriving

Though the following sounds like government is ABSENT:

Many de facto strays are called pets by owners who let them wander, said Kristen Huston, who leads the Detroit office of All About Animals Rescue, a non-profit that obtained the Humane Society’s $50,000 grant last year to feed, vaccinate and sterilize pets. Some dogs run away from their neighborhoods and threaten people, she said.

“Technically, it’s illegal to let a dog roam, but with the city being bankrupt, who’s going to do anything about it?” Huston said.

A REDUCED role for government may be a good thing in many respects

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OffThePeak 9 yrs ago
More Evidence that the MTR model works...

MTR Profit was up 5.1pct, Beating Market Target

This is despite lower contributions from Property sales

+ First Half profits were HK$4.25 billion, on a jump in rental income and passenger numbers

+ This rise is very welcome since the Group's five rail projects are entering their final stages, requiring more and more capital

+ The group is generating sufficient capital from earnings, that it will not need to raise equity to complete those projects

+ Net Debt-to-Equity has lifted to a still comfortable 0.6

+ Passenger numbers rose 3.6 percent year-on-year to 883.1 million journeys in the first half

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OffThePeak 9 yrs ago
Saving Towns with Baseball analogies

I loved this talk:

MP3 :

Chuck Marohn of StrongTowns, was on base with his arguments,

and hit it out of the ballpark.

A town can "get on base" by looking at the numbers and seeing what parts of the community actually generated a high in productive "return on space occupied":

The answers may surprise some. And the productive squarefootage in a city is not going to be the Walmarts, or the Luxury enclave in American cities.

Perhaps the failure to "run the numbers" and aim to improve them is why so many cities are headed towards bankruptcy. (!)

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ohmmmm 9 yrs ago
I was a commercial appraiser (MAI) in my prior profession and I appraised property in Detroit and throughout the USA.

In general, real estate prices go up and places do well where people want to live. Contrary to many peoples views, good zoning and strict building codes actually make a place more desirable and those areas do much better than places with few laws and restrictions. Of course there has to be proximity to jobs and decent transportational linkages. A good school system is also a very important factor as well as reliable utilities and basic services. Often communities grow organically and develop a momentum before the area catches on but that is not always the case.

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ohmmmm 9 yrs ago
If anyone wants to talk about Detroit specifically, I have had 30 years experience there and can tell you some of the specific reasons Detroit the city declined. But in summary, corruption, innercity neglect, riots, poor schools and crime contributed to most of the middle class moving to the suburbs where they could raise their families. Detroit had a run of hoodlums as mayor that just took from the city and did very litle for the people who could afford to pay taxes to make the place attractive. The Federal government sunk lots of money into community projects and housing to try and renovate specific neighborhoods, but with a corrupt city hall and a momentum of decline, investors found more appealing locations 10 to 30 kilometers out of town. Also, unions became powerful and raised wages to crazy levels thus making automakers choose locations for new plants in low wage ares in other parts of the country or in other countries such as Mexico and elsewhere...

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OffThePeak 9 yrs ago
Few Detroiters acknowledge the highways and transport system as causal - since they never would have built them if they saw this clearly.

But as someone who was born and raised there, and left partly for the reason I hated the highway monstrosity it had become, I claim to see this as an important cause of decline. (As do others who understand the reasons behind the New Urbanist movement.)

Of course, white flight and corruption were other important factors. As was the "loss of jobs" which came with the decline in the Motor City's auto industry. But I see as only another part of the "car city mentaility" and resultant internal focus, without any real understanding of what was good for America, and good for their customers.

A good example of that is an old saying you used to hear there:

"What is good for General Motors, is good for America."

Imagine thinking that way! Pure myopia !

I had to leave ! Was I right to go?

Detroit has had corrupt mayors, but I do not include Dave Bing in that list. By the time he came along, it was just too late.

Perhaps if they can build an effective light rail system, AND change the zoning laws to allow gentrification, then people will want to live their again, and the city's population will consist of more than those who "have no choice," and cannot leave.

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