Many people are more than likely sick of hearing about Detroit these days. I don't blame you really but how that bankruptcy works itself out is going to set a precedence and give us a clear picture on how the biggest lying ponzi scheme in history is going to work itself out.
This problem isn't about the investor class versus the poor public employees who need their pensions. Nope, this is about ultimately who they are going to try and stick the bill to and everyone who owns property, works a paying job or buys anything from a business will be hit if the courts try and pass the cost off on the investors.
It really is that simple. Costs are always passed on or through the investment class in one way or another. This is why our original bankruptcy laws were set up the way they were and protected bond holders most of all. If bond holders take the brunt of this why those who voted in the crooks and rode the wave of promises with no thought to how or where this easy money was coming from are taken care of then the ultimate cost of paying these pensions will come from tax payers.
That's you and me.
Yields and interest for municipal bonds will sky rocket as they will now be seen as non-secure investment vehicles. Property taxes will rise along with other sales and use taxes accordingly as services will be reduced. A reduction in services will also then manifest itself in higher insurance costs and greater minimum coverage amounts while, get this, overall property values will decrease.
Detroit's debt adjustments plan hostile to bondholders
"Fitch considers Detroit's plan of adjustment to be hostile to GO bondholders," the rating agency said in a statement. "If this priority of creditors is upheld, Fitch expects that this disregard for the rights of bondholders will factor into higher borrowing costs for local issuers, and ultimately for local property taxpayers, in Michigan."
That's right by stiffing the bondholders the tax requirements and bill will ultimately raise the property taxes for all of Michigan.
It won't end in Detroit anymore than it really began there. Pensions are way under funded everywhere in the US and even those who report 80% or better total funding are using Enron accounting and unicorn style fantasy returns on investment that will surface.
You may also think it will work itself out to a small amount overall but this is wishful thinking as well. Once the total bill is spread out the extra taxes will kill commerce and make it impossible to service the debt regardless. Not to mention those munny and other funds will still need to resort to bond offerings with skyrocketed interest to continue to operate.
It doesn't matter where you live. A decision against the bond holders will directly effect your wallet whether you are in Oklahoma or Michigan.
Keep Prepping Everyone!!!
Detroit has one new source of income. Post apocalyptic movies are being filmed there. Much of the city is perfect for use as sets, it all looks run down and abandoned.
ReplyDeleteHarry - I am sure someone will decide to tax filming there right out as well. But we will see.
DeleteIt looks like the country has been irrevocably damaged by the progressive takeover of all government, media and religion. Nothing left to do but get out of the way and watch.
ReplyDeleteUnrelated, have you seen the USDA 3million dollar feed honeybee program:
http://www.chron.com/news/science/article/USDA-spending-3M-to-feed-honeybees-in-Midwest-5265235.php
Sf - Interesting. I see it isn't offered around here but Missouri doesn't really need it as much having so much rough areas and large border stretches or wild fora. Maybe that's why Missouri doesn't suffer as many CCD deaths as other states.
DeleteSo Detroit took out loans that never should been made and is now in trouble. In responce Fitch is threatning that if they aren't paid in full it will be even more difficult to take out stupid loans in the future; and moreover the taxpayers will really pay next time.
ReplyDeleteThe logic doesn't flow.
Best,
Dan
Dan - That isn't really the end all of it ether. The entire system of public works and administration is dependent on Bond sales. Even private ventures that might benefit a local area are typically financed with Bond sales. A ruling of this nature will not just hurt Detroit's bond margins but the entire countries and that is simply one small aspect of it or could be depending on what the final judgement ends up being.
DeleteWhen you consider that pension plans are big holders of bonds, it only gets more interesting.
Delete