Detroit is broke……again

In October of 2012, President Barack Obama triumphantly declared he “refused to throw in the towel” and “let Detroit go bankrupt.” Continue reading →

California Pension System Imploding

With Detroit bankruptcy being approved just a few weeks ago look for many other municipalities and possibly states to use similar methods to fend off economically impossible to meet financial demands.
The next bankruptcy is best captured in the LA Times article entitled “California pension funds are running dry” :

The state’s pension goliath, the California Public Employees’ Retirement System, had $281 billion to cover the benefits promised to 1.3 million workers and retirees in 2013. Yet it needed an additional $57 billion to meet future obligations.

The bill at the state teachers’ pension fund is even higher: It has an estimated shortfall of $70 billion.

Bankruptcy has already happened in some California towns.

Meanwhile, cash-strapped cities are facing escalating bills. Rising pension costs contributed to bankruptcies in Stockton, San Bernardino and Vallejo.

The man behind the transparency movement in California is state Controller John Chiang. He started a website tracking a towns finances for the public to see and it grew from there.

Detroit: Land of the Wheelchair Ramps

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The Associated Press has come out with a story over Detroit going on a wheelchair ramp installation binge:

Along one half-mile stretch of crumbling sidewalks in Detroit, there are 52 new sets of wheelchair ramps. Some provide access to an empty lot where a middle school was razed in 2009. On many corners, sidewalks end after the ramps.

The ramps are being built as part of a decade-long effort to force Detroit into compliance with the Americans with Disabilities Act. But the efforts are facing criticism as the bankrupt city installs ramps in areas with little traffic while well-traveled areas, including some near downtown, still don’t have them.

This is a perfect example of the insanity that has gripped the nation in the past  decades from the “Regulation Industrial Complex”. I fully grasp the legality of the lawsuits but Detroit is a physical and financial mess. This is the furthest of things to do in order for the city to get going again. Of course this type of action comes with a price tag:

The city has spent $30 million over eight years to install 25,000 ramps, and officials estimate that $60 million more must be spent to build another 50,000

Here in a few years Detroit will be the world’s most compliant wheelchair ramp city. Hopefully the users who go there to enjoy them take their firearms when they end up the run down drug infested neighborhoods.

Gold & “Detroit Is Back”……To Being Broke

Detroit, MI is broke but not a lot of people want to accept it publicly. People are leaving in droves and the city is deteriorating physically. Personally, it is amazing passing through the city then crossing over into Windsor, Canada and seeing the stark difference of economic situations. Two different worlds separated by one body of water. From a satire point of view, watching the Presidential 2012 Election, our current President touting “Detroit is Back” was a flat out lie but the masses accepted his message.

Less than three months after the elections, the city was taken over by the state itself. The city is bleeding money and has debt that probably will not be paid back. Now CBS Detroit is reporting the latest:

Detroit’s emergency manager says the city is bleeding much more red ink than originally thought. That’s what Kevyn Orr told WWJ City Beat Reporter Vickie Thomas in an exclusive one-on-one interview. “The situation is severe,” Orr said. “It’s worse that we originally thought. It ain’t good.” With just 39 days under his belt, Orr is already putting the final touches on a draft of his 40-plus page financial report, which must be submitted to the state on Monday.

They have accumulated about $15 Billion in long term debt. Operating debts are now pinging at $18-$20 Million/year.

Bottomline, Detroit is going to go bankrupt and the news will wave it off as “No big deal”. Cities are facing enormous pressure due to geographical population shifts and long term financial promises that are very generous.

GOLD
Some interesting data on gold has come out. Gold value has suffered some price drops in the last few months due to money moving out of it and into equities(stock market). Now some new data is showing massive purchases of it. Here is some data I received from my investor advisor:

Chinese gold imports in March exploded to an all time record high of 223.5 tons. This follows 97.1 tons in February, and brings the total imports for the first quarter of 2013, to 372 tons, on par with what China imported in the entire first half in 2012. It also means that since January 2012, China has imported an absolutely stunning 1,206 tons of gold. Putting this number in context, this is 20% more than the entire report of official gold holdings of 1054 tons of the PBOC, and represents roughly half of the total 2500 tons of gold mined every year.

One more interesting financial aspect of gold….

US bullion dealers have characterized the demand for the physical form of gold as the strongest since the immediate aftermath of the Lehman Brothers collapse in 2008 and, in some cases, the strongest on record. The spike in demand caused a shortage among American Eagle gold bullion coins at the U.S. Mint in April. The U.S. Mint told authorized purchasers on April 22 that it was temporarily suspending sales of the one-tenth-ounce gold bullion coins “while inventories can be replenished,” as year-to-date demand for those coins was up 118% from the same time last year.

Gold could be very spectacular in price movement in the next six months. It maybe wise to accumulate some now to enjoy the plus side in the long run.