I’m sort of half-heartedly watching the city of Detroit going through the motions of deciding to give up its self-governance to the state of Michigan. It’s amusing, but in that “pulling my hair out” sort of way. In a recent last ditch effort to buy more time, the city is trying to raise something like $130 million in a bond offering.
You’d have to be an idiot to buy them for anything less than pennies on the $10,000. There’s about zero chance of ever getting your money back from this sink hole.
Basic projections have Detroit running out of money sometime next Thursday, which means they’re already out of money and busy raiding pension funds, charity institutions, etc. Anything with standing cash they can spend is most likely flying out the door.
So naturally all the local poltical contenders are busy putting on a show; claiming the state is robbing them, threatening to take to the streets in civil uprising, contending that they’re owed bailout money from the rest of the state, refusing to accept any responsibility or oversight as an affront to Democracy,….
My favorite is a few of the “less sentient” of the city council who seem to think they can hardball the state into better terms by refusing to vote for the current aid package, which would avoid a direct takeover and resort instead to a series of checks and reviews. Money with no strings attached; that’s the only acceptable outcome for them.
Ha, they really are just clueless on how leverage works! They have zero bargaining chips; they’re holding a 2 of hearts, and 7 of clubs, a Draw Four card from an Uno deck, and a parking validation ticket…in five card stud. And they’re trying to bluff Snyder, who’s holding a suited straight and already has all the chips.
What a mess. I await the Emergency Financial Manager with glee. Hail Caesar!
In other news, the EU is going to up their firewall/bailout to 1.1 trillion euros. Let’s go back through the last six months. This is including the 400 billion euros they appropriated last Fall. Plus the LTRO which brings the total “euros from nowhere in particular” to 2.1 trillion.
This is to keep governments running, because tax receipts are caving. But more, the EU governments need to keep rolling their debt over. So every one of those euros (plus at least another trillion if my predictions hold) is committed.
And what is all this money buying?
Nothing. The answer is: this is what they need to sustain their current economic activity, which is contracting at almost double digit rates. All these trillions in dilutive currency get them no economic stimulus whatsoever.
So I will say it again. The euro and the dollar are going to par, and when they do, we’ll see what you think of the US and emerging market economies then, now won’t we?If you enjoy the content at iBankCoin, please follow us on Twitter