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 thenelli01

Paul Krugman on Detroit

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http://www.nytimes.com/2013/07/22/opinion/krugman-detroit-the-new-greece.html?smid=tw-share&_r=0

 

 

 

...Are Detroit’s woes the leading edge of a national public pensions crisis? No. State and local pensions are indeed underfunded, with experts at Boston College putting the total shortfall at $1 trillion. But many governments are taking steps to address the shortfall. These steps aren’t yet sufficient; the Boston College estimates suggest that overall pension contributions this year will be about $25 billion less than they should be. But in a $16 trillion economy, that’s just not a big deal — and even if you make more pessimistic assumptions, as some but not all accountants say you should, it still isn’t a big deal.

 

So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces....

 

Edited by thenelli01

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The implication that $25 bil in a $16 tril economy is no big deal is that monies can easily be shifted to account for the discrepancy. "From whom?" To Krugman, wealth is causeless. The good is the social good, whatever that is for the nonce.

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http://observer.com/2013/07/editorial-lessons-from-detroit/

"In Detroit, the policies of candidates who posed as “friends of the unions” have now brought enormous pain and fiscal woe to the very pensioners who trusted them. Killing the goose that laid the golden egg is not being a friend—it’s madness.

New York cannot afford the pensions and benefits of a half-century ago, when people lived shorter lives and health care costs were more manageable.

 

Edited by SDE13579

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I don't think he's handwaving just $25 billion, it looks like he's doing so for $1 trillion.

When I read the whole op-ed in the NYT, I simply could not comprehend that he would say it's "not a big deal" as an economist. All I see Krugman now as is that he is simply a liar rather than merely wrong. I misread it as him handwaving $1 trillion too as $25 billion, like aleph_0 did. Look carefully enough, and it looks like Krugman threw in the $25 billion number in as a distraction within a larger sentence, presumably so he can get away with what he writes. In a separate NYT op-ed, someone else did the same sort of bait and switch that hopes you're angered or emotional enough to miss what *actually* was said.

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I asked a friend of mine who lives near Detroit about the bankruptcy and this is what he said (paraphrasing): "It makes no difference. We got no services from the city before, we get no services now. People are finally not being paid for the work they never did. If there is a burglary at your home in Detroit, call Dominoes Pizza, not the cops. The average police response time is 58 minutes. The average Dominoes response time is 25 minutes, and the Dominoes guy always brings a gun."

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One trillion is the total shortfall over a number of years, which presumably comes out to $25b/year more than is already projected to be spent (i.e. with the new "extra steps" he mentioned). I don't know all of the figures, but that sounds quite plausible. $1T over, say, 20 years is $50B/year, and the assumption here is that the current measures going into effect will already get them half way there, thus leaving a net deficit of $25B/year.

 

And yes, being a macroeconomist, Krugman doesn't see $25B (.18% of current GDP) as a big deal that should cause the USA to drastically change its domestic policy or pillar the entire idea of pensions in general. You might think that the USA should change its policies, but using this as an example as to why is just going to make you look retarded.

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And yes, being a macroeconomist, Krugman doesn't see $25B (.18% of current GDP) as a big deal that should cause the USA to drastically change its domestic policy or pillar the entire idea of pensions in general. You might think that the USA should change its policies, but using this as an example as to why is just going to make you look retarded.

In the long run we're all dead, so your money is my money and it's all good. Of course, as a retarded Krugman fan-boy, you'll never understand that.

Edited by softwareNerd

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When someone says that a pension fund is underfunded by $1 trillion they got that number by doing a net present value calculation which uses a discount rate to discount future cashflows. Usually this rate is the risk free rate, ie the rate paid on government bonds. With this being unusually low right now, this gives pension liabilities 100 years in the future undue significance for today's shortfall figure. In other words, the shortfall is probably much less than $1 trillion.

 

Even if interest rates never rise, and so pension liabilities continue to be discounted lightly, $25 billion a year really isn't much in the context of the US economy. It means either cutting services slightly, raising taxes slightly, or reneging on pension promises to local government workers slightly eg making them work longer before collecting the pension, etc. None of these things are welcome, but they certainly do not mean that the USA is akin to Greece, which is the point that Krugman is making.

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When someone says that a pension fund is underfunded by $1 trillion they got that number by doing a net present value calculation...

I wish this were true, but the amount by which a pension is underfunded is not the NPV of future shortfalls. No discount is involved. Instead, what is involved is projection of future rates of return and of life-expectancy. If the pension includes a cost-of-living adjustment, then it also involves a projection of the CPI.

The typical public sector pension assumes that the amount that has been funded will be placed in a mix of investments: government bonds and the stock-market. Today, projected returns are in the 7%-8% range. Today, the 10 year govt bond returns 2% and the 30-year returns 3%, both nominal. The inflation-adjusted TIPS bonds are under 2% (inflation-adjusted) for both 20 and 30 year. So, the 7% rate is barely plausible today, even if we assume a little more than 50% in stocks and also assume stocks will perform at historical levels.

There is no doubt that Detroit pensions and the pensions of many other municipalities are underfunded. (The health-care promises are even worse.)

 

... $25 billion a year really isn't much in the context of the US economy. ... ..., which is the point that Krugman is making.

When the gas tax is increased by a few cents, supporters will say it's just a few cents. And then again next time, and so on. Do you know why there is a shortfall of $1 trillion in these pensions? It is because when the shortfall was $100 billion, and $250 billion, and $500 billion someone like Krugman said it was not a big deal, and everyone moved on.

Of course $1 trillion is not a huge deal for the U.S. government to pay off over time, but the attitude that it is not a problem is the exact one that causes the problem to be blown up until it bursts. Krugman, like all Keynesians, looks at everything from a short-term perspective, of perhaps a decade.

You can hear the echo of this type of thinking coming on the monetary side from Alan Greenspan, who said that the country would not have tolerated more of a downturn after the dot.com bubble, so he decided to lower rates and let people monetize their homes. All the while, Krugman was similarly spinning his yarns about it not being a big deal.

Take the Euro and the 13 years or so when everything seemed so cool for southern Europe as their rates were close to Germany. No problem! And a Euro-sceptic who bet against it probably lost money because insanity lasts longer than a short position. Meanwhile, people making a few extra points on greek bonds were laughing their way to the bank... ... until they weren't. This story has repeated so many times that only rationalism that evades history allows people like Krugman to think their theories work in any long-term sense. 

 

Under realistic assumptions, the public liabilities of the U.S. government are about $15 - $20 trillion. So, $1 trillion is not much if one looks at it by that scale. However, that is really besides the point. The real issue is this:

 

1. Why should my child pay for the unfulfillable promises made to some Detroit cop? It is a problem that he is going to be asked to pay. Krugman's argument boils down to saying that my kid will not have to pay much; but this is not Krugman's money to give away. 

 

2. Secondly, this attitude is delusional when the debt as a percentage of GDP is projected to keep rising.Then, you have a Japanese scenario, where you keep kicking the ball down the road for decades. The reason US debt is 100% of GDP is that when it was 50% of GDP, Keynesians said it was not a problem. 

 

So, it is very much a problem. To anyone who says that Detroit is not as bad as Greece, I invite them to come to Detroit and look around, or use the net to do so. Detroit is in far, far worse state than Greece. Even Krugman in his article conveniently, and dishonestly, talks about the Detroit metropolitan area. I'm sorry, but as someone who lives in that area, Detroit is not my problem. I would rather see it razed to the ground than to see one dollar go from my taxes to subsidize more waste. It is wrong to say unctuously that Detroit is not Greece, because there is much less that Detroit can do unless we other pay for its sins. And Krugman, in effect, says: "hey, you can afford to be fleeced just a little to pay for decades of corruption and evasion".

Edited by softwareNerd

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[...]

When the gas tax is increased by a few cents, supporters will say it's just a few cents. And then again next time, and so on. Do you know why there is a shortfall of $1 trillion in these pensions? It is because when the shortfall was $100 billion, and $250 billion, and $500 billion someone like Krugman said it was not a big deal, and everyone moved on.

[...]

 

So... Krugman should do the "right thing" and manufacture a crisis where there isn't one? Sorta like your parents telling you not to make faces because it might stay that way?

 

I think your explanation here is far too narrow for starters. We all know the deeper philosophical reasons behind a shortfall like this.

 

Criticizing Krugman in this case is shooting the messenger...

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I wish this were true, but the amount by which a pension is underfunded is not the NPV of future shortfalls. No discount is involved. Instead, what is involved is projection of future rates of return and of life-expectancy. If the pension includes a cost-of-living adjustment, then it also involves a projection of the CPI.

 

A pension shortfall is the NPV of future liabilities minus the NPV of future assets. From the paper Krugman linked to:

 

 

http://crr.bc.edu/wp-content/uploads/2013/07/slp_32.pdf (bold is mine below)

 

The funded ratios presented above follow GASB’s  existing standards under which assets are reported on an actuarially smoothed basis and the discount rate is the long-run expected rate of return, which has been around 8 percent (although many plans have recently lowered their assumptions). Most economists contend that using the return on the plan’s assets produces misleading results. The returns on the bonds and stocks in the pension fund include premiums to cover the risk of holding these assets. Discounting pension benefits using the expected yield on these securities implies that the entire yield is available to help pay future benefits, making no allowance for the cost of expected losses, which is represented by the risk premium. Standard financial theory suggests that future streams of payment should be discounted at a rate that reflects their risk.3 In the case of state and local pension plans, the risk is the uncertainty about whether payments will need to be made. Since these benefits are protected under most state laws, the payments are, as a practical matter, guaranteed. Consequently, to assess accurately the status of a plan warrants discounting its stream of future benefits by the risk-free interest rate.

 

So it seems that in the US you guys discount by the expected rate of return (in the UK we use the risk free rate as economists recommend which is what I assumed you guys did). So reading the paper further, the $3.8 trillion number is the gross liabilities, with $1 trillion being the net, when using an 8% discount rate. When using a 5% discount rate (which is still way way above the risk free rate! so still much too generous) those numbers shoot up to $5.5 trillion gross, $2.7 trillion net. So the situation is actually worse than Krugman reports, not better as I wrote above.

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So the situation is actually worse than Krugman reports, not better as I wrote above.

But you see, in a sense it does not matter. Let's say it is $250 billion. It is still a huge problem. Krugman says it is not a crisis? Well, he's fighting a strawman because -- unfortunately -- nobody mainstream thinks it is. And why don't people think it is a crisis? Because if it is a trillion, or $500 billion, or %250 billion, then some tax-payer will be made to pay and he will still live. 

This is Krugman's mentality. People like him, over the decades, are the cause of the casual attitude toward government debt and toward taxing people just a bit more. When the income tax was introduced it was pretty low. What's the big deal... people can handle it... not a crisis. This is the "boil the frog slowly" idea. people get used to paying a small tax, then it is raised a bit, and on and on. 

Finally, almost everyone from the New York Times to Bill O'Reilly think that it is not a big deal if a middle class person is forking out 30-40% of his income in taxes. it is never a problem, never a crisis. Only death is a real crisis... which is why the ultimate motto of every Keynesian ought to be: in the long run, we're all dead. 

 

Krugman and others like him, going all across the party spectrum to historian and equally political Newt Gingrich, think that redistribution is right and proper. "No problem here, move on", that's their message.

Edited by softwareNerd

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But you see, in a sense it does not matter. Let's say it is $250 billion. It is still a huge problem. Krugman says it is not a crisis? Well, he's fighting a strawman because -- unfortunately -- nobody mainstream thinks it is. And why don't people think it is a crisis? Because if it is a trillion, or $500 billion, or %250 billion, then some tax-payer will be made to pay and he will still live. 

This is Krugman's mentality. People like him, over the decades, are the cause of the casual attitude toward government debt and toward taxing people just a bit more. When the income tax was introduced it was pretty low. What's the big deal... people can handle it... not a crisis. This is the "boil the frog slowly" idea. people get used to paying a small tax, then it is raised a bit, and on and on. 

Finally, almost everyone from the New York Times to Bill O'Reilly think that it is not a big deal if a middle class person is forking out 30-40% of his income in taxes. it is never a problem, never a crisis. Only death is a real crisis... which is why the ultimate motto of every Keynesian ought to be: in the long run, we're all dead. 

 

Krugman and others like him, going all across the party spectrum to historian and equally political Newt Gingrich, think that redistribution is right and proper. "No problem here, move on", that's their message.

 

But people absolutely do call it a "crisis":

 

http://en.wikipedia.org/wiki/Pensions_crisis

 

Now, are your going to blame PK and his ilk for a problem caused by a thousand years of bad philosophy? Krugman is merely mainstream, which is the case for the scientists who will invent the medicine which will keep you alive longer, the case for the hedge funder who will fatten your retirement, the case for the inventor of the next iPad or Xbox or other gadget you will enjoy, the case for the teacher who will teach your children Algebra. Are you going to join the Amish people and boycott all of them? It would be the same thing. Krugman is doing simple math and drawing a conclusion from it. The premises he uses are the same as everybody in the main stream. Blaming him is not useful. Contradicting his facts is not useful. This analysis, therefore, is not useful.

 

Here, try this one instead:

 

"The divorce from reason caused by Kantian epistemology has caused the typical mainstream politician, newspaperman, editor, community leader to be unable to think in principles, which is what is required, for instance, to understand the implications of long-term contracts e.g. pensions."

 

...or something along those lines. I'm sure if I had more time I could write a "Chicken's Homecoming" sort of article about Detroit. The blame properly belongs on the level of philosophy. Blaming somebody like Krugman for pointing what is obvious within everybody's set of premises (including his so-called enemies) is pointless, particularly when you are criticizing his virtues in intellectual precision within a set of premises. This sort of attack will achieve the opposite of what you are trying to accomplish in the long run.

Edited by CrowEpistemologist

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As someone who has been using his right hand to give directions his whole life, I can’t help but wade into this!

 

Detroit has been declining for 30 years and has lost over a million of its population since it was the motor and music capital of the country.  Personally I’m more disappointed over the later but that is a different thread.  Detroit has been managed badly and ineptly, both by those who appear to be honest but misguided as well as those who are completely corrupt. 

 

The problem is three fold.  First, it is the Keynesian spending fallacy and apologists like Krugman only perpetrate the fraud.  It is understandable your average Joe would not get the problem, especially in the light of today’s education standards, but the fact is even then they are dependant on specialists who should know better.  Krugman is that specialist and he does know better.  The fact he clearly had access to this information and blows it off as irrelevant shows the depths of his ability to fraudulently defend spending money that doesn’t exist and to be paid “sometime” by those he considers irrelevant since power brokers push numbers and make it happen in that beautiful black box macroeconomists simply leave blank on the flow chart.   

 

The fact he conflates a local issue with national numbers is also a symbol of this.  He does not see a city that cannot pay its bills, but a nation that should be centrally planned and in his dystopia irrelevant since its one TARP scheme to move on the ledger.  To bad the cold fact is this is a huge dept in context of the Detroit economy and the pension funds could not even be supported by the Michigan economy.  Thus the shell game switch to national comparisons, it pushes the issue to national context dropping when in fact no city, the entity he forgets is responsible for irresponsibly spending unearned wealth on obviously ridiculous and  unsustainable contracts to buy a voting block, can continue to ignore such facts of reality. 

 

Two – The contracts themselves; I’m pretty sure I do not have to explain how unreasonable these are here. They were unsustainable when they were new and the economy was better.  They ignored them then since the politicians got to grab votes and kick the can down the road and once again the Keynesian apologists got their golden ticket by giving it their stamp of approval.  50 years later having Krugman do this is just another nail in the coffin when the facts are painfully obvious…   Even a fifth grader understands that bankruptcy is a sign of a problem. 

 

Three – Detroit has lost a million people in 3 decades.  There are NO tax payers to pay for this.  Last year the police went to the baseball playoff game and handed out flyers warning visitors to Detroit that they could not protect them!!!  The business climate is crap and there is no incentive for a business to go there. This is not an excuse but a painful demonstration of the problem because Detroit has accelerated it.   

 

If you want to understand Detroit, think of driving down a beautiful country road and seeing a yard with an old automobile out in the long grass and completely rusted out.  You know what it is and once looked like but it is a very sad shell of its former self.   That is Detroit. 

 

Detroit is not in a temporary funk that can be tossed aside with the wave of a hand and a few accounting tricks.  It is flat lining into a symbol of the dead end resulting from bad economics and a mixed economy.  It is a warning of the future if we keep doing the same nonsense that got us here.  Krugman is white washing all of this by ignoring painful facts that you can look at and see if you look out of the ivory tower.  There is a special place in Dante’s Inferno for men like him and it’s somewhere between the collectivists and egalitarians. 

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People have been failing to plan ahead for a thousand years before either Keynes or Krugman.

 

Paul Krugman never said that "bankruptcy is not a sign of a problem".

 

You said that PK is "whitewashing facts" without any actual example of things he actually said, but rather your argument seems to be:

 

1. Paul Krugman is a Socialist.

 

2. Socialists are always wrong about Everything.

 

3. Detroit was caused by people being wrong about things.

 

4. Therefore Detroit was caused by Paul Krugman.

 

5. Therefore everything anybody says that is false was also said and advocated by Paul Krugman.

 

Folks, you are helping the cause of a socialist by coming up with lame attacks like this...

 

Paul Krugman said, "30,000,000,000 / 14,000,000,000,000 = a small number". That statement was true, as it was reasonable. We should advocate reason, not attack it.

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Paul Krugman said, "30,000,000,000 / 14,000,000,000,000 = a small number". That statement was true, as it was reasonable. We should advocate reason, not attack it.

Missing the forest for the trees...

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People have been failing to plan ahead for a thousand years before either Keynes or Krugman.

 

Paul Krugman never said that "bankruptcy is not a sign of a problem".

 

You said that PK is "whitewashing facts" without any actual example of things he actually said, but rather your argument seems to be:

 

1. Paul Krugman is a Socialist.

 

2. Socialists are always wrong about Everything.

 

3. Detroit was caused by people being wrong about things.

 

4. Therefore Detroit was caused by Paul Krugman.

 

5. Therefore everything anybody says that is false was also said and advocated by Paul Krugman.

 

Folks, you are helping the cause of a socialist by coming up with lame attacks like this...

 

Paul Krugman said, "30,000,000,000 / 14,000,000,000,000 = a small number". That statement was true, as it was reasonable. We should advocate reason, not attack it.

 

Wow. 

 

I said none of that.  Try reading it again and I'll be glad to address a real question on the content that is actually there.

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As someone who has been using his right hand to give directions his whole life, I can’t help but wade into this!

 

Detroit has been declining for 30 years and has lost over a million of its population since it was the motor and music capital of the country.  Personally I’m more disappointed over the later but that is a different thread.  Detroit has been managed badly and ineptly, both by those who appear to be honest but misguided as well as those who are completely corrupt. 

 

The problem is three fold.  First, it is the Keynesian spending fallacy and apologists like Krugman only perpetrate the fraud.  It is understandable your average Joe would not get the problem, especially in the light of today’s education standards, but the fact is even then they are dependant on specialists who should know better.  Krugman is that specialist and he does know better.  The fact he clearly had access to this information and blows it off as irrelevant shows the depths of his ability to fraudulently defend spending money that doesn’t exist and to be paid “sometime” by those he considers irrelevant since power brokers push numbers and make it happen in that beautiful black box macroeconomists simply leave blank on the flow chart.   

 

The fact he conflates a local issue with national numbers is also a symbol of this.  He does not see a city that cannot pay its bills, but a nation that should be centrally planned and in his dystopia irrelevant since its one TARP scheme to move on the ledger.  To bad the cold fact is this is a huge dept in context of the Detroit economy and the pension funds could not even be supported by the Michigan economy.  Thus the shell game switch to national comparisons, it pushes the issue to national context dropping when in fact no city, the entity he forgets is responsible for irresponsibly spending unearned wealth on obviously ridiculous and  unsustainable contracts to buy a voting block, can continue to ignore such facts of reality. 

 

Two – The contracts themselves; I’m pretty sure I do not have to explain how unreasonable these are here. They were unsustainable when they were new and the economy was better.  They ignored them then since the politicians got to grab votes and kick the can down the road and once again the Keynesian apologists got their golden ticket by giving it their stamp of approval.  50 years later having Krugman do this is just another nail in the coffin when the facts are painfully obvious…   Even a fifth grader understands that bankruptcy is a sign of a problem. 

 

Three – Detroit has lost a million people in 3 decades.  There are NO tax payers to pay for this.  Last year the police went to the baseball playoff game and handed out flyers warning visitors to Detroit that they could not protect them!!!  The business climate is crap and there is no incentive for a business to go there. This is not an excuse but a painful demonstration of the problem because Detroit has accelerated it.   

 

If you want to understand Detroit, think of driving down a beautiful country road and seeing a yard with an old automobile out in the long grass and completely rusted out.  You know what it is and once looked like but it is a very sad shell of its former self.   That is Detroit. 

 

Detroit is not in a temporary funk that can be tossed aside with the wave of a hand and a few accounting tricks.  It is flat lining into a symbol of the dead end resulting from bad economics and a mixed economy.  It is a warning of the future if we keep doing the same nonsense that got us here.  Krugman is white washing all of this by ignoring painful facts that you can look at and see if you look out of the ivory tower.  There is a special place in Dante’s Inferno for men like him and it’s somewhere between the collectivists and egalitarians. 

 

I don't know too much about Detroit, but I do know that declining cities are features of a currency union as are booming cities. They are inevitable if you have a unified currency (the US dollar) and free movement of labour (ie the USA).  If you didn't have a unified currency (ie if Detriot had its own Detroit dollar) then Detroit's currency would devalue against the US dollar and the city would become competitive again. This is basically what has happened recently to the UK with its seperate currency from Europe.

 

If you didn't have free movement of labour (ie if the USA banned Detroit workers from working in the rest of the USA in the same way as it bans Mexican workers from working in the USA), then Detroit's collapse would also be stemmed. This is akin to the situation in Europe, ie although their is freedom of movement of labour in theory, in practice language barriers prevent this. So this is akin to Greece - they will never totally collapse because Greek workers can't practically work in Germany or England.

 

I don't mention all this to suggest that the USA should implement separate state currencies or labour restrictions! Rather to point out that declining cities and states are an expected feature of America's economy as are booming cities and states. So I think the moral panic and hand wringing over Detroit is ridiculous.

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... ... declining cities and states are an expected feature of America's economy as are booming cities and states. So I think the moral panic and hand wringing over Detroit is ridiculous.

You're right that cities, like companies, can see bad times and can decline. Detroit's decline mirrors the decline of "downtowns" all over the U.S. as suburbs have flourished.

"Hand wringing" and "moral panic" are a bit vague. The intellectual and moral failure in cities like this is that the governments that ran them acted as if there was no decline, made promises they could not keep, and borrowed money they could not repay.

It is the same issue with a country like Greece that borrowed too much and allowed wages to rise. (On a per-capita basis Detroit's situation is far worse than Greece.)

The real hand-wringing is coming from the one-time employees who ought to have seen the writing on the wall a long time ago.

Further hand-wringing will be justified if someone else is stuck with the bill because the State or Federal government decide to chip in some money. Further hand-wringing will also be justified if the one-time employees end up being given a preferential deal vis-a-vis bond-holders through some creative reading of the law. (As of now, it seems as though this will not happen.)

As for Greece devaluing their currency: yes, they could have if they had one, but that's not really a good "solution". Similarly, bankruptcy -- like Detroit -- is not a good solution. These are both solutions only in the context of having first created problems that cannot be fixed without breaking sizable promises.

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I don't know too much about Detroit, but I do know that declining cities are features of a currency union as are booming cities. They are inevitable if you have a unified currency (the US dollar) and free movement of labour (ie the USA).  If you didn't have a unified currency (ie if Detriot had its own Detroit dollar) then Detroit's currency would devalue against the US dollar and the city would become competitive again. This is basically what has happened recently to the UK with its seperate currency from Europe.

 

Yeeeeahhh... not quite... I don't think moving the problem around like this would have solved the core problem. Certainly the implementation of a currency in any case is a very complicated thing, and small countries are basically rated in the same way as any private country would be anyhow...

 

The UK will enjoy the fact that they aren't stuck dealing with Greece (at least directly), but I don't think it changed their overall prospects that much...

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If you didn't have a unified currency (ie if Detriot had its own Detroit dollar) then Detroit's currency would devalue against the US dollar and the city would become competitive again.

If Detroit's currency started devaluing, residents would've left all the same.

If you didn't have free movement of labour (ie if the USA banned Detroit workers from working in the rest of the USA in the same way as it bans Mexican workers from working in the USA), then Detroit's collapse would also be stemmed.

And by the free movement of labor, you mean the free movement of people, of course. Because, last I checked, labor was done by people. And by restricting the movement of people you mean stopping everyone from leaving. And the only way a city can stop its people from leaving is with a giant wall, like the one in Berlin. Maybe land mines and barbed wire, like in North Korea.

I don't think that would've worked for Detroit, btw. I'm pretty sure that if Detroit's government tried to turn the city into a prison back when its residents started moving out, the result would be them hanging from the fences they built, not economic merriment. The American people are not quite ready for what you so obliviously decided to describe as "something other than free movement of labor".

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