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Reblogged: Does Detroit Matter For You?

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Everyone knows Detroit has long been the “sick man” of American cities.

What you don’t want to do with the story of Detroit’s bankruptcy, however, is dismiss it, just because you don’t live there.

A couple years ago financial analyst Meredith Whitney made waves in a 60 minutes interview where she predicted hundreds
of municipal bond defaults.  (https://www.youtube.com/watch?v=hI-rIGyLri4)

Whitney fell into a classic trap, which I myself have fallen into, of failing to appreciate just how corrupt government has become, and just how sophisticated the financial system is at accounting fraud, especially when governments need to keep the truth from the public, and she spoke too soon, which has allowed a lot of people to dismiss her views.

When you fall into the trap of thinking that the world is a rational place, and that investors will somehow aggressively force markets to “mark to market” the reality of any particular situation, you just are not factoring in the deeply rooted corruption in the alliance of government and the financial system.

Eisenhower warned us of the military-industrial complex.  He didn’t see the much more insidious financial-espionage complex coming, but that’s the real story.

The municipal bond market has yet to blow up, but this is not good news. It just means that the financial system, which is married to government, is masking the truth.  They are, as many commentators like to say “kicking the can down the road.”  It has become the essence of the profession, and they are really good at it.  But eventually, the truth will out.

To understand what this means for you, as the Greater Depression picks up steam, you need to look at your local government.  Now.

Detroit is front page news, and it’s going to be messy. Watch that from afar. But if you are in California, go visit Stockton.  If your in Pennsylvania, dig into the Harrisburg story. Get a sense for what this picture looks like. It will be widespread before long.

It will be a bumpy ride.  And to be sure, there will be many efforts to have states bail out municipalities, and to have the federal government bail out everyone else.   But the process won’t be smooth, and you don’t want to be in any of the hot spots, no matter what.

Whitney is sticking with her call, and says it will be “one of the biggest issues over the next five years.” (

) Of course, I disagree with her that education shouldn’t get cut. Public education should be abolished. THAT would actually spur America’s recovery. What I agree with Whitney about in particular is that some places in the US will actually do well– possibly, I anticipate, through the entire Greater Depression. Texas is one state-sized possibility.

If you are in a position to move, you should be proactive about it.

California is a fiscal wasteland. Taxes there will rise and rise and rise, not to mention the calamity which will be Obamacare. Get out while you can, especially with housing prices levitating again.  Illinois, of course, is a mess too.

One of the phenomena that will characterize the Greater Depression is huge internal migrations within the United States, which will at once severely exacerbate the fiscal position of states like California, if not lead to their outright collapse, while at the same time benefiting states like Texas.

One what end of that equation do you want to be?

There is sometimes a huge advantage to being an “early adopter” in a trend.  In this case, there definitely is.  Keep this in mind, as a personal strategy for coping with the changes coming to America. It could make the difference for you and your family.


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