Apparently at least as a result of extreme budget constraints, the city has implemented cuts of basic services including the police force which since early 2012 has instituted a policy of "virtual precincts", an interesting euphemism for a absence of police response to citizen complaints between 8:00 p.m. and 4:00 a.m. a policy which over the past year is largely responsible for an increase in justifiable homicides more that 2200 % of the national average. http://www.dailymail.co.uk/news/article-2097467/Vigilante-justice-rise-Detroit-justifiable-homicides-jump-79-cent-year.html Just this month after mayoral candidate Mike Dugeon himself became the victim of a carjacking on August 2, the police "beefed up" patrols.
Ignominiously discarded, after decades of benign neglect, into receivership under a bi-partisan mandate sanctioned by the Republican governor Rick Snyder, the Democrat mayor Dave Bing, with the active coordination of the Obama regime and under the aegis of millionaire Wall Street bankruptcy lawyer Kevyn Orr, the vast 143 square mile megalopolis, once a thriving showcase of American technological ingenuity, now faces not only the legacy of the systemic decades long flight of capital and industry to foreign shores but also the ensuing and financially destructive investment and accounting practices which have pegged the city's municipal bonds and pension funds to Interest Rate Swap derivatives.
Not surprisingly though, and disingenuously ignoring the infernal complexities of post Glass-Steagal Wall Street derivative investment practices, we have the mayors of other major American metropolises chiming in a chorus of unison over the apparent major role of underfunded pension obligations in the bankruptcy the funding of which they are proposing to summarily and conveniently excise from the budget as Mr. Orr is presently accomplishing in Motown with the arguably dictatorial powers of emergency financial manager. Under Orr's plan, the city's payment as counter party on the losing end of the Interest Rate Swaps (little more than bets on interest rates) would be discounted 25%, thus compensating the holders of the swaps, Bank of America and UBS.
"Orr gave the swaps payments, as secured debt, priority over retirees and holders of unsecured debt, including the pension borrowings. While swaps holders would take a 25 percent cut in payments, other creditors would receive much less".http://www.bloomberg.com/news/2013-07-16/detroit-said-to-reduce-swaps-debt-by-25-in-orr-deal-with-banks.htmlIn other words the city's pensioners, 21,000 retirees, 10,000 active city workers, and other "unsecured" creditors were shunted to the end of the line behind the big banks much like the depositor creditors of Jon Corzine's MFGlobal's stunning $200 billion default. Meanwhile the billionaire NYC mayor Michael Boomberg, Chicago's mayor Rahm Emanuel, and LA overlord Eric Garcetti, all democrats, began their predictable mutual recrimination of pensioners. Bloomberg's comments were pretty much typical of the mayor's pro-corporate willfully ignorant, and homogenous reaction.
“One of the major reasons that Detroit could not stop its downward spiral was that its labor costs—especially its retiree costs for pensions and health care—crowded out its ability to invest in the things that make a city an attractive place to live and visit.”In view of the fact that even the captured, "regulatory" minions at the CFTC are investigating whether 15 banks instructed brokers to illegally manipulate the ISDAfix, the benchmark rate for Interest Rate Swaps, to guarantee higher payments, there is more than a reasonable possibility that the investment houses are tweaking the interest rates to reap windfall profits at the expense of Detroit and other US cities much like the now infamous and unresolved LIBOR rate scandal.
Bloomberg’s speech culminated in a blunt threat to workers and retirees in America’s most populated city. “We are only a short distance from relapsing into decline if we allow health care and pension benefits to crowd out the investments that make New York City a place where people want to live, work, study, and visit,” http://beforeitsnews.com/economics-and-politics/2013/08/detroit-bankruptcy-provokes-calls-for-nationwide-assault-on-pensions-2455564.html
Such rank corruption and fraud across the financial sector has become by now common knowledge and yet remains largely unaccountable and immune from prosecution as the corporate sector remains seamlessly merged with government and regulatory agencies as exemplified in the case of former White House Chief of Staff Emanuel, a former Wall Street investment banker and Bloomberg whose corruption needs little recounting.
That this situation cannot proceed much longer however has become amply demonstrated by the inexorable rise of yields in the TNX 10 year US Treasury bond which is flirting with the critical 2.75% rate, an alarming trend which not only demonstrates the first waves of inflation leaking into the markets but also the first cracks in the interest rate derivative markets. It is probably no accident that the Detroit bankruptcy coincides with these critical developments in IRS derivatives which Jim Willie describes as massive flying buttresses supporting the bond market which will crumble with rising interest rates as in the TNX. In this respect we have the following from Hugo Salinas Price on King World News.
"I think we are going to see a series of bankruptcies. I think the rise in interest rates is the fatal sign which is going to ignite a derivatives crisis. This is going to bring down the derivatives system (and the financial system).
There are (over) one quadrillion dollars of derivatives and most of them are related to interest rates. The spiking of interest rates in the United States may set that off. What is going to happen in the world is eventually we are going to come to a moment where there is going to be massive bankruptcies around the globe."http://theeconomiccollapseblog.com/archives/billionaire-issues-chilling-warning-about-interest-rate-derivatives
|Financial hit man Orr|
“For a long time the city was dumb, lazy, happy and rich.” The period of post-World War II economic growth, he complains, “allowed us to have a covenant that held if you had an eighth grade education, you’ll get 30 years of a good job and a pension and great health care, but you don’t have to worry about what’s going to come.”http://www.wsws.org/en/articles/2013/08/07/korr-a07.htmlMeanwhile Chinese investors along with the ubiquitous international hedge funds have descended on what remains of the once vibrant city to scoop up urban properties at fire sale prices and steep discounts. http://endoftheamericandream.com/archives/why-are-the-chinese-gobbling-up-real-estate-and-businesses-in-detroit
Of course, this is nothing new to the state of Michigan which like so many other Chinese "economic opportunity zones" is being carved up piecemeal and being auctioned off to the Chicoms at bargain basement prices. The southeastern Michigan city of Milan, a 40-minute or so commute to Toledo or Detroit industrial centers, might become the new home for a 200-acre or larger “China City” that would house Chinese business people. Milan, a city of 6,000 surrounded by farm fields, is the locale for an unusual deal in the industrial heartland as the rocky relationship continues between the People’s Republic of China and the United States. A group of mainland Chinese known as Sino-Michigan Properties LLC paid $1.9 million for 200 acres of farmland on Milan city limits in purchases this year and in 2011, according to local officials and property records.http://www.daytondailynews.com/news/business/michigan-town-near-ohio-could-become-china-city/nNrWn/