Requim for Detroit

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One in five houses now stand empty. Property prices have fallen 80% or more in Detroit over the last three years. A three-bedroom house on Albany Street is still on the market for $1.
Unemployment has reached 30%; 33.8% of Detroit's population and 48.5% of its children live below the poverty line. Forty-seven per cent of adults in Detroit are functionally illiterate; 29 Detroit schools closed in 2009 alone.
But statistics tell only one part of the story. The reality of Detroit is far more visceral.
"Never get out of the car in that area people have been car-jacked and shot."
Law and order has completely broken down in the inner city, drugs and prostitution are rampant and unless you actually murder someone the police will leave you alone.
What makes all this so hard to understand is that Detroit was the frontier city of the American Dream not just the automobile, but pretty much everything we associate with 20th-century western civilisation came from there. Mass production; assembly lines; stop lights; freeways; shopping malls; suburbs and an emerging middle-class workforce: all these things were pioneered in Detroit.
But the seeds of the Motor City's downfall were sown a long time ago. The blind belief of the Big Three in the automobile as an inexhaustible golden goose, guaranteeing endless streams of cash, resulted in the city becoming reliant on a single industry. Its destiny fatally entwined with that of the car. The greed-fuelled willingness of the auto barons to siphon up black workers from the American south to man their Metropolis-like assembly lines and then treat them as subhuman citizens, running the city along virtually apartheid lines, created a racial tinderbox.
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On 13/03/2010 3:14 AM, Bjrn Helgason wrote:

So they killed the goose that laid the golden egg.
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What is and where is the golden egg?
Something rotten here - maybe it was misplaced somewhere.
As far as I know the goose is still trying to breathe and produce eggs even if they are not golden anymore if they ever were.
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On 13/03/2010 9:20 AM, Bjrn Helgason wrote:

On expensive intensive life support with a grim long term prognosis.
Fact of the mater is people have less to spend on autos, which means even though GM can't make them profitable today, they will not be profitable for some time to come as pricing pressures increase. And sooner or later out of control governemnt debt for GM and other leaches are going to see government pull back as they are broke. And GM has asub-zero credit rating.
Bad mix for GM futures.
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Government Motors will be cut down into pieces and killed off in time of trouble.
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On 13/03/2010 1:33 PM, Bjrn Helgason wrote:

No doubt, government would hatchet GM if it helped prop up government statism. And cash is getting in short supply, they can't create it fast enough, too many sucking on the hind. Sooner or later someone is going to shake them off.
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The film Requim for Detroit was on BBC tonight. Unbelievable how fast such a big and thriving city has fallen back to the basics back to petty crime, capital crime, drugs, burning houses, self destruction segregation and back to africa
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On 14/03/2010 1:42 AM, Bjrn Helgason wrote:

Certainly not the place I would move to. But remember they did it to themselves.

http://www.youtube.com/watch?v=-uAfyiqNUGw

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That is a very good question. Did they do it to themselves? They were lured by the good live from the south.
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On 14/03/2010 11:56 AM, Bjrn Helgason wrote:

Unquestionably they did it to themselves. Auto management executive and board, unions, politicians all had a hand into turning GM & Chrysler into needy greed slugs. As no one wanted to face reality for over two decades. Like stunned sheep infront of a train and ignored it. They all had a part. Then they squeal like wounded pigs when reality caught up to their bullshit and came right up and bit them on the ass.
Now we pay for it. But that is why the economy sucks, too much leaching, debt, dysfunction and hangers on the hind.
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Canuck57 wrote:

Hah! How cool - almost half a million dollars per North American GM job saved. That doesn't even meet the road-to-bankruptcy Keynesian "dollar multiplication" factors criteria.
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On 14/03/2010 3:36 PM, Bill Putney wrote:

Keynesian was a fraud. Just an excuse for governmetn to let common sense go to the wind.
Never seen anyone debt-spend their way out of debt to prosperity. Seen it dig deeper holes though.
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Canuck57 wrote:

You mean Keynes.
You may have missed my point, which was they often justify dumping more money to save a job than the job is worth by saying that every dollar spent means 7 or 8 (or whatever their b.s. number of the month is) dollars spent in the economy - IOW - they say you can justify saving a $20k job by borrowing $150 to save it.
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On 14/03/2010 6:21 PM, Bill Putney wrote:

Yep, but close enough. The theory of his is seriously flawed in several repects. The big one, it didn't factor in so much government debt and the ability to pay for that debt.

If you were 1000% for sure, sure enough to litterally put your liver, kidneys and heart on the bet that it would permanently solve the problem forever... I might be swayed. But it isn't realistic and the ROI isn't there in the near term or long term.
But the fact is GMAC for example has already have 4 bailouts. GM directly has $50 billion plus, and no one knows for sure how much in loan write offs and the spin offs like Delco, others suppliers and the like have cost but few disagree that the total has gone well past $100 billion for auto alone. Banks, even more.
What hasn't been measured is the loss of jobs BECAUSE of the bailouts. Governments can redistribute wealth but they can't create it. They can take a few thousand from every worker/family in the land and bailout GM for example. But then those same people spend less, even spend less on GM! They will be spending less in their own communities that would employ people there. Banks want lower debts before taxes go up as not to be burned so they reduce credit lines, which is prudent.
Then there is the fear factor. Why invest in USA or Canada? We don't know who is expected to pay for the 30% increase in debt and bailout costs! And that is signifigant enough to hold off and wait any business decision big or small. In fact, prudent to wait.
Then the preditory part. If people ar buying less cars, that means less labor. While you subsidise GM at the 2009 rate of $60,000 per auto they did sell, other companies lay off more people as they didn't ge the sale. Yep, Toyota, Nissan, BMW, Ford and others couldn't compete with subsidised GM auto so they laid people off. So the efficiency of saving "GM" has serious short comings.
The rational fact is bailouts are bad and inefficient and fix nothing. The problems remain and nothing but more debt to show for it. Your great grandchildren will be paying interest on the GM debt in 100 years.
Bailouts are corruption, easy to write them off and continue. A sunk cost of waste to mega proportions, but you can't 1/2 cut out cancer and expect to live.
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Compare how differently Germany and US treat similar situation.
Twenty years ago West Germany swallowed all of East Germany.
For the sake of the argument lets compare Berlin and Detroit.
All of East Germany was bankrupt and the unemployment was similar to Detroit.
All of united Germany has been struggling for 20 years because of this unification but it has been steadily building up and the criminality never became an issue.
Compared to Detroit there has hardly been any problem at all.
Both Berlin and of course all of East Germany was a much bigger issue than Detroit and GM but how things are treated is completely different.
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Strange as it may seem then comparing Berlin and Detroit facing similar challenge is like black and white.
It would be closer to reality to compare the demise of Detroit to Rumania or Bulgaria.
The whole social system of Detroit is bankrupt with schools closing and criminality rising.
That is better described by these former communist states who have not yet faced reality.
Who would have believed this to be happening in the US?
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On 14/03/2010 9:21 PM, Bjrn Helgason wrote:

Might be a good title for a movie, "Escape from Detroit".
I can actually. Too many union bums in the area. Often arrogant, bully, pig headed, self important piss ants. Now the bubble has broken.
I figure a basic auto worker is worth $12/hr and basic benefits for a 40 hour week. Any more, and there should be a surtax on the extra until the debts are paid in full, including the bond holders. As basically most of them are uneducated bums. Ok, if they are a robotics journeyman, $20/hr.
Lets face it, the unions job is to rattle up the discontent, pump up the egos, we deserve more attitude. Keeps justifing their dues. Then extort the companies to pay for it.
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Bjrn Helgason wrote:

Because the people of East Germany learned the hard way to cherish freedom. The politics and culture in Detroit have been totally eaten up with far left victim/entitlement mentality, which, while certainly the decline in the auto industry was more than a small factor, was also a huge factor in their economic demise.
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What I think is a general difference is that the government in Germany is doing something about the situation. The people of old east Germany still do not do very much and the level of unemployment is high there. The government in Germany has made sure that the schools are good and unemployment benefits are good so the next generation is not under the same illusions as the older generation growing up under communism that you do not need to do anything. They are allowed to grow old and stay in relative good living.
In Detroit the first things to happen is that schools are burnt down and destoyed and lawlessness is rampant. The problems keep increasing.
Uneducated people are always a problem and dangerous if they do not get an option to do something and can not improve their situation.
So east germany is improving while detroit is getting worse and that is clearly the difference in policies by the government.
Both started out the same with a governing body that took care of everything and then they were abandoned.
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On 15/03/2010 4:35 AM, Bjrn Helgason wrote:

It can take at least a generation to fix Detroit and east Germany social issues. But it does start with a good edication.
Germany is also in financial trouble. Don't kid yourself.
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