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Panic in Detroit

Similarly, we have the U.S. government wildly understating inflation. The epitome of this occurred in July of last year. Asian governments were having an emergency summit to deal with the "global food-price crisis"; the World Bank was reporting food-inflation at an annualized rate of 120%; and the U.S. government claimed (in this global economy) that inflation inside the U.S. was literally 0%.

As I've noted in previous commentaries, when any government grossly understates inflation, this automatically grossly exaggerates many statistics directly derived from that inflation number, most notably GDP. The "GDP growth" reported by the U.S. government for the past four years of this so-called "recovery" is no more substantial than the fantasy jobs reported by the BLS, and no more plausible than the U.S. government's "0% inflation" claim.

What this means is that the "state administrator" being sent in to supposedly repair Detroit's financial crisis has a 0% chance of succeeding. Garbage in; garbage out. Armed with the same fantasy data as his/her predecessor, the revenue projections for "the New Boss" will be just as laughably optimistic as those of "the Old Boss."

What could (will) this administrator do?

... an appointed city manager would ultimately hold powers to cut city spending, change contracts with labor unions, merge or eliminate city departments, urge the sale of city assets, and even, if all else failed, recommend bankruptcy proceedings. [Emphasis mine]

Does this agenda sound familiar? It should. In Europe they call it austerity. It has an unblemished track record: complete and utter failure with every government that has inflicted this economic sadism on its own population. Just ask the people of Greece, and Spain, and Portugal, and the U.K.

It's a recipe for turning dying economies into dead economies. However, along the way, these regimes always manage to sell off the "family jewels." The only profitable assets of these governments are sold off (at pennies on the dollar), and almost inevitably these assets end up in the hands of Fat Cats with close connections to whatever (corrupt) regime is administering this "austerity."

Once these "administrators" have finished cutting jobs, slashed compensation in negotiated contracts, merged/eliminated entire departments and sold off the family jewels, they simply shrug their shoulders, declare bankruptcy anyway and claim that they "did their best."

Yes, I'm sure they did. But for whom did they "do their best"? Let's take a look at what already happened in another large city, struggling with its own severe financial problems: Chicago.

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