NEW YORK ( TheStreet) -- My apologies to David Bowie for borrowing the title of one of his songs for this article. However, there is no better way to encapsulate the financial emergency facing this bankrupt shell. What is a "panic"? It's when people behave irrationally in a crisis, generally due to either being in a state of shock, succumbing to some form of (mindless) "herd behavior" or both. In the case of Detroit, we are clearly dealing with the latter condition. What makes Detroit such a significant case study here is not simply its size, but rather because it is well-known that the city is (was) a one-industry town. Specifically, "Motor City" got its nickname for being the hub of the once-thriving U.S. auto industry. More importantly, as the city teeters on the brink of formal bankruptcy, we know what got the city to this state of ultimate crisis: the loss of its tax base. We can establish this point not only on an individual basis, but also on a collective basis. Individually, we have what has already been pointed out: the collapse of one industry in a one-industry town (state). More generally, however, when the financial collapse of Detroit is examined more closely, we see the same phrase crop up that we see in the chronologies of every U.S. city/state/municipality with serious financial problems: "overly optimistic revenue estimates." The same governments who used to be able to make accurate revenue projections have not only seemingly and suddenly lost the capacity to perform this function. They all suffer from precisely the same (wildly) optimistic bias. What is the more rational conclusion for us to draw in assessing this situation? Is it more plausible that once-sober bureaucrats from all across the U.S. all suddenly and simultaneously morphed into cock-eyed optimists? Or is it more likely that the data they have been given on which to base their calculations has become severely flawed? Garbage in; garbage out. Specifically, the macroeconomic "statistics" being passed off on Americans (and the world) by the U.S. government have been demonstrated to be nothing but fantasy numbers. The mythical "job-creation" numbers from the Bureau of Labor Statistics can be proven to be fraudulent on many bases; however, the most absolute proof was supplied by the corporate media itself: Job and wage numbers supplied by the BLS grossly overstate what the U.S. government is actually taking in with tax receipts. The jobs don't exist.
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.
What did Chicago do when it desperately needed to raise $1 billion? It sold its prime asset, the city's extremely lucrative parking business. Pardon me. Officially, it was merely "leased" -- for the next 75 years. Who snapped up Chicago's family jewel? Wall Street bankster Morgan Stanley. Here's where the number crunching starts to get interesting. We have the city of Chicago, which is so hard up for money just to keep the lights on that it conducted a fire sale to sell off its prized asset. Meanwhile, the buyer of this prized asset can (literally) get trillions of dollars in free money (so-called "0% loans") merely by picking up the phone and calling its good friend at the Federal Reserve, B.S. Bernanke. Cash-strapped governments all across the U.S. are forced to sell off their best assets (at pennies on the dollar); while the same financial crime syndicate that caused the economic problems that resulted in this financial crisis is given trillions upon trillions in free money -- and what it doesn't use gambling in its derivatives casino goes into vulture purchases ... from its victims. Now a financial thug is being sent into the city of Detroit from the state capital (against the wishes of its elected government) to "do a Greece" (or "a Chicago") to the people of Detroit. And when the thug is finished, the city will have been stripped of any/all profitable assets, services will be reduced to some Third World level, city employees will have their pensions stolen and their wages slashed, and then the city will be allowed to declare bankruptcy. This organized economic rape has been the mode for relentlessly pillaging Europe for nearly four years now, starting with Greece. Now, finally, it's coming to America. What is the solution for the financial problems of Detroit, Chicago, Greece and governments across the Western world? There isn't one. The financial crime syndicate that has been allowed to "advise" our governments on their fiscal management has led all of these governments past the point of insolvency -- deliberately -- just as bankers have been doing for more than 2,000 years. Once they have bankrupted these public authorities, then (naturally) the fire sales begin -- and the bankers instantly become ravenous vultures. Only then is "Debt Jubilee" (i.e. mass bankruptcy and debt amnesty) declared. In other words, only after there is nothing left for the banksters to steal. It's time to end a system in which the people (and their governments) live in perpetual penury, while a criminal banking syndicate has vaults that are perpetually overflowing with free money. Debt Jubilee today; exterminate the financial crime syndicate tomorrow. The real beauty of Debt Jubilee is that once our Ponzi bond markets have been purged of all their fraudulent debts, this "too big to fail" crime syndicate will no longer be "too big to fail." Follow @bullionbulls This article was written by an independent contributor, separate from TheStreet's regular news coverage.