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Sunday, July 20, 2008

Not Letting Detroit Die

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A month ago, I wrote about Detroit, Michigan that:

  • The school system is nearing the point of collapse. The city's government is inept and corrupt.
  • The only decent and honest mayor in the past 3+ decades, Dennis Archer, left in disgust and Kwame Kilpatrick was immediately elected by the residents of the the city... a testament to their unbridled stupidity and racism.
  • Vast tracts of the city are uninhabited or uninhabitable.
  • The governor of Michigan, Jennifer Granholm, has too many problems of her own to get involved in Detroit's fiasco.
  • And Michigan's economy is no longer able to subsidize the city.
So, overall collapse is nearer.
Today, Nolan Finley, editorial page editor for the Detroit News wrote:

A city must be awfully hard to kill. How else do you explain that Detroit is still breathing?

Detroit is down with a fatal case of chaos. The structure of government has dissolved, with every public institution in dysfunction and disarray. Last week's shouting match between City Council members and mayoral appointees looked a lot like anarchy.

And it was brought on by public officials who are all about serving themselves, rather than their people.

Kwame Kilpatrick once promised to leave a legacy as the boy wonder who gave Detroit back its dream. Now, his stubborn refusal to step aside despite facing perjury and corruption charges has assured he will be remembered as the man who strangled a city.

In other places, the City Council might be counted on to offer stability when a mayor stumbles. But this is Detroit, and the Detroit City Council on its best day barely rises above inept.

Instead of putting out the fire, the council poured on fuel by getting itself entangled in a federal bribery probe. The council can't very well yank the mayor for corruption when some of its members may be heading to the courthouse with him.

While City Hall is burning, no one seems to notice that the Detroit school board is at war with its newly hired superintendent. The school district has mismanaged its finances so thoroughly that it is just a bounced check or two away from insolvency.

Try packaging all that into a two-minute elevator pitch to sell Detroit to investors, job creators or new residents.

Can Detroit be cured? Maybe. But you're kidding yourself if you think a return to health will require anything short of a miracle.

The prescribed miracle is for Detroiters to get mad as hell and declare they're not going to take it anymore.

But instead, Detroiters are sitting on the rooftops like the pitiful Katrina victims waiting for a rescue boat to float by.

That boat's not coming.

Mr. Finley went on to urge residents of Detroit to get angry:

This is your city. You can't wait for the business community to do something. It's got no vote. You can't wait for Gov. Jennifer Granholm to do something. She's got no spine.

As a city, you've got to lift yourself out of your deathbed.

Unfortunately, Mr. Finley, the residents of Detroit have proven... for the past three decades... that they are more interested in promoting "black" politics than a good city. That's why they have Kwame Kilpatrick as their present mayor. That's why they had Coleman Young as a mayor for two decades.

As the old saying goes:
Be careful what you ask for; you may get it.
..

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
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Tracking Interest Rates

Tracking Interest Rates

FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)