Thursday, December 10, 2009

Detroit - The New Republic Misses The Target


From The New Republic:

The Detroit Project

A plan for solving America’s greatest urban disaster.

For much of the United States, Detroit has become shorthand for failure--not just because of the dilapidation of the town’s iconic industry, but because the entire metropolis seems like a dystopian disaster. It is the second-most-segregated metropolitan area in the country; the city’s population is 82 percent African American. No other American city has shed more people since 1950--Detroit is only half its former size. Its city government fails at the most basic tasks. A call to 911 will bring a response, on average, in about 20 minutes. (Such emergency calls are depressingly common in the metropolitan area: There are 1,220 violent crimes per 100,000 people.) And that’s to say nothing of corruption in the municipal ranks. This year alone, at least 48 Detroit public-school employees have been investigated for fraud--which might help explain why only one in four high school freshmen ever receives a diploma. Unemployment in Detroit stands at a staggering 28 percent. And, in key measures of economic vitality in the nation’s 100 largest metropolitan regions, Detroit finishes dead last.

Read more....

I had written the following to Mr. Katz on December 3:

Mr. Katz:

I read with interest your paper, "The Detroit Project," in the December 2 issue of The New Republic. As a resident of Detroit suburbs for nearly 40 years and having worked in downtown Detroit during the 1990s, I can attest to the fact the Detroit represents the worst of U.S. cities.

The same or similar concept you describe was presented in the Detroit Free Press in May [abstract]. The idea of large parks and some agriculture mixed in with concentrations of homes or businesses seems appealing. The problem is that Detroit residents simply lack the skills, education, leadership, resources, or focus to attain such a transformation. Detroit is a predominantly black city of predominantly under-educated, lower-income individuals. That may sound racially charged and biased, but it is simply a fact [see the first link below]. Overall, the percentage of unemployed is about the same as the percentage of vacant/abandoned/derelict parcels. A recent infusion of federal funds has barely made a difference.

I have written several times regarding the Detroit situation including, but not limited to the following:

The point of these posts is that the most straightforward way to salvage Detroit is to retrench. Detroit reached its present geographic area through annexation as its economy and population expanded. It is time to split off areas that cannot be supported through the present resources of the city. 138 sq. mi. is just too great an area for 800,000 people to fill and support when those people cannot support themselves. Two generations have presided over the decline of Detroit. Given the present economic situation in the U.S. and Michigan in particular, the likelihood of creating a viable city of 138 sq. mi. is quite remote. A myriad of problems, not the least of which are 1960s-style unions, massive corruption, high taxes, high crime, and a "[poor]black-[sub]culture" mentality of the populace makes it unlikely that well-educated, highly-resourceful, non-blacks will move back to rescue the city.

Detroit's business and cultural core can be restored and is being restored partially and randomly, but not keeping up with concomitant decay. The anchor represented by the rest of the city is preventing real vitality. Detroit needs to shrink back to its core area and a few viable business and residential areas and disenfranchise the rest. Allow the state to reclaim and reorganize the remainder, including condemning large tracts that could become the basis for new "greenfields" for parks, agriculture, or enterprise zones. The City of Detroit is not capable of such transformation in its present form.


Bruce Hall
This is a case for the State of Michigan to declare "eminent domain" and get the job done. That $18 billion in 2008 just sort of disappeared. It should have been used to clear out vast tracts of unsalvageable properties.



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There is always an easy solution to every human problem—neat, plausible, and wrong.
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“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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Tracking Interest Rates

Tracking Interest Rates


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."
"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."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
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 "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)