Friday, July 19, 2013

Detroit declares bankruptcy

...but the distortion of the markets continues...

Detroit declared bankruptcy according to the Chapter 9 of the federal law. You may see what it probably means for the city and the bondholders and others. We are talking about the "city proper" only – with 700,000 people, it's the 18th largest U.S. city (but the population was 2 million just decades ago). The metropolitan area hosts about 5 million people and is largely unaffected.

A century ago or so, Detroit was the leader of innovation in the same way as Silicon Valley is today (or at least was several years ago) after Henry Ford would ignite his automobile revolution in the city just decades earlier.

Some popular music was born there – the company Motown (standing for motor town) was founded in 1959. Still, the bankruptcy is no surprise for me because a neighbor on a flight 7 years ago or so has explained to me the ghost-town character of the contemporary Detroit in quite some detail – an hour of zir monologue. Ze told me about the empty skyscrapers and other sad things – I couldn't avoid thoughts about the deathbed of the industrial superiority.

What was going wrong?

First of all, it's clear that Detroit has always heavily depended on the heavy industry which ceased to be the "ultimate core" of the technological progress at some point, perhaps 50 years ago, perhaps more recently. It was destined to shrink a little bit and indeed, the population in Detroit proper dropped to 1/3 of its peak value a few decades ago and returned to the pre-automotive-boom levels of 1910.

Detroit started to be ugly some years ago and people began to move to the suburbs. That turned a specific feature of American cities against the interests of Detroit proper. Unlike the cities in our good old Europe, cities in America are fragmented and what would be called neighborhoods and parts of a big city by us the Europeans are independent municipal entities. So the suburbs were getting the taxes from the former inhabitants of Detroit proper while Detroit proper was in trouble.

I always found it a bit crazy that Cambridge "isn't" a part of Boston, not to mention hundreds of similar examples. You just cross the bridge, much like you cross the Charles Bridge in Prague, and you find yourself in another famous city. It just sounds weird. Most of the time, this would be just an unusual geographic convention that doesn't affect anything. But when it comes to bankruptcies, such conventions do matter.

It seems to me that America should start to abandon this model of separate cities that share a living room, nevertheless. If the people may easily move from one part of the "bigger city" to another and if many of them actually commute every day in between several "small cities" that share the public transportation and other things, it's just crazy that they don't share the public finances as well. Boston should administratively merge with Cambridge and all the other towns of Greater Boston, and similarly in every other U.S. city.

Fine. Back to the reality. The bankruptcy is here and because it means a "reboot", it's a good news for Detroit. If there's a city that needs to be "rebooted", it's Detroit.

I believe that the worsening of the finances and viability of Detroit was helped by some distortions of the markets, unrealistic expectations about the prices, and so on. In particular, I do find it crazy if a skyscraper is empty for several years. If you can't find people who will rent the offices in your building etc., it just means that you must lower the price. It seems to me that some folks were trying to prevent the inevitable gradual decrease of Detroit's importance which is why the discontinuous one that will start today had to arrive.

Similarly, if a city isn't getting enough money for its public services etc., it has to shrink them. It has to reduce the number of people whom it employs and it has to lower their average salary, too. I don't know the exact budgets of the city of course but I do know the mentality of many people and it seems to me that many people were trying to deny the reality.

This is how most of our cities will look like if we fail to protect our civilization against the global warming alarmists and similar Luddite terrorists and if leftists are allowed to control a city for half a century

Now, when the bankruptcy has started, I am sort of shocked by the immensely weak rights that the Chapter 9 gives to the holders of the debt etc. Many people who hold some bonds that were considered the "safest among municipal bonds" will find themselves uninsured – which means that they will receive just a few percent of their previously impressive assets. It's hard to imagine that with this realization, the price of the municipal bonds won't drop and the yields won't go up.

Another thing that protects the bankrupt municipal borrower is the regulation that the bankrupt entity can't be forced to sell its buildings, paintings, and other assets. I find it completely insane. With such rules, "declaring bankruptcy" effectively means "a request to be forgiven the debts without any further problems". Such an arrangement not only means immense moral hazard – an invitation for other cities to follow in the footsteps of Detroit, their role model – and is very bad for the lenders but it will also make it impossible for the city to get really healed. The bad way in which the city officials were managing the city assets has certainly contributed to the bankruptcy and the bankruptcy should be a signal to realize that someone else could be a better manager.

(Of course, I failed to mention the reason that may be the main actual reason behind Detroit's collapse: the city has been entirely run by leftists including unionists since 1962, see the video above. The entitlement programs and government dependency that these stunning left-wing assholes created made the city a near equivalent to the socialist countries with their leading role of the working class. Finally, let me mention one aspect of the situation that MSM totally hide but many of you will say "I see, that's why": Detroit allowed itself to become a black ghetto with 83% of black Americans, leading a hitparade.)

These bankruptcy regulations are wrong, wrong, wrong, and they indicate that even in the U.S., even a lousy irresponsible, clumsy, unhandy bureaucrat connected with the local or global government may always rob or otherwise screw any private entity. In this sense, the difference from Stalinist Czechoslovakia in the late 1940s when companies were nationalized is just a quantitative one. The institutionalized bias against the private entities is self-evident in both cases.

We will see whether at least Detroit will become a better place if the lenders have to be screwed in this insensitively arrogant way.

By the way, Microsoft switched to a (modest) profit after a loss a year ago but a top Microsoft executive already found a better business for himself and his wife: to import Czech (well, Moravian) wine to the U.S. ;-)


  1. Obama and friends want to merge cities with their suburbs and closely neighboring cities, but this is not well known to the public. Conservatives who know about it oppose it on the grounds that it would extend big-city corruption and general foolishness to grabbing a much larger amount of revenue. Of course, it must be pointed out that people in suburbs and smaller cities don't want to be paying the tab for places so poor as the large cities, but I don't think this invalidates the conservative argument.

    If, as you say, European cities encompass large areas which in the U.S. would be separate cities, I wonder why. I'd think it had something to do with the fact that neighboring municipalities in the U.S. were quite distinct in the "recent" past; population density was either low between them (as opposed to "in them"), or low in one of them, with the latter leading from union to separation.

    For example of the latter, my home town of Westwood, Massachusetts, was originally part of Dedham; Westwood was just farmland owned by people in Dedham - not many people lived in Westwood. When Westwood began to acquire a significant population, it separated.

    Also, don't miss the fact that neighboring cities are joined in a county, and county government is more important in some parts of the U.S. than in others. In some places, such as California, a county has both "cities" and "unincorporated areas," even though the latter have names, as if they were cities.

    BTW, for years after I moved to California, I was puzzled by the fact that every town, no matter how small, was called "city." I thought it was an example of Californians' being wacky. Then I learned that California has no concept of "town" or "township."

  2. Thanks for this interesting essay, Smoking Frog. Well, one may oppose big-city corruption but there may be corruption in a smaller place, too. When the place is bigger, the potential for corruption is of course larger as well. But the corruption as a percentage of the budget doesn't really have a good reason to increase when concentrated in big cities.

    That's nice if suburbs people don't want to pay to the big cities in their center - but it's just unfair, a sort of tax evasion, if they actually benefit from the big city's nearby location. The public sector should be small, effective, and so on, but when it already does exist, it should be funded in a fair way.

  3. I think there's a question of how much they benefit, and whether there's any "disbenefit."

  4. Dear Smoking Frog, do you have some particular examples of disbenefits (why it would be better to live very far from a big city as opposed to a similar town/village that is near a big city)? I don't.

    By benefits, I mean that the folks in the big cities' suburbs use the large and cheaper shops and malls and restaurants and many other commercial things that are possible in areas with concentrated population, easier ways to sell their agricultural and other products, offices that solve bureaucracy for them and that are much closer than for those in the countryside, airports that were built because of the big city (and similarly big railway stations etc.), public transportation, and many people who live in the suburbs just work downtown so in the productive sense, they equally belong there.

    Whether the municipal public sector brings enough benefits for its costs is a different issue but my point is that the way of life of the suburbs folks isn't that qualitatively different from the people who have residence downtown.

  5. Down under, we're battling the dark side. The Federal Government is trying to "recognize" local governments via an alteration to the constitution which would allow the Federal government to directly fund municipalities ... with conditions attached, not necessarily conditions pertaining to the nominal target of the funding.

    Changing the constitution requires a referendum with a clear majority of voters and States. The States are the core sovereign entities of the federation.

    More at my blog:

  6. Now you put a virus in Detroit and you have the movie "I'm legend"... sooo scary.

  7. To understand the inner cities of the US, read Dalrymple's "Life at the Bottom". He was writing about inner city life in the UK, but crime in large urban centers centered on 'government project housing' and the nihilism that pervades entertainment, academics and the media have destroyed the family unit and traditional values, as in 'don't rob your next door neighbor or beat up your family'. Detroit had the highest murder rate in the US last year. Civilized people fled years ago when the violence became commonplace and the police chose not to incarcerate the criminals. Chicago is now on the same path as Detroit.....People were forced to send their children to government schools in their neighborhood, and the inner city kids beat up and bully those trying to learn.
    This is true even in the state of Texas and appears to have started with the government program of 1965 that paid women to have illegitimate children. These children are feral human beings, and no one wants to live around wild animals.

  8. Seems to me, LM, that merging the suburbs with the big cities is just a way for the corrupt politicians of the big cities to maintain their parasitic ways. Similar in certain respects to the relationship of, for example, Greece to Germany. The big cities would simply suck off the more affluent suburbs, with no incentive to change their ways.

  9. Detroit, should have to sell it's art collection. An entity should not be permitted to file Bankrupty while sitting on a mountain of Luxury goods. Politicians pandering to Unions have put the public in this position. Now, the public is broke.....they should be FORCED to sell non-essential items to help pay creditors. No bailouts, no financial arrangements should be made until AFTER ... contracts have been re-negiotiated, and assets have been sold. Property (land), Art, Vehicles etc should all be auctioned off.

  10. Luboš, ok, how about THIS: from left to right, from upside down, we are fuc*ed from all perspective imaginable. Fits this description better to the City of Detroit, US, and Planet Earth? :-)

  11. Right. The expansion of the suburbs gave the opportunity for people who didn't like the bad governance in Detroit to escape it. Detroit could have competed for people and capital with the suburbs, but didn't. So with the bankruptcy filing Detroit's leaders admit that they can't manage their affairs, and want their debtors to do it for them, which can't be any worse.

    The suburbs limited the damage done by Detroit's political leadership.

  12. In addition to counties and cities, there are also agencies created by local elections that can overlap cities (school districts) and are often small (landscaping districts). And there are agencies created by the cities, such as transit districts. Often, transit districts are multi-city.

  13. I was born in Detroit and as I write this I am about 10 miles south. Detroit is part of Wayne County as is the town I live in. I pay taxes to my town as well as to the county and much of that money is turned over to Detroit. Also I pay taxes to the State of Michigan, which has also been subsidizing Detroit for decades.

    Your idea that suburbs should pay something for the benefits they receive from central cities is already the way it works.

    But there are no shopping centers in Detroit, no grocery stores either; there are a couple casinos and some sports related restaurants but little else. Detroit has a zoo and a couple museums which are supported by special county wide taxes.
    Industry began moving out of the city just after World War II and in most cases only often only went 20 or 30 miles. I work in such a factory.
    The thing that will prevent any recovery is the fact that the crime rates are much higher than what is reported outside a few downtown locations the city resembles Somalia.
    I have a lot of sentimental affection for the city since I remember it just as the decline began but if somehow the whole place vanished, I along with most people would get along fine (or better) without it.
    I have no sympathy for anyone foolish enough to be holding Detroit bonds, they deserve to take a loss.

  14. Well, holy cow now a judge says the bankruptcy has to honor the president in order to be legal.

  15. I have always found it interesting that you can cross the Harlem, and East Rivers (which really aren't rivers) and most of New York Harbor and still be in New York City, but cross the Hudson and you are in a different state, yet there isn't any real geographic features that tell you that you have left Queens and entered Nassau County.
    I also have long thought it odd how many people say they live in Boston but really live in Cambridge or another suburb.

  16. Jesus Christ, Alexander, this bankruptcy is no global apocalypse of the kind you're waiting for. It just means that 1 / 10,000 of the world population will have to reorganize the way how they pay for sewers and a few other things. This is business as usual.

  17. It's a persuasive way to phrase it. Still, I wouldn't pretend that those who escaped are saints. People usually escape for egotist reasons and by this act, they may reduce the income of a decent leadership, too.

  18. It seems to me that America should start to abandon this model of
    separate cities that share a living room, nevertheless. If the people
    may easily move from one part of the "bigger city" to another and if
    many of them actually commute every day in between several "small
    cities" that share the public transportation and other things, it's just
    crazy that they don't share the public finances as well. Boston should
    administratively merge with Cambridge and all the other towns of Greater
    Boston, and similarly in every other U.S. city.

    I love this blog, and hate to disagree with you, but your proposal is very European and completely un-American. People moved out of Detroit proper to independent suburbs because they didn't like the way Detroit was being run (and similarly in other cities). Once the unions and Democrats start to destroy a city, there is nothing one can do but leave. Its what makes Obama's reign of destruction so hard - there's nowhere to go.

  19. Luboš, ok, I exaggerated a bit I admit. But on the other hand it is not only about Detroit. Check e.g. here: Regarding busines as usual - I think it is already ending for countries such as Greece, Spain, Syria, or Egypt. I dont think coming civil war in Egypt is anythink close to "business as usual", but maybe for some people it is... Cheers, Alex

  20. Who cares if they are saints. About half of the people who left to the suburbs were Democrats, the opposite of saints. But the possibility of moving to a nearby place with better schools or whatever created competition and incentives for governments to clean up their acts.

  21. Combined with other municipal bks, this event will raise yields on munis. Which is a good thing, because the low rates on munis have been causing all kinds of craziness. Unfortunately, it's not significant enough of an event to change behavior as much as I would like.

  22. Not exactly. For 50 years, Detroit Democratic leaders and the city employee unions conspired to defraud the city about the true cost of the pension obligations. Now that the cost is being exposed, the city is forced into bankruptcy. So they should, what, have to sell off all their art, parks, and daughters to pay the obligations they acquired by fraud? A sensible renegotiation with the union needs to happen before asset sales.

  23. You could always move across the river, no?

  24. Amalgamation is the answer! I see no reason why Windsor, a city of 200K just to the south across the Detroit River, is independent. The city I live in is about 400K, after the merger it's 100 miles long and 40 miles deep.

  25. "Detroit started to be ugly some years ago and people began to move to the suburbs. That turned a specific feature of American cities against
    the interests of Detroit proper."

    First sentence, bang on. 2nd sentence, I don't understand what the specific feature is.

    Grew up up across the river from Detroit. Have a definite soft spot for city. Why I don't agree with you, (a rarity) and I'm just expanding on Smoking Frog's comments. I believe there are a few pillars of undeniable, absolute truths. One of them being, "Monopolies are the root of economic evil". i.e. without competition, there is no choice and one is obligated to pay "the man". Expand the city and a larger monopoly is created. The whole idea of burbs is if you don't like one, move to another hence competition is created. Competition will force operational efficiencies which overcome the advantages of economies of scale. Detroit thought its brand would overcome its inefficiencies and corruption and they were obviously wrong.

    You are right about the black ghetto. After the riots in 1967, the white flight began. The mayor, Coleman Young, extremely corrupt was out to make "Whitey" pay for taking advantage of the black man for centuries. And by "pay" I mean into his pocket. Detroit had one of the wealthiest black populations in the USA at that point time. I'm not saying racism didn't exist, but they were moving forward much faster than much of the rest of the country. The city was definitely segregated (freely) into the black and white parts. Under the guise of "making things better for the working man, people had to pay very large sums of money to the mayors office in order to get business licenses. You weren't allowed to buy one piece of property. You had to buy entire blocks. The list goes on. It was ridiculous. Then the intelligent, economically literate black population got the hell out of there leaving the city with a mostly gov't dependent, economically ignorant population which is mostly black. The corruption continued through city hall, even after Coleman Young left office and it finally came home to roost last week. Too bad on Mayor Byng as I think he was trying to do the right thing.

    Mike Huckabee had a good point. He talked about how Detroit was on the leading edge of technology for all those years. It is still on the leading edge just a different one. Many other cities are going to follow them into bankruptcy if they don't change their ways.

    By the way, I've moved on from Pilsner Urquell as my Czech beer of choice. I've moved to Czechvar. Great summer ale. For some reason, the Urquell tastes great after a good session of hockey, but it doesn't appeal so much after a lazy Saturday.


  26. Lubos, I thought you believed in capitalism. If you invest in a company that goes bankrupt, you lose all your money. If you invest in a city that goes bankrupt, you lose all your money. That's the way that capitalism works. Maybe things are different in the socialist republic of Czechia, but I don't see any reason that holders of municipal bonds should be protected from bankruptcy.

  27. I don't believe in your kind of capitalism that I call a communist protection of losers.

    If someone goes bankrupt, it's the economic counterpart of death and the lenders are supposed to consume the remaining pieces of meat of the bankrupt entity.

    That's why I find it outrageous when those folks are going to keep their paintings, buildings, and pretty much everything else, and continue in business as usual. This is not what I call bankruptcy. This is what I call a simple robbery of the lenders by the shitty borrowers.

  28. Hi Lubos,

    The bankruptcy laws that Detroit is operating under were (or could have been) known to the buyers of the municipal bonds when they both them. It would be unfair to change them now.

  29. I am not proposing any retroactive change of the laws. I am just proposing a change for the future because the existing laws - not only in the U.S. - aren't defining a proper capitalism.

  30. I am thinking that Detroit is now the perfect place for the Obama Presidential Library. Please, "Take him to Detroit":

    And for all of you Trayvon Martin fans, if Obama had a city of his own, it would look like Detroit. ;~)

  31. Main Street is falling apart all around us, and the S&P is hitting
    all-time highs. But why is this so, Peter? It's because we live in
    BENZARRO WORLD -- a world where state-sponsored neoliberalism is sucking all the life of

  32. All of this was planned by the white-flight, neoliberal Left, Mike. White
    birds of prey will now descend on Detroit, demanding that the city sell
    its infrastructure to them for pennies on the dollar so they can reap
    immense gains collecting rents by squeezing what's left of Detroit. ;~)

    But with Al Sharpton waiting in the wings, you can bank on the black
    hole of despair being very short-lived in Detroit. As soon as he gets
    done organized race riots for the shooting death of Trayvon Martin,
    he'll help organize race riots for the bankrupt city of Detroit. ;~)

  33. If only the city planners would have had a little more foresight, they
    would have known they could have replaced the departing auto industry
    with service jobs. More Starbucks, McDonald's and Best Buy's and
    everything would have been just fine. /sarc

  34. Look at the bright side, Lubos. Detroit's carbon footprint should be a
    lot lower now. And the people of Detroit will all be driving free Volts,
    to boot!

    I distinctively recall Rahm Emanuel saying something about NEVER
    letting a serious crisis go to waste. Obama should put these wise words
    to use by getting the Detroit people of color to work producing his
    magic algae that'll end global warming. Detroit can then prevail as the
    nation's leader in urban farming.

  35. If our Federal Reserve did not invent credit out of thin air, Detroit
    and the other 99 or so bankrupt American cities would have been
    contained decades ago, because rational savers would not lend non-collateralized money to these cities.

    This is entirely the byproduct of the Fed's money invention process.
    It's actually quite rational to borrow money, with little constraint,
    and party on it until you're bankrupt when you know perfectly well that
    your losses will be socialized. The people who get punished are those in
    the cities who are NOT in trouble, yet will be forced to pay for

    I'll bet money on it that Detroit will NOT be "bailed out" and will
    tomorrow be the city that it is today. HOWEVER, certain CREDITORS will
    absolutely be taken care of because THAT's how it happens. Just like the
    World Bank "bailouts" do absolutely nothing for the citizens of 3rd
    World Countries since all they do is give money back to the banks. The
    people on the street never see it.

  36. There are some obvious similarities between Greece and Detroit.

    The problem is the level of economic activity can now only support a
    certain number of people. It should have been red flagged far earlier
    because inevitably the falling level of activity on a declining
    population would make the debt harder to service. Even throwing money at
    it is pointless.

    What is needed is an increase in economic activity making the level
    of debt sustainable. Voila Greece, economic level plunges and goes into
    a tailspin of unserviceable debt. The other major point is any
    restoration of Detroit or Greece's society will come from the existing
    level of economic activity. Yet having fallen so low, it will now take
    decades of year-over-year (YOY) growth to restore either of them.

  37. Lubos,

    You make excellent points. However, Detroit for many, many decades gained its competitive edge via the Great Lakes and the downstream St Lawrence Seaways. It was in a prime position to benefit once the Industrial Revolution hit the US in the mid to late 1880s. Even before the advent of the automobile, Detroit like Cleavland Ohio and Chicago had rapidly growing steel, machine tool and die, textile, and transportation industries (namely seafaring).

    Detroit's automotive industry was icing on the cake. It should be noted that the all of the major industrial concerns were located in the urban areas. surrounding these factories were hundreds of urban neighborhoods populated by Central and Eastern Europeans (the African Americans would arrive in the 1930s and 1940s). Yes, the continued boom in the automotive industry put pressures on Detroit, as space within the city was non-existent. But, the death-knell for Detroit (or the biggest challenge it faced) was the 1956 Federal Highway Act. Until 1956, there were few large interstate highways in the US. Most goods and services were transported either via rail or via ship. After 1956, the transportation edge Detroit enjoyed was removed.

    To make things even more difficult, in 1962 Detroit elected a very young Democrat Mayor by the name of Jerome Cavanagh. He was a Progressive Democrat who spent a huge some of money (at least in 1964 it as huge -about $134 million) in urban renewal. This converted tens of thousands of African American homes into government subsidized housing and "ghetto projects". Racial strife instead of falling trebled. The famous 1967 race riots in Detroit broke out, and it was all downhill from there. In 1974 alone, inner city Detroit lost 22,000 residents (mainly White). By then most if not all of the industrial concerns moved out of Detroit.

    As far as how cities and their tax bases are managed, each individual state manages city boundaries. Many people who flee the cities (white and black) flee the high taxes and horrific crime. The suburbs through their state lawmakers usually prevent their incorporation into the adjacent urban metropolises for these reasons. I know of several Europeans who visit America for the first time are astounded by the huge suburban sprawl that surrounds most of our largest cities.

  38. Luboš,

    "In proper capitalism, when someone goes bankrupt, it's the economic counterpart of death and the lenders are supposed to consume the remaining pieces of meat of the bankrupt entity." -- You are not right wing, you are just plain crazy, to put it mildly.

    Milton Friedman, Friedrich Hayek, etc. were just pure innocent compared to your ideas.



  39. OK, I find it incredible if someone is capable of disagreeing with my nearly tautological definition of bankruptcy.

  40. Bankruptcy is the process by which creditors decide what to do with what is left after a company or municipality fails to pay its obligations. This is part of the creative destruction part of capitalism. It is natural selection in finance. And it works because if the bankrupt company or municipality is long term viable then a debt restructuring will occur and the company will emerge from bankruptcy in a stronger state. But if the company is truly rotten and the creditors can see no viable future, then the assets of the company will be liquidated and sold to someone who will probably be able to make better use of them. The creditors will lose on their investment, as they should since they misjudged the quality of the company or municipality.

  41. Greece and Spain are suffering from a misguided single currency. This was an idiotic attempt to ignore basic economics in the interest of furthering a pro-EU agenda.

    Syria and Egypt are victims of an Islamist wave that is heavily financed by Qatar and Saudi with the high oil prices.

  42. People are putting their money in the stock market because there is no where else to put it and get a return on it. Bonds are bad because the fed won't stop printing money. The fed won't stop printing money because if they do all the credit markets will collapse. Gold is not necessarily the place to put any money either because if the world economies collapse gold will collapse too. Only commodities will have value in a hyper inflated world.

    BTW, this is not the first time municipal bond holders have lost their money. 35 or 40 years ago a municipal water supply in Washington or Oregon declared bankruptcy and the bond holders lost then too.

    Also corporate bond holders for the automakers lost when Obama and his criminal administration stole their money and gave it to the crooked UAW.

  43. It would not have made a bit of difference Cynthia because the politicians would have kept promising the public sector unions whatever they wanted in order to keep the city running and the debt would have piled up anyway.

    Public sector unions should be illegal. That would solve a lot of the problem. Another solution is to get rid of public schools and go to a tuition voucher system. Parents should be able to send their kids to any school they want to including religious schools. That would get rid of the teacher unions and improve education dramatically. Democrats will not do that though because they are inherently racist and in thrall to the unions.

  44. Romney's company's decision of whether to save a company or take it into bankruptcy was purely a business decision, Peter. Some of the companies or parts of them were so badly damaged they could not be saved, but his company created thousands more jobs than they let go. And it was private money, not taxpayer money. Investment has risk. Commies like you don;t understand that.

  45. Capitalism is an economic system, not a political system Alex. What has being "right-wing" got to do with it?

    You don't understand the role of creditors in business. You can all Lubos crazy, but you are just plain ignorant.

  46. The people of Windsor don't want to merge with Detroit and have to pay higher taxes to try and solve problems they didn't create. And really, why should they?

  47. Obama already has a city that looks like him - Chicago. It has one of the highest murder rates in the country, its government is completely corrupt, and it is close to ending up like Detroit.

  48. Who needs a distinct geography when you can have a sign that says "Welcome to Connecticut"?

  49. It is pure capitalism, Lubos - the people voted with their wallets which they tool with them when they left.

  50. I guess its appropriate that we have a bastard president running a bastard nation.

  51. "Disbenefits" would include traffic, crime, government corruption, pollution, government regulation (an indirect or hidden cost), and the direct cost of government as in taxes.

  52. Dear woodnfish, well, yup, I sort of share your point, too. For example, it seems just OK to me when big earners escape from the 75% income tax in France, and so on. This is a negative feedback that allows the proponents of similar bad decisions to weaken.

    Still, one may escape from responsibilities that he should be held accountable for, too.

  53. do you have some particular examples of disbenefits (why it would be better to live very far from a big city as opposed to a similar
    town/village that is near a big city)? I don't.

    No, not for which I can make a compelling case. Your question is ambiguous between "disbenefit" and "net disbenefit," but even if you were to specify "disbenefit," my answer would be much the same.

    I would have answered sooner, but I was in the hospital a couple days after I became severely confused. They don't know what happened, and there are a couple strange things about it. But all this is off-topic.

  54. Dear Smoking Frog, I hope you are quite self-aware now - your writing suggests so - and they weren't doing the "implanted fake memories" experiments with you as if you were a mouse.

    Your unusual hassles of this sort are never off-topic. By the way, wouldn't you like to write a guest blog - perhaps a speculative one etc. - about what you remember etc.?

  55. Thanks for your concern, Lubos. No, they weren't doing "implanted fake memories" experiments. :-) AFAIK, I remember everything. The mice might say the same thing, of course. :-)

    Your invitation is tempting, so much so that I doubt such invitations should be issued. Candidate guest bloggers should be made to fight for the privilege! :-)
    I don't think I could do a guest blog - I feel it wouldn't be interesting enough without some things which should go unmentioned (no, not drugs). If you and I were alone in a bar somewhere, I'd tell you the whole story, but here in the blog it would not be appropriate.

    I can tell you that hospital food in the 1950s, as bad as it was, was actually good compared to the "scientific" crap they serve nowadays.

    I'll tell you something else from those days, irrelevant but what the hell. I was 10 years old. The kid in the next bed was an American Indian with an appendectomy. We'd play checkers, Monopoly, etc. all day. His doctor would come in to see him and say, "You know what caused this, don't you? You damn Indians eat too goddamn much popcorn!" Everyone, including the kid, would laugh. Nowadays that doctor would be lucky only to be fired.

  56. I agree that one should be a responsible person, but there is no contract in the case of taxes and regulations. It is simply government force used to steal the wealth of citizens. And I understand that the state has to have some kind of income in order to exist, but in the USA we are way beyond what the state needs to exist.

  57. I can tell you that hospital food in the 1950s, as bad as it was, was actually good compared to the "scientific" crap they serve nowadays.

    That's a way to show that we're not in the Matrix:

  58. So maybe we were in the Matrix in the 1950s?

    I've just confirmed that my blood pressure has been fluctuating wildly. I got a surprisingly high reading in the hospital (135/x), which I "didn't believe." After I got out, I bought a blood pressure monitor, then another because the cuff on the first one was too small. Now, on both of them, I've seen lows in the 80s and highs as high as 150, and this is with making checks to make sure I'm measuring it correctly. If there's any value to others in this paragraph, it's: Don't believe your blood pressure measured only once in a while! Buy a monitor!

  59. Yes, thanks.

  60. Yes, thanks, johnl.

  61. I forgot to put the smiley face after my comment :) It was intended as a trick question.

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