.

User Forum Topic
Submitted by flu on July 18, 2013 - 6:54pm

Submitted by njtosd on July 22, 2013 - 9:36pm.

Hobie wrote:
relax the constraints of energy production and Motor City will return as we will always need lots of new cars/trucks.

Really? How many people want to move to the rust belt? If you look at any representation of population change by state the northeast is losing population and the southwest is gaining. Michigan is perpetually overcast and humid, with hot summers and cold snowy winters. With auto manufacturing plants all over the country, Detroit's rebirth is unlikely.

This is not the first time this has happened in Michigan. The capital of the state was at one time suggested to be Calumet. Have you ever heard of it? It's in the upper peninsula and was the seat of the mining industry in Michigan, which was huge up until about 1900. According to Wikipedia:

"Copper mining in the Upper Peninsula boomed, and from 1845 until 1887 (when it was exceeded by Butte, Montana) the Michigan Copper Country was the nation's leading producer of copper. In most years from 1850 through 1881, Michigan produced more than three-quarters of the nation's copper, and in 1869 produced more than 95% of the country's copper."

The mining companies pulled out, moving to Arizona and other parts of the southwest; Calumet (and the rest of the area) imploded and never came back. Detroit is obviously much larger, but I believe the same will happen there. Industries change, and areas that depend on single industries are vulnerable.

Submitted by spdrun on July 23, 2013 - 12:49am.

Really? How many people want to move to the rust belt? If you look at any representation of population change by state the northeast is losing population and the southwest is gaining

This isn't universally true -- NYC, Boston, and DC all gained in the last 10 year, and have similarly harsh climates to Michigan. OK, NYC and DC have less strong winters, but still unfavorable to many people.

The problem isn't climate or location; it's lack of industry and laws/corruption that don't favor establishment of new industry.

Submitted by CA renter on July 23, 2013 - 4:43am.

SD Realtor wrote:
It is hard to admit that other employees will do the same work or even higher quality work for a fraction of the cost.

In some circles, that is simply not acceptable.

EVERY worker in the U.S. is competing with others who would do the work for less. Should we all just continue down the rat hole until we are all living in mud huts and eating a bowl of rice per day? Maybe we should all strive to live with 15 people in a single room with dirt floors? Would our corporate masters be happy then?

All the while, corporate profits are at historic highs -- and executive compensation is also at historic highs -- because companies are able to take advantage of cheap labor and lax environmental standards in poor countries, and then sell their products and services to people in developed countries...people who still believe that their wages will eventually "catch up" to costs with inflation, so they've shifted from buying with wages to buying with debt. That is doomed to fail, eventually. Seems to me that we need to rebalance and shift more of the profits back to the people who actually do the work that makes the profits possible in the first place. We should work to bring everybody up, not down.

Submitted by Jazzman on July 23, 2013 - 5:00am.

CA renter wrote:
paramount wrote:
Another victim of public sector unions.

Public Sector Unions are a Terminal Cancer.

That has got to be one of the most ignorant statements you could possibly make. Detroit's problems are tied to the demise of the manufacturing sector (largely because of **mismanagement,** not unions), white flight, and the resulting demographic/population changes.

Some history:

http://www.reuters.com/article/2013/07/1...

http://www.npr.org/2012/09/11/160768981/...

http://www.changinggears.info/2011/03/23/detroit-a-boom-town-goes-bust/

As far as I have been able to discern the proverbial camel's back was broken by a derivatives bet with UBS and BoA on which way interest rates would go. That lead to the default. Granted a long history of decline preceded that, but it s the familiar story of breaking your neck and going to the knackers yard to get it fixed.

Submitted by The-Shoveler on July 23, 2013 - 6:40am.

Well I thought it was going to be Stockton to be the first to default on pensions, but it looks like Detroit has a much better argument and is in much more dire situation.

Once that is done I think there will be an avalanche of defaults coming IMO.

Like I said I fully expect the Fed to step in and bail out the pensioners but with some Cap’s on maximum benefits (maybe 50-70K per year).

Submitted by njtosd on July 23, 2013 - 7:26am.

spdrun wrote:

Really? How many people want to move to the rust belt? If you look at any representation of population change by state the northeast is losing population and the southwest is gaining

This isn't universally true -- NYC, Boston, and DC all gained in the last 10 year, and have similarly harsh climates to Michigan. OK, NYC and DC have less strong winters, but still unfavorable to many people.

The problem isn't climate or location; it's lack of industry and laws/corruption that don't favor establishment of new industry.

There is a difference between being willing to relocate to an economically viable area (NYC, DC) and convincing enough people to move to a blighted area to revitalize it. I grew up outside of Detroit. The Renaissance Center (which you see in every stock photo of the city) was built 30 yrs ago as part of a major effort to revitalize the city. At that point it was probably possible - but I don't think it is any longer. And I do believe it was politicians (influenced by the unions and the big three) that killed the city. Case in point - Kwame Kilpatrick, who will soon be sentenced to an additional prison term of 20-30 years.

Submitted by scaredyclassic on July 23, 2013 - 8:27am.

If we had half as many children could labor demand more money?

Are there just too many of us?

Should I have had less kids?

I'm sorry.

Submitted by FlyerInHi on July 23, 2013 - 9:01am.

Convincing Americans to move Detroit is not possible. Detroit is done as a big city. It needs to scale down.

It should follow the example of Baltimore and welcome new immigrants who will open small businesses to bring back to life the store fronts.

Free birth control for the population would be a good idea to stop the cycle of poverty.

Submitted by FlyerInHi on July 23, 2013 - 10:01am.

The-Shoveler wrote:
Well I thought it was going to be Stockton to be the first to default on pensions, but it looks like Detroit has a much better argument and is in much more dire situation.

Once that is done I think there will be an avalanche of defaults coming IMO.

Like I said I fully expect the Fed to step in and bail out the pensioners but with some Cap’s on maximum benefits (maybe 50-70K per year).

Avalanche of municipal bankruptcies? I doubt it. The creditors and the politicians don't want bankruptcies. They will reduce services to the bones before they ask for haircuts.

Nobody but the citizens of the cities have anything to gain in bankruptcy. And the citizens don't have control.

Detroit is different because it's losing population. But growing cities, such as LA, can cut services and defer maintenance to pay creditors. The citizens will suffer and they might move with their feet but that takes decades.

The politics of bailing out Detroit are dicey. It's a black city with "crazy" outspoken leaders (not so much the mayor, but the other civic leaders). The more they scream, the less likely there will be a bailout.

The governor of Michigan is republican as is the legislature. The governor signed off on the bankruptcy and he's taken ownership. Detroit will have to look to Michigan and its constitution for a bailout.

As far as the bankruptcy goes, a big chunk of the $18 billion is secured and fhe bondholders will fight. The math does not really work.

I think the Feds will come to the rescue later rather than sooner. Obama will not touch this hot potato unless Rick Snyder personally calls for bailout.

Submitted by livinincali on July 23, 2013 - 11:59am.

At some point somebody has to take the loss. I figure it will be the pensioners. Even if you do manage to force the losses onto the bond holders the bond holders are likely somebody's pension fund, so a Detroit pensioner maybe gets paid while some other pension fund has an increase in unfunded liabilities.

20 years down the road when this pension things has been washed out pensioners will look back in hindsight and realize that accepting promises for deferred compensation from people that aren't going to be around when they want to collect was the dumbest thing they ever did. Many public sector employees got trapped in a job they didn't particularly like to guarantee themselves a comfortable risk free retirement. It's starting to look like that risk free retirement was a myth. They'll likely be wishing they had a defined contribution plan they managed themselves.

Submitted by FlyerInHi on July 23, 2013 - 1:25pm.

20 years down the road? I think more like 50 years.

Some rust belt cities will go down, but the other cities still have a lot left to cut. They can continue to cut services and dedicate an ever larger portion of revenue to salaries, pensions and debt service. The cuts in services will spur a call for higher revenue which will pass because voters are worried about cuts to services their kids use. But those new revenue will be diverted to maintain the status quo.

Employees have built layers of legal protections (all the way to the constitution in MI) into their contacts and bondholders will demand security to refinance. Or they will demand senior priority to revenue.

Detroit, thanks to cheap real estate and tax abatements, could revive the urban core by attracting young urban professionals and new immigrants. But the vast expanse of the city is hopeless and needs to be bulldozed and returned to unincorporated areas.

The lesson is that if you want parks and services, avoid the cities in decline. Avoid the edges of cities. Stay in hip urban neighborhoods, or move to the suburbs.
We all know that as cities get older and infrastructure and houses need maintenance, and taxes increase, people will move away. Eventually, more and more of the population is poor and can't take more taxes. As the voter base becomes less educated and ignorant, scoundrel politicians move in to loot. Witness Orange County as an extension of LA and what's happened to the working class cities of LA county.

Cities who adopt defined contribution plans will ensure their own long term survival.

Submitted by no_such_reality on July 25, 2013 - 11:37am.

Maybe CalPERs has cadillac plans, but regular family plans aren't much different.

On a hourly rate, those CalPERS plans run $9.65/hr.

That's our real problem. Obviously, minimum wage isn't going to cut it. That's the hard truth we need to address. $25/hr isn't going to cut it. Not just in Detroit, everywhere.

Anything less is in reality, a starvation diet. People need sustainable wages. Jobs that can be done profitably with a sustainable wage need to go away.

The sooner we get there the better.

Submitted by CA renter on July 25, 2013 - 4:57pm.

no_such_reality wrote:

Maybe CalPERs has cadillac plans, but regular family plans aren't much different.

On a hourly rate, those CalPERS plans run $9.65/hr.

That's our real problem. Obviously, minimum wage isn't going to cut it. That's the hard truth we need to address. $25/hr isn't going to cut it. Not just in Detroit, everywhere.

Anything less is in reality, a starvation diet. People need sustainable wages. Jobs that can be done profitably with a sustainable wage need to go away.

The sooner we get there the better.

Yep, and many public employers will tell you that medical benefits (for current employees, not just retirees...again, retiree healthcare has been getting phased out for decades) are a greater burden than the much-maligned pension benefits.

On the bolded part of your post, do you mean, "Jobs that cannot be done profitably with a sustainable wage need to go away"? If so, we largely agree on this issue. I would also argue that too many (very profitable) companies are receiving indirect subsidies from taxpayers via publicly-funded healthcare for their employees who do not receive benefits, or are under-insured, at work. Think Walmart.

Additionally, this healthcare debacle is why many of us are staunchly opposed to a for-profit healthcare system. There are far too many conflicts of interest in such a system, and we are NOT getting better care as a result.

http://www.pbs.org/newshour/rundown/2012...

Submitted by no_such_reality on July 25, 2013 - 9:46pm.

Yes, cannot, bad typo on my part. My self-imposed net-nanny time limit for non-productive sites, cut me off.

I view low wages as an external cost like pollution. Saying you need to pay low wages is like saying you must be allowed to pollute in order to compete.

They'll whine that ALL those jobs will go away, but they won't. Only some will. So instead of having the 100 people at the poverty wage paying place all dependent on the dole for food stamps and health care, we'd have some of them on the dole and many of the remainder would be working at the place that paid real wages and still made decent stuff that was worth the price paid. We'd all have to do with less disposable stuff.

But that's me, I don't think it's horrible to contemplate a life where we'd actually still have cobblers around because everybody actually resoled and repaired their shoes instead of buying disposable slave labor products.

And heaven forbid if the twinkies or their knock-off made in Mexico in the vending machine at work needs to $2.50 instead of a $1.25 in order to pay the people involved. That'll do us good too.

Submitted by CA renter on July 25, 2013 - 10:45pm.

Agreed.

Submitted by The-Shoveler on July 26, 2013 - 8:36am.

"Additionally, this healthcare debacle is why many of us are staunchly opposed to a for-profit healthcare system. There are far too many conflicts of interest in such a system, and we are NOT getting better care as a result."

+1

"
I view low wages as an external cost like pollution. Saying you need to pay low wages is like saying you must be allowed to pollute in order to compete.

They'll whine that ALL those jobs will go away, but they won't. Only some will. So instead of having the 100 people at the poverty wage paying place all dependent on the dole for food stamps and health care, we'd have some of them on the dole and many of the remainder would be working at the place that paid real wages and still made decent stuff that was worth the price paid. We'd all have to do with less disposable stuff."

+1

Great posts guys

Yea and I need to set hard stops too.

Submitted by SK in CV on July 26, 2013 - 10:23am.

Interesting development here:

The bad news for Detroiters is that the city’s bankruptcy will likely only deepen the decay of its downtown housing market.

That might deter most prospective home buyers. But some look at Detroit’s hard times and see profit.

Specifically, bargain-hunting Chinese investors. Since the bankruptcy was announced on July 18, talk of snapping up Detroit housing for a pittance has picked up on Sina Weibo (link in Chinese), reports Sina Finance. And it appears to be translating into real interest; Caroline Chen, a real estate broker in Troy, Michigan, says she’s received “tons of calls” from people in mainland China.

“I have people calling and saying, ‘I’m serious—I wanna buy 100, 200 properties,’” she tells Quartz, noting that one of her colleagues recently sold 30 properties to a Chinese buyer. “They say ‘We don’t need to see them. Just pick the good ones.’”

http://qz.com/107937/the-latest-chinese-...

It isn't impossible for Detroit to come back. Though I doubt there is either the political fortitude nor the private risk capital to make it happen any time soon. Gentrification takes a lot of time, a lot of money, and a lot of risk. I don't suspect these particular investors are going to take it that direction. I hope I'm wrong.

Submitted by livinincali on July 26, 2013 - 10:39am.

The-Shoveler wrote:

I view low wages as an external cost like pollution. Saying you need to pay low wages is like saying you must be allowed to pollute in order to compete.

They'll whine that ALL those jobs will go away, but they won't. Only some will. So instead of having the 100 people at the poverty wage paying place all dependent on the dole for food stamps and health care, we'd have some of them on the dole and many of the remainder would be working at the place that paid real wages and still made decent stuff that was worth the price paid. We'd all have to do with less disposable stuff."

Low wages are subjective. Why should we attempt to set the minimum wage at a level where you can support a family of 4 on a single income. Clearly there are numerous members in our society that work part time for some discretionary income that are not supporting a family of 4 and do not require a wage that supports a family of 4. Honestly is retail clerk, or pizza delivery driver, or burger flipper a career that we should inspire people to start a family around. When was the last time you walked into one of those places and saw mostly people that looked like family breadwinners on the other side of the register.

As you can see from Europe when you set various employment standards and work rules the result seems to be locking the inexperienced youth out of the work force. Youth employment is tremendously high in many European countries and a lot of that has to do with work place rules and wages that make it way to risky for business to hire inexperienced youth. If you make it risky and cost prohibitive to hire inexperienced youth where are your future experienced productive employees going to come from.

Do you think target and walmart are going to raise prices when minimum wage goes up to maintain what are small profit margins (<10%) or do you think one of them will take to opportunity to explorer more self check out stations and new technologies that bill your credit card as you walk out the door.

Submitted by spdrun on July 26, 2013 - 12:25pm.

Mix the best of Europe and the US.

Europe: guaranteed vacation time, limit on working hours to 35/wk, public health insurance and pensions. This takes benefits out of the hands of employers, preserves employees' sanity and family time, and forces more hiring to happen since productivity is limited by hours (spread the wealth).

US: Employment at will, right to work -- makes it easier to let go employees that aren't performing, unlike in Europe where such rules are more rigid.

Submitted by burghMan on July 26, 2013 - 6:47pm.

Caroline Chen, a real estate broker in Troy, Michigan, says she’s received “tons of calls” from people in mainland China.

It may seem like a small point, but Troy is not Detroit. It's even in a different county. There are some very nice areas around Detroit, including Troy, north of the "8 Mile." Michigan has some very nice, upscale cities (even though it is very flat and the weather is not great.) Although the heydey of the auto industry is gone, there is still lots of industry in Michigan.

The problems with Detroit are mostly in the city proper. Drive south from Troy to Detroit on I-75 and you can see it the neighborhoods get worse the further you go. By the time you reach downtown, the abandoned buildings and decay are quite obvious even from the highway.

I don't see the city ever recovering. It seems to be past the point of no return. There are entire neighborhoods that would have to be razed. Maybe it will recover slowly, after many decades it could all be cleaned up, but I don't think I will see the city of Detroit recover in my lifetime.

Submitted by njtosd on July 26, 2013 - 10:38pm.

burghMan wrote:
It's even in a different county. There are some very nice areas around Detroit, including Troy, north of the "8 mile".

BurghMan - you must be from CA. It may be "the 5" here, but in Detroit, it's just 8 mile (also the name of Eminem's movie). It separates Detroit from everything else.

Submitted by burghMan on July 27, 2013 - 7:58am.

I do live in CA, but I'm from an industrial city similar to Detroit that ends in "burgh" (note the "h")

In the past year I traveled to Detroit (Rochester Hills) quite a bit. My co-workers were making fun of the fact that I had to go to Detroit, but I was pleasantly surprised when I got there the first time.

I have lived in CA for a long time though. I guess I picked up the habit of putting "the" in front of road names.

Submitted by CDMA ENG on July 27, 2013 - 8:04am.

Hobie wrote:
Sure there were problems with labor costs but in the mid-late '80's Toyota Celica had a 'betty' to announce if your door was a-jar. No American car had this. The wow factor coupled with a affordable price point garnered consumerism attention and money.

Market forces prevail and the cool factor of the hip, airplane cockpit gauges took hold. Detroit countered with the Pinto and Gremlin. or K car even. C-mon. The Japanese skunked us. We did not learn and they took, and continue, to take huge market share.

Simply put, with or without unions, Detroit had viable competition that is winning by delivering a better product.

Relax the enviro constrictions on manufacturing and relax the constraints of energy production and Motor City will return as we will always need lots of new cars/trucks.

Man... As much as I like to bash unions... Hobie is completely correct. Unions were just the "knob turners" that put the product together. The management and marketing staff refused to understand thier markets and the companies suffered for it. Unions merely compounded the problem. Let's distribute the blame correctly here.

If McNamara had continued to head Ford the Japanese and Germans may have been ran out of North America. He understood what forgein product represented to the consumers and moved quickly to match it.

Detroit with be an interesting experiment in urban reconstruction.

CE

Submitted by FlyerInHi on July 27, 2013 - 7:03pm.

SK, I talk to many Asians and other foreigners who have never been to America, They have a warped understanding of our country. They can't believe that it's really that bad. They expect America to be modern and advanced. In most places in the world, they build house of concrete. So they don't realize that American houses are wood that rot away. Repairing the facade of an old wood house that contains architectural details costs a fortune.

Detroit's decline started 60 years ago. Those houses are rotting away and spread over 140 sq mikes! Few of us want 60 year old houses except in primo locations.

Buying houses sight unseen in CA or NY is one thing. But Detroit? I doubt the Chinese investors know what they are getting into.

All that said, I'm a big believer of buying where there is a growing Asian population. They tend to be professional and educated. Can't go wrong in terms of appreciation. Bay Area and the suburbs of NY (such as Fort Lee) come to mind. But those are expensive.

If i wanted to gamble on an "undervalued" city, I'd bet on Baltimore (thanks to proximity to DC) before Detroit. But maybe the urban core of Detroit has a fighting chance if the liabilities of servicing the other areas could somehow be done away with in bankruptcy.

Submitted by spdrun on July 27, 2013 - 8:06pm.

Actually some places in northern and western NY are more like Detroit, sadly. Suburbs of NYC are actually much cheaper than San Diego if you look in the right places, but what you gain in price/rent ratio, you lose in higher property taxes, unless you're real lucky.

Submitted by CA renter on July 27, 2013 - 11:45pm.

SK in CV wrote:
Interesting development here:

The bad news for Detroiters is that the city’s bankruptcy will likely only deepen the decay of its downtown housing market.

That might deter most prospective home buyers. But some look at Detroit’s hard times and see profit.

Specifically, bargain-hunting Chinese investors. Since the bankruptcy was announced on July 18, talk of snapping up Detroit housing for a pittance has picked up on Sina Weibo (link in Chinese), reports Sina Finance. And it appears to be translating into real interest; Caroline Chen, a real estate broker in Troy, Michigan, says she’s received “tons of calls” from people in mainland China.

“I have people calling and saying, ‘I’m serious—I wanna buy 100, 200 properties,’” she tells Quartz, noting that one of her colleagues recently sold 30 properties to a Chinese buyer. “They say ‘We don’t need to see them. Just pick the good ones.’”

http://qz.com/107937/the-latest-chinese-...

It isn't impossible for Detroit to come back. Though I doubt there is either the political fortitude nor the private risk capital to make it happen any time soon. Gentrification takes a lot of time, a lot of money, and a lot of risk. I don't suspect these particular investors are going to take it that direction. I hope I'm wrong.

It looks like the Chinese have bought the propaganda that unions are what has brought Detroit to its knees. Unmanageable costs for the city's infrastructure (including employees) are not the problem; they are a symptom of a much bigger problem that stems from the decline of the manufacturing sector in the U.S., a growing wealth/income gap that is only getting worse, and population/demographic shifts. These Chinese investors are going to be in for a VERY rough time, IMHO.

Submitted by spdrun on July 28, 2013 - 9:32am.

^^^

(Good. If they were too fucking stupid to do their research, they'll be getting what they asked for. They may as well be buying the Brooklyn Bridge sight-unseen. Shame on their countrymen who are selling them on this crap, though.)

This being said, the problem stems as much from decline of manufacturing/realignment as it does from extreme and prolific corruption in Detroit. Cities have had one problem or the other and survived, but typically not both.

Chicago: extremely corrupt, but with a fairly diverse economy still.
Pittsburgh: no extreme corruption (some as always), but had to go through massive realignment after "Big Steel" died out in the US.

Submitted by SK in CV on July 28, 2013 - 10:12am.

spdrun wrote:
^^^

(Good. If they were too fucking stupid to do their research, they'll be getting what they asked for. They may as well be buying the Brooklyn Bridge sight-unseen. Shame on their countrymen who are selling them on this crap, though.)

This being said, the problem stems as much from decline of manufacturing/realignment as it does from extreme and prolific corruption in Detroit. Cities have had one problem or the other and survived, but typically not both.

Chicago: extremely corrupt, but with a fairly diverse economy still.
Pittsburgh: no extreme corruption (some as always), but had to go through massive realignment after "Big Steel" died out in the US.

Detroit's problems go back at least 5 decades. Manufacturing job losses, the race riots, population decline, the racism towards its first black mayor back in the mid-70's, when both businesses and other politicians rejected his leadership and policies irrespective of their benefits for the people of Detroit, corruption, unions, even the way the city was designed, constructed, and developed. And more. It isn't any two things. And it isn't like any other city. Nor can it be repaired like any other city.

Submitted by birmingplumb on July 29, 2013 - 9:38am.

Henry Ford pulled the farmers sons off the family farm leaving ma and pa holding the bag. Then the Cass Corridor was built to house the several hundred thousand transient southern worker. We had 100,000 at Ford Rouge, 60k at dodge main. Conner Avenue had 100 bars from Jefferson to 6 mile ( 6 miles) and at quiting time just after the War, there were 100'000 people on Conner. That was our heyday. One by one, plants closed helped by the Japan invasion in the 70's. People bought Toyota's vw's and Datsuns. Once secretive auto companys were forced to sub contract components to compete with the jap government subsidized foreign cars. ( prob ours too) Once the sub contractors had control and we sold our equipment, they sold all our technology to Kia and others who sprang to the front with bought technology from suppliers with no loyalty. So thats where we went wrong folks. Suppliers broke the monopoly. It was good while it lasted. Detroit is a shell of it's former self. When the plants pulled out, they left a waste land of welfare and liquor stores for the children to study. 4 th generation of welfare is here in Detroit. Add corrupt slick ass college boys politicians and u have the fox guarding the hen house. I moved my children to San Diego 3 years ago from Detroit. God bless San Diego and the forum and especially Bearish Gurl. Motown

Submitted by spdrun on July 29, 2013 - 10:35am.

It's not only Asian and Euro imports to blame. What about domestic manufacturers who moved their operations to more "pro-business"/less corrupt states and cities?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.