automaticearth | On July 18th, the city of Detroit filed for Chapter 9 municipal
bankruptcy, the largest such filing in US history. After kicking the can
down the road, with increasing desperation, for many years, then end of
the line has been reached. The city is finally admitting that far too
many financial promises have been made, and that the majority of these
simply cannot be kept. It does not matter whether the promise-holders
have a good case for receiving services or needing payments, or whether
those promises are legally protected.
Promises that cannot be kept will not be kept. It is as simple as that.
To complicate matters, however, the architecture of the financial
system prioritizes promises, in a perhaps counter-intuitive, and
certainly self-serving, manner. This will make the task of allocating
extremely scarce resources to stakeholders lower down the financial food
chain very much more difficult. It is time for a good look at the range
of promises made, the competing needs of the recipients, the leverage
enjoyed by powerful players in shoring up their own position, and the
real world implications for municipalities far beyond Detroit.
Outside of Detroit, for the time being, one would hardly think the
United States was standing on the edge of a major financial precipice.
Optimism is riding high in America at the moment. Markets have been
booming until recently, and consumer sentiment is at its highest level in a long time. People have been spending freely and having no trouble justifying it to themselves.
