Detroit is a zombie story - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 23 July 2013
Detroit is a zombie story A  A  A

Madrid, Spain

But gold? It shot up $43. And if you've been reading these diaries, you know why. Gold is not the only money. But it's the only kind that works in our extended economy.

Today, we approach the same story...from a different angle. From this perspective, it's interesting too... It is the story of what happens next -- when the growing power of zombies meets declining available resources.

Yes, the Motor City has been flattened. Now, it's being scrapped. The largest municipal bankruptcy in history. Detroit was once the richest...and most in the country. It was the center of its leading and most profitable industry - automobiles.

But while German and Japanese automakers had the good fortune to be bombed out in World War II, Detroit grew bigger...more prosperous...and full of zombies.

Yes, dear reader, Detroit is a zombie story. Since 1971, almost all big stories have a zombie angle. Because the credit-based monetary system that Richard Nixon put us in is a perfect habitat for zombies.

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First, the New York Times has the report:

    DETROIT - Detroit, the cradle of America's automobile industry and once the nation's fourth-most-populous city, filed for bankruptcy on Thursday, the largest American city ever to take such a course.

    Not everyone agrees how much Detroit owes, but Kevyn D. Orr, the emergency manager, has said the debt is likely to be $18 billion and perhaps as much as $20 billion.

    For Detroit, the filing came as a painful reminder of a city's rise and fall.

    "It's sad, but you could see the writing on the wall," said Terence Tyson, a city worker who learned of the bankruptcy as he left his job at Detroit's municipal building on Thursday evening. Like many there, he seemed to react with muted resignation and uncertainty about what lies ahead, but not surprise. "This has been coming for ages."

    Detroit expanded at a stunning rate in the first half of the 20th century with the arrival of the automobile industry, and then shrank away in recent decades at a similarly remarkable pace. A city of 1.8 million in 1950, it is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.
Yes, the handwriting has been on the wall for a long time. But what did it say?

We'll answer that without hesitation: it said 'beware of zombies.'

And here, we offer a simple test so Dear Readers can tell which side they're on. Ask yourself: in the absence of government would people still willingly give you money to do what you do? If the answer is 'no,' then you are probably a zombie.

Here's how it works, when people realize they can use the police power of the government to get other peoples' money, they rarely hesitate. In the case of the Motor City, unionized workers found that they could use government to back their demands. Gradually, wages and benefits rose...

After the war, Germany and Japan built new auto industries, with factory workers who were willing and able to turn out better cars at lower prices. Detroit, by contrast, let its machinery get old...and let its workers get soft. Between poor quality, out-of-date styles and high costs - US auto businesses could barely make a go of it.

Light manufacturing was fleeing the country - to China, Southeast Asia and Mexico. The heavy industry - automaking, steel, mining - was a sitting duck. It couldn't protect itself from zombies. The zombies soon got control over the government....and then, preyed upon fixed industries.

Only 4 years ago, the US government bailed out GM...or rather, it bailed out its zombified labor unions, guaranteeing wages and benefits the company couldn't afford to give.

What was happening in the auto business was happening even faster in the city itself. As Detroit zombified, productive businesses and real taxpayers moved out. Zombies were all that was left. People on welfare. People working for the government. People who were disabled. Crooks, malingerers, shysters - they were all there, getting money for nothing in the age-old zombie fashion.

Was there no way to turn Detroit around? Of course there was. It was obvious how to do it. But who wanted to? The more dysfunctional the city got, the more money the city's sleazeball leaders got from the federal government. That's how zombieism works; the worse things get the better they are for the zombies...

And that's why zombieism is like drug addiction. You rarely just 'give it up.' Instead, you have to go all the way...and hit bottom.

Detroit may be hitting bottom now.

And how long will it be before Baltimore and Chicago go broke too? It depends on how fast interest rates rise. The higher they go the harder it is for these cities to keep up with their promises to the zombies. And since interest rates are is just a matter of time before they all go broke.

That is when the jig is up. Zombies fall. The credit-based money system collapses. Gold rises.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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3 Responses to "Detroit is a zombie story"


Jul 24, 2013







Jul 23, 2013


Like (1)


Jul 23, 2013

From city to the Govt. Has it not started with "Prime Rate Bubble on the international scale?"
Near our home, Mill Workers engineered strike destroyed Textile Industry. Now Aggressive Adventurisim of high pitched demands in Pune's Automobile Industry is also taking the workers on the same path. Yes militency is an integral part of Unions but NOT Taking on the Path of "SELF DESTRUCTION". I hope we will not follow that path.

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