What happened in Detroit will happen to the USA

[redrumloa]

http://www.lewrockwell.com/north/north828.html

Who ya gonna blame?

The media pundits cannot decide, so they simply ignore the collapse. "Detroit? Never heard of it."

The lesson of Detroit is this: the experts do not see a collapse coming. They assume that next year will be like today, give or take 3%. They do not believe that anything as complex as a city can collapse. So, they believe that things will continue, as they always have. Taxes need not be cut. Spending need not be cut. Schools should be allowed to educate. Tax-funded welfare programs should be increased. When it comes to tax revenues, "there's always more where that came from."

And then, overnight, the system collapses. The assumptions were wrong. Real estate prices collapse, indicating an irreversible flight of capital from the city. The ability of the government to collect taxes collapses.

OBAMACARE

This brings me to the other subject: the health care law. It is not law yet, but it soon will be.

I know what is going to happen.

1. Cost overruns
2. Fraud
3. Additional coverage extended to groups
4. Rising deficits in the program
5. Lower payments to physicians
6. Lower payments to hospitals
7. Delays in payments
8. Rising taxes on the rich
9. Rationing by doctors, hospitals, government
10. Delays in treatment
11. More HMO care: assembly line medicine
12. A search for scapegoats

You had better start getting into shape. You can no longer afford to be vulnerable to the diseases and afflictions of a flabby lifestyle. ObamaCare has changed the risk-reward ratio. Risk has just gone up. It will continue to go up.

There will be no roll-back of this law. It is going to be enforced for as long as the U.S. government has money.

That may not be as long as Obama thinks.

 

[ilwrath]

The media pundits cannot decide, so they simply ignore the collapse. "Detroit? Never heard of it."
[...]
They do not believe that anything as complex as a city can collapse. So, they believe that things will continue, as they always have.

Detroit has a lot of lessons to learn from, that is for sure. I think it should be a requirement for the major leaders of our government to visit every big city of the US and really get a feel for what is going on there. I'd like to hope we'd get a lot better informed decisions from them that way.

Then he goes off the rails and starts insinuating that this happened overnight, and somehow health care will cause this to happen worldwide. Well, I think this is trying to tie disparate issues together with a bunch of faulty statements. From these quotes, I highly doubt Gary North ever visited Detroit, let alone lived in it. Detroit's plight has been ignored for decades.

In 1994, the median sales price of a house in Detroit was about $41,000. The housing bubble pushed it up to about $98,000 in 2003. In March 2009, the price was $13,600. Today, the price is $7,000.
[...]
There is no surge of buyers to take advantage of fabulously low prices in Detroit. Can you imagine buying a home for cash for $13,600 in 2009 – a house that had sold for $98,000 six years earlier – and losing half your money? It's incredible.

This makes a number of false assumptions.

1) The median house selling in 1994 is the same house in the same condition in the same neighborhood as the median house in 2009. Detroit has a number of neighborhoods, some more functional and sane than others. The houses selling for $98,000 in early 2000's are in a different neighborhood from the houses selling for $7,000 in 2010. The very few middle-class areas of Detroit don't turn over a lot of houses. What you've seen with the median change is more activity at the low end of Detroit.

2) The $7,000 house is far from a new thing in Detroit. The difference is the activity on those houses were largely scams in the early 2000's, and prices now reflect reality again. In 2001, you could pay a guy to appraise a $7,000 house for $41,000 fairly easily. Remember, Detroit wasn't a happy functional place in the early 2000's. Heck, Detroit hasn't been a happy functional place in my lifetime.

3) "There is no surge of buyers to take advantage of fabulously low prices." Yeah, right! Who the hell COULD live in most of those areas? You have very spotty municipal services, no police protection, very limited fire protection, extraordinary gang activity, and the mentally unstable as neighbors (people flushed out of the mental hospitals that literally have no where else to go). That's not to mention the other benefits of the area, such as insane insurance prices, provided you could even find a reputable company that would insure you there, and the packs of wild dogs roaming some streets, the prostitutes and pushers on others. Heck, you can't even get a pizza delivered to most Detroit zip codes.

4) Even in the 2000's, houses were taking years to sell, and still not selling for listed or appraised prices.

But don't take my word for it. If you use a little google cache search for the actual WSJ article, it starts to paint a different picture.

Three times, thieves broke into their cars. "When they come into my house, I'm out of here," Mr. Andrews told a neighbor at the time, they both recall.

Not long afterwards, Mr. Andrews found his house pillaged. The antique chairs were gone. A trail of his CDs crossed the front lawn. The couple found a house they wanted on a golf course. But it took them a year to sell 1626 W. Boston Blvd.

In 2005, they found a buyer, Kimberly Carpenter, willing to pay their $189,000 asking price. They were too relieved to question why Ms. Carpenter's closing documents recorded the sales price as $250,000.

Who documents a paid price of $61,000 more than they are paying? Pyramid scammers, and speculators. That's who. This is documented fraud, more than a realistic representation of housing markets or government failure. Unless you mean the failure of GWB administration to recognize the incredible amounts of mortgage gaming that was going on. That one I'll buy.