The people out there that believe that the U.S. economy is experiencing a permanent recovery and that very bright days are ahead for us should have their heads examined.  Unfortunately, what we are going through right now is simply just a period of “hopetimism” between two financial crashes.  Things may seem relatively stable right now, but it won’t last long.  The truth is that the financial crisis of 2008 was just a warm up act for the economic horror show that is coming.  Nothing really got fixed after the crash of 2008.  We are living in the biggest debt bubble in the history of the world, and it has gotten even bigger since then.  The “too big to fail” banks are larger now than they have ever been.  Americans continue to run up credit card balances like there is no tomorrow.  Tens of thousands of manufacturing facilities and millions of jobs continue to leave the country.  We continue to consume far more than we produce and we continue to become poorer as a nation.  None of the problems that caused the crisis of 2008 have been solved and we are even weaker financially than we were back then.  So why in the world are so many people so optimistic about the economy right now?

Just take a look at the chart posted below.  It shows the growth of total debt in the United States.  During the financial crisis of 2008 there was a little “hiccup”, but the truth is that not much deleveraging really took place at all.  And since the recession “ended”, total credit market debt has gone on to even greater heights….

So what does this mean for the future?

Well, if a small “hiccup” in the debt bubble caused so much chaos back in 2008, what is going to happen when this debt bubble finally bursts?

That is something to think about.

Sadly, most Americans seem oblivious to all of this.

If you go out to malls in the wealthy areas of America today, people are charging up a storm.  In all, Americans charged a whopping 2.5 trillion dollars on their credit cards during 2011.  Way too many people have already forgotten the lessons that we all learned back in 2008.

Of course some Americans pay off their credit cards every month, but way too many Americans are not doing that.  Today, Americans are carrying 793 billion dollars in revolving credit balances.

And student loan debt is an even bigger bubble than credit card debt is.  As I have written about previously, total student loan debt in America is rapidly approaching a trillion dollars.

So it looks like U.S. consumers have not learned to stay away from debt.

That is not good.

Well, what about the banks?

Has the financial system learned any lessons since 2008?

No, not really.

Sadly, the “too big to fail” banks are now even bigger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.  If they were to fail today, they would be even more of a threat to our financial system than they were back in 2008.

And our major banks continue to be very highly leveraged.  In fact, major banks all over the world are absolutely swamped with debt.

The following statistics come from Zero Hedge….

The U.S. banking system is leveraged 13 to 1.

The Japanese banking system is leveraged 23 to 1.

The French banking system is leveraged 26 to 1.

The German banking system is leveraged 32 to 1.

These are insane levels of leverage, and they are just inviting another major financial crisis.

Do you all remember Lehman Brothers?  The fact that they were leveraged so highly is what did them in back in 2008.  When the value of their holdings declined by just a little bit they were totally wiped out.

Well, during this next financial crisis large financial institutions are going to be wiped out all over the world.  Major banks all over the globe are going to be crying out for more bailouts when things take a turn against them.

They are making the exact same mistakes that they made before, and they are going to be expecting more government handouts when things go bad.

Will we ever learn?

So obviously the banking system has not learned any lessons.

What about the federal government?

Well, if you follow my blog regularly, you know that I love to write about how horrific U.S. government debt is.

Unfortunately, over the past four years things have gotten so much worse.

Back in 2008, the U.S. national debt crossed the 10 trillion dollar mark.

Just recently, it crossed the 15 trillion dollar mark.

So now we are in a much weaker position financially to respond to another major financial crisis.

Just check out the chart posted below.  This is a recipe for national financial suicide….

During fiscal 2011, the Obama administration stole close to 150 million dollars from our children and our grandchildren every single hour.

At the moment, the legacy of debt that we are passing on to future generations is sitting a grand total of $15,351,406,294,640.49.

But keep in mind that it is going up every single hour.

Meanwhile, our ability to service that debt is declining.  We are rapidly getting poorer as a nation.

During 2011, the amount of money that left the United States exceeded the amount of money that entered the United States by more than a half a trillion dollars.

This gap is called a trade deficit, and it is absolutely ripping our economy to shreds.

For a moment, imagine Uncle Sam standing next to a giant pile of money on a map of the United States.  Then imagine a half a trillion dollars being taken out of that pile every single year.

So why haven’t we totally run out of money yet?

Well, it is because we borrow those dollars back.  In order to maintain our false standard of living, our federal government, our state governments and our local governments have to go out and beg the rest of the world to lend us our dollars back.

Sadly, our government schools have “dumbed-down” the population so much that most of them don’t even know what a “trade deficit” is anymore.

Meanwhile, our economic infrastructure is being gutted like a fish.

Look, I know that I go over this point over and over and over, but it is absolutely imperative that we all understand this.

The half a trillion dollars a year that leaves this country every year could have gone to support businesses and jobs inside the United States.

But instead it is going to support businesses and jobs on the other side of the world.

The consequences of this are absolutely devastating.

According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010.  Overall, more than 56,000 manufacturing facilities in the United States have shut down since 2001.

Even many so-called “American companies” have been bought up by the rest of the world.  The following comes from a recent article posted on Economy In Crisis….

RCA is now a French company, Zenith is a Korean company. Frigidaire is a Swedish company. IBM’s Personal Computer Division—with its 500 patents—is now a Chinese company. Westinghouse Nuclear Energy’s major shareholder is Toshiba—a Japanese Company. Lucent Technologies, a former research division of AT&T, along with all the patents acquired from the beginning of the phone system, is now a French company. In 2008, Brazilian-Belgian brewing company InBev purchased the iconic American brewer Anheuser-Busch, makers of Budweiser. With the sale of these manufacturing companies, the future profit and technologies all belong to foreign entities.

We once had the greatest economic machine in the history of the world.

Now it is being dismantled and bought up by foreigners.

When America’s economic infrastructure declines, that means that there are less jobs available for all of us.

As I wrote about the other day, the employment situation in this country is not getting better and we have never even come close to recovering from the recession that started back in 2008.

During 2008 and 2009, the U.S. economy lost millions of jobs.  Since the beginning of 2010, the percentage of the U.S. population that has had a job has remained very stable….

Normally, when a recession ends the percentage of Americans that have a job bounces back pretty dramatically.

So considering the fact that the employment situation has never recovered from the last financial crisis, what is going to happen when the next financial crisis hits?

And most of the jobs that have been “created” during this so-called “recovery” have been low income jobs.  In fact, if you look closely at the employment numbers that were released last Friday, you will find that the vast majority of the “new jobs” were part-time jobs.

But you cannot pay a mortgage and support a family on a part-time job.

Sadly, the truth is that median household income in America has been steadily dropping over the past several years.  Tens of millions of American families are deeply struggling and more Americans than ever are falling into poverty.

Back in the year 2000, about one out of every nine Americans was living in poverty.  Today, about one out of every seven Americans is living in poverty.

All of this is causing a great deal of anxiety in America today.  Large numbers of Americans know that something has fundamentally changed, even if they don’t understand the specifics.  That is one reason why sites such as this one have become so popular.  People want some answers.

And once people get some answers about what is really happening, they tend to want to prepare for the hard times that are coming.

In a few days, a new series on National Geographic entitled “Doomsday Preppers” premieres.  The mainstream media is starting to take notice of the growing “prepper” movement in America today.  It is estimated that there are at least 2 million “preppers” in the United States at this point.  Of course people are “prepping” for a whole host of reasons, but the number one concern among most groups of preppers is the economy.

As the economy crumbles, more Americans than ever have decided that it is not a good thing to be 100% dependent on the system.

Back in 2008 and 2009, millions of Americans suddenly lost their jobs.  Because they did not have any finances stored up, large numbers of them also lost their homes.  Many went from being solidly middle class to being out on the street in a matter of months.

That doesn’t have to happen to you.  Instead of blowing your money on frivolous things, do what you can to set something aside for the difficult times that are on the horizon.

A lot of those “in the know” are quietly making their own preparations.  For example, legendary film director James Cameron (Avatar, Titanic and Terminator) has purchased more than 2600 acres of farmland in New Zealand and he is getting out of the U.S. for good apparently.

Unfortunately, most of us do not have the resources for something like that.  But what most of us can do is we can change our priorities and start focusing on the things that will help us survive the hard times that are coming.

So are you ready?

The Economic Collapse

Read this carefully and you might figure out the problem…

SPRINGFIELD — Making local school districts pick up the employers’ portion of teacher retirement benefits could save more than $1.3 billion a year for Illinois’ beleaguered state treasury. It also could mean financial ruin for some local school districts, school administrators say.

Financial ruin?  How did that happen?

“That would kill school districts, at least most districts. For us, we’re living paycheck to paycheck,” said Tony Sanders, chief of staff for Elgin School District U-46, the state’s largest district outside Chicago. Sanders said the state owes it $12 million for this school year. “There is no magic pool of dollars waiting for us to swim in.”

So what did you promise the teachers with when you negotiated the contracts, including those pensions?  Where was the magic pool of dollars then?

Oh, see, that’s the fraud, and everyone involved in it both needs to get run out of town on a rail and be prosecuted.  There was no magic pool of money, but boy oh boy did those promises get made.

This is identical to what happened in this area when the School District tried to get a 1/2 cent sales tax levy for replacement of refrigerators and roofs on school buildings.  Refrigerators and roofs that were installed years ago, which the school district knew damn well had a service life and therefore should have an impound account that is funded every year so as to provide that “pool of money” with which to replace the now-worn-out items.

But the district instead effectively stole those funds and spent them elsewhere by not allocating them to that impound account in the first place, thereby allowing the district to spend money it didn’t factually have.  Once the shortfall became apparent years later they bleated to the people and asked that we pay twice.

The people here (wisely) said “No — you did not properly budget and set aside these funds, you figure out where to take it from and restore fiscal sanity.”  My personal recommendation is that the board members and administrators be fired and/or have their salaries confiscated, including that of the Superintendent, until it’s covered.  After all, what you really need in a school is teachers, a janitor to sweep the floor, a principal and perhaps one vice principal, and one person to answer the phones.  Everything else may be nice, but in terms of actually educating kids it’s not required.

“I’m trying to see how it equates to good education, sound education, fiscal education, for students if you want the best for them,” said Pam Manning, superintendent of Cahokia School District 187, already on the state’s “financial watch list” because of a shaky budget condition. “We need more services, or at least need to maintain the services we’ve been providing.”

No, you need to stop stealing the people’s money.  When you make promises you must be prepared to fulfill them.  If you can’t reasonably figure out where the funds are going to come from and secure them, then you can’t make the promises.  This called accountability and we the people need to start demanding it from top to bottom.

You’ve made promises you can’t cover and now you want everyone else to take care of that for you.

The correct answer to that request, incidentally, is “No.”

On Friday, the entire financial world celebrated when it was announced that the unemployment rate in the United States had fallen to 8.3 percent. That is the lowest it has been since February 2009, and it came as an unexpected surprise for financial markets that are hungry for some good news.  According to the Bureau of Labor Statistics, nonfarm payrolls jumped by 243,000 during the month of January.  You can read the full employment report right here.  Based on this news, pundits all over the world were declaring that the U.S. economy is back.  Stocks continued to rise on Friday and the Dow is hovering near a 4 year high.  So does this mean that our economic problems are over?  Of course not.  A closer look at the numbers reveals just how fraudulent these employment statistics really are.  Between December 2011 and January 2012, the number of Americans “not in the labor force” increased by a whopping 1.2 million.  That was the largest increase ever in that category for a single month.  That is how the federal government is getting the unemployment rate to go down.  The government is simply pretending that huge numbers of unemployed Americans don’t want to be part of the labor force anymore.  As you will see below, the employment situation in America is not improving.  Yet everyone in the mainstream media is dancing around as if the economic crisis has been cancelled.  I can’t take it anymore!  It is beyond ridiculous that so many intelligent people continue to buy in to such fraudulent numbers.

The truth is that the labor force participation rate declined dramatically in January.  For those unfamiliar with this statistic, the labor force participation rate is the percentage of working age Americans that are either employed or that are unemployed and considered to be looking for a job.

As you can see from the chart posted below, the labor force participation rate rose steadily between 1970 and 2000.  That happened because large numbers of women were entering the labor force for the first time.

The labor force participation rate peaked at a little more then 67 percent in the late 90s.  Between 2000 and the start of the recent recession, it declined slightly to about 66 percent.

Since then, it has been dropping like a rock.  The chart below does not even include the latest data.  In January, the labor force participation rate was only 63.7 percent.  That is the lowest that is has been since May 1983.  So keep that in mind as you view the chart.

In reality, the percentage of men and women in the United States that would like to have jobs is almost certainly about the same as it was back in 2007 or 2008.  There has been no major social change that would cause large numbers of men or women to want to give up their careers.  So there is something very, very fishy with this chart….

The federal government has been pretending that millions of unemployed Americans have decided that they simply do not want jobs anymore.

This does not make sense at all.

The truth is that unemployment is not really declining at all.  The percentage of Americans that are working is not increasing.  The civilian employment-population ratio dropped like a rock during 2008 and 2009 and it has held very steady since that time.

In January, the civilian employment-population ratio once again held steady at 58.5 percent.  This is about where it has been for most of the last two years….

Does that chart look like an “economic recovery” to you?

Of course not.

If the percentage of people that are employed is about the same as it was two years ago, does that represent an improvement?

Of course not.

If the employment situation in America was getting better, the civilian employment-population ratio would be bouncing back.

We should be thankful that our economy is not free falling like it was during 2008 and 2009, but we also need to understand why things have stabilized.

The federal government is spending money like there is no tomorrow.  During 2011, the Obama administration stole an average of about 150 million dollars an hour from our children and our grandchildren and pumped it into the economy.  Even though the Obama administration spent that money on a lot of frivolous things, it still got into the pockets of average Americans who in turn went out and spent it on food, gas, clothes and other things.

Without all of this reckless government spending, we would not be able to continue to live way above our means and our economic problems would be a lot worse.

But even with the federal government borrowing and spending unprecedented amount of money, and even with interest rates at record lows, our economy is still deeply struggling.  Just consider the following facts….

-New home sales in the United States hit a brand new all-time record low during 2011.

-The average duration of unemployment in America is close to an all-time record high.

-The percentage of Americans living in “extreme poverty” is at an all-time high.

-The number of Americans on food stamps recently hit a new all-time high.

-According to the Census Bureau, an all-time record 49 percent of all Americans live in a home that gets direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

So let’s not get too excited about the economy.

Yes, things have somewhat stabilized.  The percentage of Americans that have jobs is about the same as it was two years ago.  Considering how rapidly jobs are being shipped out of the United States, that is a good thing.

Enjoy this false bubble of hope while you can.  Things are about to get a lot worse.

Do you remember how rapidly things fell apart after the financial crisis of 2008?

Well, another major financial crisis is on the way.  This time it is going to be centered in Europe initially, but it is going to spread all around the globe just like the last one did.

As the charts above show, we have never even come close to recovering from the last recession, and another one is on the way.

So how bad are things going to get after the next wave of the financial crisis hits us?

That is something that we should all be thinking about.

The Economic Collapse

Here it comes!

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has effectively eliminated homeowners’ and the public’s ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman. “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

I like it, I predicted it, and now we have an attorney general with a set of balls who has finally stood up and acted upon what, in my view, was both inevitable and necessary to clear the property title system, return it to a functional state, and ultimately allow the market to clear and housing prices to return to sustainable value.

This appears to be NY’s answer to the Miller-brokered “settlement”; it appears to be rather succinct and easily-understood too, distilled down into something like this:

Normally, I do not make commentary on specific candidates for any office other than those candidates (of any political party), which support and uphold individual liberty and sound economic policy.  FedUpUSA in general is apolitical, since economics is based upon MATH, not politics.  However, as events are unfolding, I feel compelled to make the following statement:

Anyone considering voting for Romney had better watch this video.  Have we as Americans learned NOTHING in the past 5 years?!  How many times are we going to elect the SAME fascist oligarchs and expect a different outcome?!

If this happens, we deserve everything we get.  Romney is NOT better than Obama – in many ways he is far worse.  The only bright spot about a Romney nomination is that he will be at the helm when the Republican party goes the way of the Whigs and what remains of this country is destroyed.

For crying out loud, wake up America, you’re being herded like sheep to the candidate pre-chosen by those who already control our lives and this country – the same people who have eroded our liberties through discarding the US Constitution.  If you can’t figure this out, we apparently don’t deserve to be saved.

http://www.youtube.com/watch?v=rVfwvgz_IMc

I’m in the latter camp with this one, and it is rare for me to brand something as not possibly wrong and in error, but intentionally fraudulent.

Total nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month.

This looks really good; here’s the chart that is on the front page:

I wish I could take this report, pick it apart at the household level, and find confirmation.  Remember that last month the alleged 200,000 jobs that were gained were a phantom; when one looked inside the household data we found instead deterioration in both the employment participation rate and a decline in the absolute number of employed persons, while population rose.  That is, the actual counts (as opposed to black-box statements) said that the labor picture deteriorated in December, contrary to the reported numbers.

This month it was worse.  Far worse.

Let’s start with the “base picture” that is causing the cheering:

That nice red line looks good, right?  Well……

“Not in labor force” numbers leaped upward on an annualized basis (seasonally adjusted the “right way”) and what’s worse on a raw basis 1.572 million people exited the labor force last month.

That’s 0.6% of the entire labor force that departed the working population in one month, three times the alleged drop in the unemployment rate.  This means that internally, the numbers were even worse than they first appear!

Indeed, the total number of employed persons fell.  A lot.  To put a number on it, the total number of employed persons fell by 737,000 by actual count.

Now the cheerleaders will state that this is a common thing in January, and indeed it is.  But the correct adjustment is to look at the population increase and subtract that back off as well.  In other words, we take the loss of employment and add the population growth.  When we do this we get a whopping 2.422 million in the wrong direction which was bested only by the -2.618 million in January of 2009 through the process of this downturn!

In fact other than January 2009 there has never been a single month in my table, which dates back to 1999, that put up a worse combined number.  This “performance” rates a literal ”second from utter despair and disaster”, and the employment rate shows it:

This is not a strong report folks, and in fact documents an actual and ongoing collapse in the US labor force, despite the crooning on the mainstream media disinformation channels!

The Market-Ticker

Discussion (registration required to post)

How is borrowing money based on fraudulent claims of asset value and future income any different from counterfeiting money?

Let’s compare three financial criminals. The first is an old-fashioned counterfeiter who doctors up paper and runs a printing press to produce fake currency.

The second  criminal borrows money based on a fraudulent asset and phantom future income. For example, the criminal might obtain a credit card based on false assets and income, or borrow money against a property that is worth far less than he claims and base his credit on an inflated fantasy income he does not actually receive.

The third criminal borrows money from the Federal Reserve at zero interest and extends a loan to a fraudulent borrower because a government agency has guaranteed the loan. Whatever income the lender receives is pure gravy, and whatever losses are incurred when the fraud is uncovered are made good by the taxpayer.

Since our banking system is based on money being borrowed into existence (i.e. fractional reserve), then how is creating money unsecured by either assets or income any different from actually counterfeiting bills? The outcome is identical: money created out of thin air.

If I fraudulently obtain credit based on bogus claims of future income, borrow a large sum and promptly squander it on consumption, then the lender has no recourse: there are no assets to grab and no income to tap. In effect, I had a good time at the expense of all holders of the currency, as my money-created-from-thin-air diluted the currency without adding any productive value.

The way the debt-counterfeit game is played in the U.S., the lender is also a  financial criminal who exploits the moral hazard extended by Federal agencies. If you can’t lose money on a loan, then why not give money to fraudulent borrowers? As long as they pay enough interest to cover your origination costs, then the rest is  pure profit.

We might also ask: how is writing a derivative based on false claims of asset valuation any different from counterfeiting? Once again the creation of an “asset” that can be sold to unwary investors for cash that is based on fraudulent claims of valuation is the equivalent of counterfeiting currency: both add no  productive goods or services to the economy and both are created out of thin air.

Since the Federal Reserve creates money out of thin air to buy assets which can be sold later to credulous investors, then how is the Federal Reserve not counterfeiting dollars? It adds no goods or services to the economy and dilutes the currency, in effect stealing value from all holders of the currency.

The U.S. financial system is one vast, interconnected web of complicity, fraud and counterfeiting.

For more on our counterfeit economy and policies, please see Our Counterfeit Economy and Counterfeit Money, Counterfeit Policy.

Charles Hugh Smith – Of Two Minds

Oh look, show trials complete with plea deals that are entered at the same time as are the charges!

Federal prosecutors unveiled criminal charges against three former Credit Suisse Group AG employees, providing a window into the way traders allegedly invented inflated values for mortgage bonds during the financial crisis.

Two of the three men pleaded guilty to criminal charges of conspiracy, admitting they attempted to conceal the scheme from managers in a bid to boost their bonuses.

Yes, and happy days are here again, the bad guys are all in prison and we can all go back to our work.

One employee was captured on a taped call worrying that “someone is going to spot” the inflated prices, prosecutors said. When another employee told his boss he should book a large loss, the boss allegedly balked: “That’s a lot of money, dude,” according to a taped conversation cited by prosecutors.

Wait a second… Taped call eh?  From 2007 and 2008?  Can someone please explain why it’s four years later when we’re seeing these charges?

Oh, I wonder if the delay has anything to do with this?

A U.S. Justice Department source has told The Daily Caller that at least two DOJ prosecutors accepted cash bribes from allegedly corrupt finance executives who were indicted under court seal within the past 13 months, but never arrested or prosecuted.

The sitting governor of the U.S. Virgin Islands, his attorney general and an unspecified number of Virgin Islands legislators also accepted bribes, the source said, adding that U.S. Attorney General Eric Holder is aware prosecutors and elected officials were bribed and otherwise compromised, but has not held anyone accountable.

The bribed officials, an attorney with knowledge of the investigation told TheDC, remain on the taxpayers’ payroll at the Justice Department without any accountability. The DOJ source said Holder does not want to admit public officials accepted bribes while under his leadership.

Say it isn’t so!  I mean, c’mon — there hasn’t been anything going on with bribery when it comes to, oh, Jefferson County in Alabama, right?  We haven’t actually seen municipal officials go to prison while the banksters who booked outsized profits (and after all, for there to be a bribe someone must offer a bribe while someone else receives said bribe) walk around chuckling, right?

But this allegation is a new low — if true, then there are people walking around right now who had indictments filed under seal but the indicted handed over the proverbial “big envelope” and, well, people sorta “forgot” about it.

Read the whole story over at Daily Caller.  It’s disgusting, and one has to assume that if this occurred in that context it is probably not an isolated incident.

On January 29 Bloomberg reported Bing Races to Beat Michigan Deadline for Union Detroit Deal

Democratic Mayor Dave Bing is racing to wrest concessions from 48 bargaining units to erase a $200 million deficit in the home of General Motors Co. and the cradle of the U.S. auto industry.

Otherwise, the city of 714,000 dominated by Democrats may face a Republican-appointed manager with authority to sell assets and nullify contracts. State Treasurer Andy Dillon has said Detroit will run out of cash by May, and called for concessions by early February.

This week, Bing began firing 1,000 of Detroit’s 11,300 employees. The mayor also proposes a 10 percent cut in payments to vendors and doubling the 1 percent tax on corporations.

Bing, 68, has said the city must trim annual employee benefit and pension costs, which have risen since 2001 to $35,000 per employee from $18,000.

“We are meeting, not daily but more than weekly, and there are sidebar conversations every day,” said Al Garrett, president of AFSCME Council 25, which represents about 3,000 employees. “I’m not sure an emergency manager would be any more Draconian than what the city itself is asking, but it’s a real possibility.”

Deal Reached?

Mayor Bing is taking his script straight from Greece where a deal has been “close” for days, weeks, and now months.

Today’s Bloomberg headline does not match the facts presented. Please consider Detroit Reaches Pact With City Unions to Avoid Takeover, Detroit News Says

Mayor Dave Bing and a majority of city employee unions have reached tentative agreement on concessions aimed at avoiding a state takeover.

“This agreement is the first meaningful step in achieving the necessary concessions and structural changes,” Bing, 68, said via Twitter.

The deal, but no details, was confirmed by Al Garrett, president of AFSCME Council 25. The agreement covers about 6,500 of the city’s about 11,000 employees, not including police and firefighters who have resisted a demand for a 10 percent wage cut, he said.

The city and unions must agree to concessions early this month to avoid state action, such as the appointment of an emergency manager with broad powers to cut spending, said state Treasurer Andy Dillon. Dillon is leading a review of city finances, after a preliminary review found it will run out of cash by May, and that it faces a $200 million operating deficit.

Deal Reached? Really? No, Not Really

According to mayor Bing we have an “agreement”, albeit an agreement with no details, and without covering police or firefighters. What kind of deal is that?

What’s Best for Detroit?

The best thing for Detroit would be if there is no deal, or the state rejects the deal.

Unions are the problem and the solution is to get rid of them entirely. That will not happen under Bing, but it could happen in a state takeover.

Bing is not interested in what’s best for Detroit taxpayers nor is he interested is what’s best for Detroit school children where shockingly only 25% graduate high schools. Rather, Bing is out to save as much of the status quo as he can, including his own job of course.

Detroit Schools Bankrupt

Flashback July 24,2009: The Wall Street Journal reports Detroit’s Schools Are Going Bankrupt, Too

Detroit is like many urban  school districts—large, unwieldy and bureaucratic, with a powerful union  that makes the system unable to adapt to changing circumstances and  that until very recently had an indulgent political class that insulated  it from reform. That insulation came in two forms. The first was  neglect. Mayor Kwame Kilpatrick spent several years distracted by a  scandal stemming from his affair with a staffer. He resigned last year,  pleaded guilty to obstruction of justice, and was sentenced to four  months in jail. Had he been an effective mayor, he might have also been a  powerful advocate for students.

The other insulating force was a  conscious decision to wall off Detroit from charter schools. In 1993,  Michigan’s legislature made it difficult to create new charters in  Detroit by declaring that only community colleges could authorize  charters for primary and secondary schools in “First-Class  Districts”—defined as those with more than 100,000 students. Detroit was  the only First-Class District. In  2003 the state, under pressure from the Detroit Federation of Teachers,  turned down a gift of $200 million from philanthropist Robert Thompson  that would have established 15 charter schools in the city. Those charters are needed today.

The  net result has been a school system that’s been coming apart as the  teachers union has dug in its heels. In 2006, the union illegally went  on strike, killing a plan to force teachers to take a pay cut to balance  the system’s books.

Collective Bargaining has Morally and Fiscally Bankrupted Detroit Schools

Read  that again. Under pressure from the Teachers’ Union, Detroit turned  down $200 Million. That was in 2003 dollars. Wow. No doubt the  union  “did it for the kids“.

For more on the appalling behavior of Detroit’s teachers’ unions please see Detroit Public Schools (25% graduation rate) teachers unions opposing highly qualified volunteer teachers.

It is time to kill collective bargaining for public unions, every one of them, and nation-wide, not just Detroit.
Mike  “Mish”  Shedlock – Global Economic Analysis

A Financial System Built to Fail: a look back at 2008 w/Karl Denninger

http://www.youtube.com/watch?v=oxwoTBaM4ac