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Why Detroit’s Bankruptcy Should Concern You

74 views  2013-07-22 02:14   Tagsgovernment  official  blank  running  example 

Well, it’s official—as of last Thursday, the city of Detroit is bankrupt.

Detroit is a sad example of a city that was continually running a large budget deficit. But it grew into such a huge amount of government debt that the only way out was to file for bankruptcy and give investors pennies on the dollar.

While some might not feel sorry for large investors, don’t forget that many pension funds will lose a significant amount of money as the city restructures its government debt. Early reports of the proposed restructuring indicate that retired municipal city workers will get less than 10% of what they are owed.


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That just shows once again that you cannot run a budget deficit, spending more than you make, indefinitely. At some point, the government debt grows so large that the cost to maintain it ultimately brings the whole scheme down.

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