The Clevelands of the World

Today I watched a documentary on Cleveland’s decline. The tone was generally morose, though there were shimmers of hope
from all the new construction. New exurbs, renovations in the sururbs, even a brand new neighborhood in the city itself.

The documentary must have been finished up this summer, because then reality hit Subprimes — that disastrous result of government subsidies to social engineering and credit card companies, took down Cleveland. The flow of investment increased consumption, but it did not create real development.

A similar dynamic is working in many countries that export oil and natural gas. Reality is hitting. Hugo Chavez’s region ally, Ecuador, is now bankrupt. Market economies punish the “Clevelands” of the world — those governments that are unable to generate wealth, and can only provide a good life if someone else is financing it.

Of course, not everyone agrees. Tom has a post decrying that low oil prices means that Kazakhstan now has to generate wealth, instead of just pumping it out of the ground. This blank check financing is as out of date as when it was first proposed in United Nations garb in the 1970s and 1980s. Outside the subprime mortgage, oil finance, and UAW, however, I think most people realize this.

Don’t throw away money on the Clevelands of the world. Foreign oil dependency is a threat to American national security. We need to build a new electrical grid, both on land and under the sea. We need hydrocarbon substitutes, such as ethanol for flex-fuel vehicles and solar and wind for replacing natural gas powerplants. We need biodiesel stations and in-town electric vehicles.

We don’t need more Clevelands in this world.

8 thoughts on “The Clevelands of the World”

  1. They have missed a payment, but they are far from bankrupt. They have a 30-day grace period, and are said to have somewhere between 4 and 7 billion in cash reserves.

    One of the countries they owe money is Venezuela.

  2. They have missed a payment, but they are far from bankrupt. They have a 30-day grace period,

    Though the grace period is now down to 41 hours, and they’ve announced they will not be paying. [1]

    So you’re right, not in default yet (though that may change before work Monday. We will see)

    and are said to have somewhere between 4 and 7 billion in cash reserves.

    Perhaps, though (besides showing that defaults can occur even when cash is still reported as positive), I’m not sure what your point is.

    One of the countries they owe money is Venezuela.

    It will be interesting to see who receives what of the debt!

    [1] http://www.mcclatchydc.com/world/story/57752.html

  3. “I’m not sure what your point is …”

    Their debt is reported to be just under 12 billion, a significant percentage of which is refinancing charges. Their reserves are 6.5 billion. They are exporting 350,000 to 400,000 barrels per day. They are not bankrupt.

  4. My experience in Fort Wayne was similar — there is a viable town of the sort I recognize from the upper midwest – and an industrial relic.

    Does Detroit anything beyond the relic?

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