09
03/10
A Small Story with an Important Sentence
by John Galt
March 9, 2010
While there are literally hundreds of news stories that I scan each day, every now and then the most innocent appearing of stories where you say “huh, that’s logical” or “wow, that’s important” which causes me to take pause. As I was reading this story from Bloomberg:
Eaton Vance Dumps Dirt Bonds as Florida Land Districts Default
a very important sentence jumped off of the page and made me reflect on to the depths of the economic crisis we are in. The fact that Eaton Vance was intelligent enough to liquidate a loser was important and their admission of an error in judgment says it all. It was this key sentence though which was extracted from the article:
Dumping the so-called dirt bonds at a discount was a better bet, the Boston-based Metzold said, than taking over 218 empty acres (88 hectares) from the project’s builder and waiting for a real-estate rebound that may not come until the early 2030s, according to a Moody’s Economy.com forecast.
This is the key sentence. If the “dirt” bonds are pretty much that, then what does that make the underlying municipal bonds in these communities where housing is still in decline and the future of economic development is totally dependent on an impossible demographic situation:
An aging, non-technically oriented baby-boomer group with poorly educated lower class citizens and lackluster educational and industrial development.
Municide was something I wrote about two years ago, where the declining revenues due to the housing and commercial real estate collapse finally forces cities and counties to either downsize or seek out bankruptcy. I fear that these communities will do so in return for guarantees and management by Federal overseers rather than make the hard choices themselves. It would appear that this issue, if not resolved by a rapid collapse of our currency and economic system, will be a festering wound that we will be forced to endure for decades to come if the Moody’s forecasters are correct with one city after another collapsing into less than viable ghost towns, dependent completely on a Federally based system of support and recovery.
