Glenn Reynolds has been rounding up excellent out-of-the way commentary on Detroit’s bankruptcy, including “Detroit’s 60-year decline into bankruptcy hell” (Eric Pianin, Fiscal Times), “Detroit: The shape of things to come” (Karl Denninger, Market Ticker) and “25 facts about the fall of Detroit that will leave you shaking your head” (the pseudonymous Tyler Durden, ZeroHedge).
To this mix I would like to add Holman Jenkins’s weekend Wall Street Journal column “Detroit’s bankruptcy is so 1990s.” Jenkins’s column isn’t exactly out of the way, but it has been placed behind the Journal’s jealously guarded subscription paywall, although I found it online in full text form this morning after reading it in hard copy yesterday. The whole thing is must reading.
The column is less about Detroit than the fiscal wonderland of The Age of Obama and the monetary wonderland of the Bernanke Era. Jenkins takes a vaguely satirical look back to the auto bailouts at the dawn of the Age of Obama and pays tribute to the intellectual advance of the age — the discovery that money shortages are illusory. The case of Detroit, however, shows the universal catch:
As economists have come to understand that money shortages are essentially illusory, if infinite and unlimited money is made available to some but not others, then only racism can be the reason.
Some will object that Detroit’s emergency manager, Mr. Orr, is black. President Obama is black. But Ben Bernanke is white.
Monetary racism is a relatively new branch of economic study. In fact, its pioneers are mostly found in the Yale English department.
Jenkins anticipates a future Paul Krugman column that would invoke this intellectual advance to protest that apparent money shortages are a function of false consciousness. Krugman’s column today — “Detroit, the new Greece” — takes us about half way toward the fulfillment of Jenkins’s satirical vision. It’s difficult to satirize Krugman, as it is the Times, which inspired Jenkins’s riff on “monetary racism.”
Jenkins elaborates on the intellectual advance of the age:
Mr. Krugman may point out that, though white, Ben Bernanke is getting a bad rap. Mr. Bernanke is currently making available on a monthly basis $85 billion through QE to relieve any potential money shortages of the federal government. Detroit’s money shortage (its debt) is less than $20 billion in total. Mr. Obama could fix this with a snap of his fingers, much the way he fixed GM’s money shortage.
He would simply give Detroit $20 billion to pay off its debts, and Detroit would give back nothing in return, and the $20 billion “loss” to the U.S. taxpayer would be made up out of the $85 billion the Fed will be giving us next month. And so on.
But scientific revolutions take time. The world did not immediately embrace Galileo, and it will not immediately embrace the discovery that money shortages are illusory.
As I say, Krugman isn’t quite there yet, but he’s well on the way, and more quickly than even Jenkins appears to have anticipated. I’m afraid that Obama may get there before Krugman. In any event, for those trying to put Krugman’s column today in context, I recommend Steven Malanga’s “The pension that ate California.”