Record Bankruptcy for US City, Detroit
On 19th July 2013, Detroit became the largest city in United States history to file for bankruptcy protection after piling up debt of more than USD$18 billion. For more than a decade, the city has been borrowing money to pay for its expenses and fund its expensive pension system. Apparently, the breaking point came about after Detroit failed to reach agreements with the bondholders and creditors to restructure the city’s debt out of court.
People who are familiar with The Federal Reserve’s money creation process would not be surprised by Detroit’s bankruptcy. Since President Nixon decoupled the link between gold and the U.S dollar in 1971, it effectively ended any form of gold peg internationally. Without any convertibility to gold by any currency, governments all over the world are free to create as much fiat money as they wish without any restriction. As a result, debt levels began to climb. At this point of writing, U.S debt alone amounts to more than USD100 trillion.
The dire consequence of our current debt-based system is that it could get out of control, resulting in hyperinflation and social security problems. Today, Detroit faces the tricky problem of obtaining bailout from the Federal government because of its credit rating junk status. Unemployment and crime rates in the city are high. Creditors are expected to wrangle with the pensioners for the city diminished wealth. Henceforth, BullionStar believes that in such a scenario, there could be complete loss of personal wealth, unless that wealth is held in gold.