Detroit has been mismanaged and allowed its industrial based to wither over the past 2 or 3 decades. As a result, we could see Detroit’s financial collapse coming for many years. Although insolvency was resisted for several years, the inevitable arrived on Thursday when the City of Detroit filed for bankruptcy.
The amount of money Detroit actually owes is unclear but is believed to be between $18 and $20 billion.
The population of Detroit is now about 700,000.
If we divide the Detroit’s debt ($20 billion) by Detroit’s population (700,000) the result is a “fair share” of roughly $25,000 in city debt for every man, woman and child in Detroit.
This suggests that when a government’s debt reaches a “fair share” level of $25,000 per person, that government may be in trouble.