234-years ago, Adam Smith published the Wealth of Nations. While some see confirmation of Smith’s beliefs in the return of robber barons, others believe Smith did not mean what you think he meant. We see that the Adam Smith we have come to know is actually only 60-years young, and came from Chicago:
…Lost Legacy has never been slow in criticizing the ‘Chicago Adam Smith’, a person with ideas that are far from the ideas of the Adam Smith born in Kirkcaldy in 1723.
George Stigler’s boast that “Adam Smith is alive and well and lives in Chicago (1976) reflects to invention of the Adam Smith of the “invisible hand (a mere metaphor for Adam Smith whose single use of it in Wealth Of Nations referred to the unintended consequences of the risk-avoidance of some, but not all merchants … who preferred the home trade), and had nothing to do, at least in Adam Smith’s mind, with how markets worked, … or how the price system worked.
The belief that the “invisible hand was a significant ‘idea’, ‘concept’, ‘theory’, or ‘paradigm’ was wholly invented in the 1950s by neo-classical economists on the back of general equilibrium mathematics … and in support of a worthy criticism of Cold War, Soviet central planning. It is now taught in every economics 101 class as if it had historical validity, mainly by people who have never bothered to read Wealth Of Nations. …
Would the actual Adam Smith agree with Reagan that “Government was not the solution, Government was the problem ? Would he worship the wealthy? Would he have opposed the Stimulus Act? Would he have cozied up to corporations? Would Smith pass the litmus test of the teabaggers and the Mount Vernon Statement? Would he have been a free-market deregulation ideologue? Would he even recognize capitalism as we know it?
The economic slump, however, is forcing debt-laden cities, towns and smaller taxing districts throughout the U.S. to consider using Chapter 9. As their revenue declines faster than expenses, some public entities are scrambling to keep making payments on municipal bonds. And that is causing experts to worry about the safety of securities traditionally considered low risk.
Chapter 9 bankruptcy is seldom employed and generally unknown to most of the populace. It provides very specific protections (from US Courts):
The purpose of chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
It applies only to the following (again, from US Courts):
Only a “municipality” may file for relief under chapter 9. 11 U.S.C. § 109(c). The term “municipality” is defined in the Bankruptcy Code as a “political subdivision or public agency or instrumentality of a State.” 11 U.S.C. § 101(40). The definition is broad enough to include cities, counties, townships, school districts, and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities, and gas authorities.
Most states are experiencing revenue shortfalls, resulting on strain to state budgets. States in turn are delaying or suspending funding to local municipalities, creating financial crisis on the local level. Some municipalities have dabbled in the exotic financial instruments that are partly to blame for the Great Recession, and given the anti-incumbent environment and high unemployment, elected leaders would be hesitant to raise taxes. On the first page of the search results for “Chapter 9 Bankruptcy on Google News names Las Vegas, Harrisburg, and Sand Diego and Vallejo, California, but there are certainly others.
I’ve highlighted in the past how Google Trends “ a measure of the searching behavior of Google’s users “ can surface sentiment and intentions (previously, here and here). Now, I’m not saying that the towns listed above are contemplating “Chapter 9 bankruptcy protection after defaulting on municipal bond payments or other financial crisis, but I am saying that enough users from those towns (and states) searched for “Chapter 9 for Google to reveal a significant trend (also note that there is insufficient volume to refine to that state level or for a more discrete time range). Unless those users were searching for Chapter 9 of the latest Harry Potter book, this may very well mean something.