Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
Last month, I posted some old photos of Chicago in the 1940s. I grew up in a neighborhood that has since gone badly downhill in spite of a lot of positive features that should have kept it livable. It is South Shore and here is the previous post. We went back for a visit this week and just returned home last night. I posted some more photos of the old neighborhood Here.
We even revisited some spots from my post about a week in Michigan from two years ago.
If you’ve flown much in the last few years, you’ve probably seen what I’ve experienced, as well – completely full planes, high prices, and aggravating extra charges for baggage, wi-fi, etc… This is really a symptom of what has actually occurred, which is that airlines have finally moved past an era of competition into an era of oligopoly.
The real indication of their new status isn’t the high prices and full planes – it is in the stock price.
Here you can see the major carriers which have survived and consolidated the US market – Southwest, American Airlines, Delta, and United / Continental. For years and years the stock prices of major airlines have languished – per Warren Buffet
He said that a durable competitive advantage in the airline industry “has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down,” he joked. “The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit.”
Each of the major airlines has predominantly broken their strong unions and taken medicine from bankruptcy to mergers in order to restore their finances. Instead of a focus on expansion, they are operationally focused in terms of filling every seat on every plane at the highest price possible, in terms of ticket costs and extra fees. Today they charge you for every sort of upgrade; “economy plus” which is a seat that you can sit in and get work done, costs extra, as well as for checking bags.
There is absolutely nothing wrong with a company doing all they can to maximize profits, especially after savaging investors for many years with poor stock prices and a lack of dividends (and the high risk of total financial collapse). The airlines have finally figured out technology as well – if you want to upgrade any element of your flight experience, from business to first class to economy plus to a daily club pass – it is all right there as long as you are willing to give them your credit card number.
The airlines have also figured out that their frequent flyer programs provide benefits but also can be a millstone. Rather than rewarding miles, they are looking at the prices of the tickets paid by each traveler which rewards those that actually provide the greatest benefits to the airlines. If you’ve tried to actually use your benefits (except for Southwest), you’ll find that seats are very limited and you need to plan far in advance to receive benefits from these perks.
Moody’s has downgraded the rating of the debt of the City of Chicago to “junk”.
This triggers all sorts of crazy swap termination fees, accelerated payments, and the like. The damage of the downgrade is in the billions of dollars.
The City of Chicago has been in a death spiral for a while now, and I think it is probably time to just go all “Detroit” and get it over with. The bondholders will get a haircut, as well as the pension funds and everybody else.
But that aside, here is yet another case where if the Republicans were smart, they could simply run on a “we’re not them” platform. Every single thing that has happened in Chicago has come under the Democrats’ watch. There is no way out for them. They created it, they participated in it, and they kicked the can down the road for the current generation to watch it all implode.
I have written about this before, but either the Republicans are too nice, or don’t care. It is so easy to put this at the Donks’ doorstep. I just don’t understand why the Republicans don’t do it.
This implosion of a once great city is disgusting and should be front page news. But it isn’t.
I grew up in a Chicago neighborhood called South Shore. At that time, 1943 to 1956, it was one of the nicest parts of the city. Now, now, it is a cesspool of crime.
When my father moved us to the house at 7344 Paxton Avenue, I was 6 years old. The area was quiet and peaceful. Not far away was South Shore Country Club, a beautiful club that offered golf, skeet shooting and a horseback riding to members.
It was a elegant place and I visited a few times but we were not eligible for membership because my father was in the business of owning and repairing juke boxes. That was not a respectable enough occupation. Prosperity was not the criterion. Los Angeles County Club has barred people from the entertainment business for the same reasons.
Our home had been built in 1912 and still had gas lighting fittings in the bathroom and living room, as electrical lighting was still a bit suspect.
This is the house many years after we were gone. It has had the front porch enclosed in brick. Otherwise, it looks much the same. The owner saw me taking a photo and came out to ask me who I was. He insisted on showing me through the house which has had some interior remodeling. He asked if I could send him photos of what it looked like when we lived there but most of my old pictures are home movies.
Today we see that the latest bond offering from the Chicago Board of Education will be priced at over twice what a BBB offering demands. That is brutal. I still won’t touch that with a ten foot pole.
It is inevitable that the State of Illinois and City of Chicago and their organs will be having major financial issues, to say the least, within a year or two. It could be Detroit on an inter-galactic scale.
My question is this – why don’t the Republicans make the Democrats own these massive boondoggles? I understand that in Illinois, many of them are in on the fun – however, the State of Illinois, City of Chicago and Detroit have all been essentially run by Democrats for literally generations – and it is all blowing up.
Is the issue too complex for Joe Six Pack to understand or care about? Are the Republicans afraid to be held to a higher standard? I just don’t understand why they wouldn’t shout from the mountain tops at how much graft, corruption and incompetence it takes to completely tank a city with as much potential as Chicago and a State with so many potential positives as Illinois.