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This is the tip of the iceberg. Two comments.

(1) In Cyprus, the failed bank's creditors were only required to take an 80% haircut. Detroit is asking creditors to take a 90% haircut. This will not fly. The litigation will be monumental and shake all of government to the core.

(2) The credit/bond rating agencies have changed the standard by which pension obligations must be accounted for. A huge number of state, local and unions (and corporations) are going to find themselves so far underwater that there is going to be a run on the Pension Benefit Guaranty Corp. That will be the bailout of all bailouts.

“...The pension changes from Moody’s, and separately the Governmental Accounting Standards Board, scheduled for this month, could result in Los Angeles, San Francisco, San Jose, Azusa and Inglewood joining fiscally troubled Stockton and San Bernardino, among others, as severe credit risks. It's all largely due to soaring employee retirement costs...”

http://www.foxbusiness.com/government/2013/06/11/california-on-brink-pension-crisis/#ixzz2WOjpWwzJ

The credit/bond rating agencies have changed the standard by which pension obligations must be accounted for. A huge number of state, local and unions (and corporations) are going to find themselves so far underwater that there is going to be a run on the Pension Benefit Guaranty Corp. That will be the bailout of all bailouts.

As they say in England, no worries, mate!

The Fed will just print the money. To maintain stability in the markets, of course. And, yeah, food will go up another 5% and gas prices will rise but they're not counted in the CPI [too volatile] so the effect will be nil.