So it begins. Greece is the start of the economic downturn, sending signals all across the board. With the world on the brink during the Greece crisis, and Puerto Rico a US version of the Greece crisis, then such of which means there will be others.
Now, Chicago a monument in the US for gun control and horrific violence, but still a large city in the USA is about to go bottoms up. Symbolically it is the supposed birthplace of the president.
When Chicago Public Schools announced on June 24 that it would borrow $1 billion to make a $600 million-plus pension payment due June 30 an eerie feeling spread across bond investors and taxpayers alike.
It was the same feeling that gripped investors when Moody’s Investors Service downgraded Chicago’s credit rating to junk based almost entirely on the city’s pension problems.
The fear was that elevated pension costs, in cities like Chicago, might push these public entities into insolvency, wiping out much of the holdings of municipal-bond investors.
Once a sleepy corner of the municipal bond market — often not even properly reflected on cities’ balance sheets — public pensions have recently turned into the biggest headache for taxpayers and municipal-bond investors, threatening to bring down the finances of U.S. cities and states.
In some places, like Puerto Rico, Illinois, New Jersey and Chicago, entire balance sheets of cities or states hang in the balance.
