Friday, January 21, 2011

Municipal bonds = mortgage-backed bonds?

The municipal-bond market is in crisis, with prices falling and investors running for cover — and for good reason.

Munis — bonds sold by states, cities, counties and other localities to finance government operations — are in trouble because the Ponzi scheme of Big Government is coming unglued. The markets are merely reflecting this reality, as they always do. . . .

The $3 trillion muni market was once regarded as the safest of all investments because the bonds are backed by government taxes. Now it’s showing all the earmarks of the 2007-08 meltdown. . . .But suppose taxes are so high that people leave cities or states in droves, depleting the pool of revenue need to pay bondholders? Suppose these states have so many other obligations — from federal mandates, massive “guaranteed” pensions to government workers and more — that they can’t or won’t make the vast cuts needed to keep paying on their bonds?
Charles Gasparino in The Coming Municipal Bond Meltdown


  1. The Times had an article today saying that 'people' are starting to talk about creating a legal way for states to go bankrupt. (Haven't read it yet ---)