Thursday, June 03, 2010

Three American cities on the brink of broke

Jefferson County, Alabama, Harrisburg, Pennsylvania, and Detroit, Michigan are going broke. According to Fortune magazine, via, the leading causes of financial upheaval for these three American cities are rampant unemployment, timid consumer spending, and underfunded public pensions. These cities are facing financial ruin mostly brought on by problematic politics and poor financial decision making by city officials.

Municipal bonds that are issued to fund public projects such as roads and public buildings have a less than half percent rate of default within a 5 year average, and are historically the safest avenues to invest. However, municipal bond defaults are on the rise. If these cities default on their debt, then the other, already financially overburdened states, as well as American taxpayers will have to foot the bill.

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