By: Chriss W. Street
Last week we first reported that California Sales Tax Revenue Nose Dives by 33.5% for the month of July, and then Moody’s Warns of Mass California Municipal Bankruptcies. During the “Great Recession” of the last four years, the California private sector was forced to slash employment and infrastructure spending, but the public sector made only modest cut backs. Much of this state and local spending was funded by selling municipal bonds to elderly investor who were told the “muni market” was safe, because the default rate is very low. But a new Federal Reserve study: “The Untold Story of Municipal Bond Defaults”, debunks that municipal bonds are safe investments and blames the Moody’s and S&P credit rating agencies for deceiving the public. This is sure to fan the flames of the growing panic among holders of California municipal debt. Continue reading