Wall Street’s worst nightmare? Why New York City bondholders should brace for a 1970s-style financial shock as warning signs start flashing
municipal bonds, as per a report.
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According to The New York Post, analysts warned that financial markets investors, especially those who hold tens of billions in municipal debt, could face a possible crisis that resembles the fiscal shock that hit the city in the 1970s.
Political instability and financial anxiety
The source of this worry is the political instability of the city, as per the report. Mayor Eric Adams, who was once regarded as a moderate leader, is currently caught up in scandals and losing control of the city's leadership. According to New York Post, if his political position continues to deteriorate, the city might be turned over to more progressive figures such as Public Advocate Jumaane Williams, who openly campaigned for policies like higher taxation and more government spending. Those actions might chase away businesses and residents already exiting to states like Florida, which has lower taxes, further diluting the tax base of the city, the report added.
Municipal bonds: A lifeline with risks
According to New York Post, municipal bonds, or “munis” are the city’s way of funding everything from public transportation to infrastructure projects. These bonds are popular among small investors because they offer tax breaks and are generally considered a safe investment, as per the report. However, municipal bonds are not entirely
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