Even if the economy stabilizes a little, it’s really hard to see how New York is going to solve its budget woes, given the collapse of Wall Street, big media and real estate. A combination of a bad economy, lower public services and higher taxes could make the city toxic for years to come. No wonder than that credit default swaps on the city’s debt are trading at all time wide spreads, implying a 50% chance of default within five years, according to numbers run by Zero Hedge.
That’s not ironclad. Obviously CDS spreads have shown some screwy things in the past, like how McDonalds is safer than the UK (although that’s not as crazy as it looked even a few months ago).
Says the pseudonymous Tyler Durden:
So for all those who are planning on buying real estate in the City, you may want to ride it out on rent for the next 3-4 years. One of the positive side effects of a municipal bankruptcy tends to be an 80% price cut on that 2000 sq. foot loft in Tribeca you have had your eye on (and getting mugged at gunpoint every time you leave it).
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