Is Chicago the Next Detroit?

The bankruptcy of the city of Detroit was the largest municipal bankruptcy in history. But recently, Moody's downgraded the municipal debt of the city of Chicago, raising fears that the Windy City could become the next problem spot. Will Chicago be the next Detroit?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the Moody's downgrade of Chicago's debt, noting that a pension crisis will require the city to contribute more than $1 billion to shore up pension fund balances. Moody's argues that such large contributions raise questions about the long-term solvency of the city, with the fear being that a downward spiral of declining city services and rising taxes could make Chicago suffer what Detroit has already gone through. Yet Dan points to bond-analyst beliefs that Chicago isn't in the same situation as Detroit. Detroit's economy was highly dependent for decades on Ford (NYSE: F  ) , General Motors (NYSE: GM  ) , and the rest of the auto industry, while Chicago has a more diversified economy. Nevertheless, investors need to keep their eyes on the situation to make sure that the situation doesn't deteriorate further and put their money at risk.

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  • Report this Comment On March 10, 2014, at 1:15 AM, larrrup wrote:

    They have the same union thug mentality in Chicago as was prevalent in Detroit, The teachers went on strike while the children were in school they should have been fired en mass if they didn't go back to work. The politicians have no doubt given into union demands for more and more pay and more and more deluxe retirements at an earlier age.

    They need to be in a right to work state. Cities and the state should refuse to collect dues for unions.

  • Report this Comment On March 10, 2014, at 9:28 AM, randydevinney wrote:

    Detroit, Chicago, the US. All are just at slightly different places along the same path.

  • Report this Comment On March 10, 2014, at 10:22 AM, AmericanFirst wrote:

    Yep,

    Democrats / Unions doing what they do best!

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