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I believe that Harrisburg, Pennsylvania’s actions represent the very tip of the iceberg municipal bond missed payments and/or defaults. Remember, the muni bond market is $2-3 trillion in size, so we’re not talking about a minor issue here.
Worst of all, individual investors are the ones most likely to end up getting creamed.
Indeed, ever since the 2008 Crash, investors have been generally pulling money from stocks and putting them into bond funds. All in all they’ve put $480 billion into bond funds since June 2008. Of this, some $88 billion or 18% has gone into municipal bond funds according to the Investment Company Institute.