The Impact That Brexit May Have On Chicago
On Thursday June 23rd, citizens of the United Kingdom voted to leave the European Union. While you may feel that the British exit, or ‘Brexit’ as the world is calling it, from the European Union will not have a direct impact on you as a resident of Chicago, an article from the Illinois Policy begs to differ. This article argues that, given Chicago’s already tenuous financial situation, Brexit and its ensuing wake may potentially have a devastating impact on Chicago. The article suggests that because Chicago is already teetering on the edge of bankruptcy, a slump in international markets caused by Brexit may just be the straw that breaks the camel’s back and forces our city into bankruptcy.
World Markets Slump In Wake Of Brexit
The Guardian claims that the Brexit vote created an international panic responsible for wiping $2 trillion off of the world markets, as the vote was happening. This immediate reaction does not bode well for what’s to come. While many scary financial statistics and predictions have been coming to light in the days following Brexit, the following sound bites provided by the Guardian do a great job of summarizing the first financial responses to the Brexit vote:
- World markets in Europe, America, and Asia have slumped,
- Some economists predict that Brexit will cause the United Kingdom to sink into a recession, and
- The British pound dropped from $1.50 against the U.S. dollar to just $1.33 in a single day.
While these figures and predictions relate mostly to the United Kingdom it is a mistake to think that the rest of the world won’t feel the ensuing ripple effect. For example, The Illinois Policy reports that the wake caused by Brexit resulted in a 600-point stock market sell-off as well as negative interest rates around the world.
Brexit May Push Chicago Into Bankruptcy
While the world waits to see what will happen next with the international markets, Chicago faces a very real possibility of bankruptcy. Analysts from the Illinois Policy note that if Brexit results in a major stock market dip, or an international recession, then Chicago’s already-underfunded pension system may collapse and may drag Chicago into bankruptcy.
Even before the Brexit vote, Chicago’s Public School system was teetering on the brink of bankruptcy with the city’s pension funds severely underfunded. Analysts from the Illinois Policy note that our city’s pension funds rely on investments to grow, and that therefore their financial health is closely aligned with the financial health of the stock markets. These analysts report that Chicago’s pension funds need a return on investment of approximately 7.5 to 8 percent annually in order to function properly. However, in 2015 the four city funds and the public school teachers’ fund earned significantly less than that with a return on investment of just 1.8 percent. Chicago’s financial health was already failing before Brexit with the city facing a $35 billion shortfall, but now as the post-Brexit economy looks uncertain Chicago’s financial status can be described as tenuous at best.
How Can We Help?
International market trends can greatly impact an individual’s finances. If you live in Chicago and find yourself in financial trouble consider talking with a bankruptcy lawyer to discuss your options. Schedule a consultation with the our experienced bankruptcy lawyers at the Bentz Holguin Law Firm, LLC today by calling 312-647-2116.
