Posted on 06/29/2015 9:27:01 AM PDT by SeekAndFind
The governor of Puerto Rico has admitted that it can't keep paying down the over $72 billion worth of public debt obligations.
As a result, it finds itself in a uniquely awful position.
It can't go into bankruptcy according to its own laws, so now it has to deal exclusively with its creditors to restructure its debt.
That means it has to deal with Wall Street.
"I think the surprise was that it happened this quickly," said Brian Kelly, CEO of Connecticut-based fund Brian Kelly Capital. "We thought it would take 6 months to a year... the solution is a debt restructuring."
Of course, when you restructure an economy that's already in tatters, its ability to pay is reduced as it struggles to fulfill its obligations. It can be a vicious cycle.
And once you're in the cycle, Kelly said, "the question is: 'Is this the first domino to fall?'"
Here's the situation: Puerto Rico's economy is in recession with a 14% unemployment rate. With little money coming in, legislators were already debating major cuts to its $10 billion budget.
“My administration is doing everything not to default,” Governor Alejandro García Padilla said. “But we have to make the economy grow,” he added. “If not, we will be in a death spiral.”
But growing out of this is not an option.
(Excerpt) Read more at businessinsider.com ...
The perfect storm. Debt-busted Governors having to negotiate with Wall Street bankers, resulting in “austerity” cuts to programs and higher taxes. Allowing politicians like Liz Warren who rail against EEEEEEEVIL Wall Street Bankers to find even more of an audience.
Yikes, those PR bonds are part of a lot of “tax-free” portfolios.
How bad does the mismanagement have to be for a territory smaller than Connecticut to get $72 BILLION in debt?
[“If not, we will be in a death spiral.”]
Welcome to the party, pal.
But at least we can forget about ANY thought of statehood for PR
A fully owned and operated subsidiary of the Democratic Party
Democrat Party Vote buyin’ costs MONEY...
They never said it was THEIR money they were using.
RE: How bad does the mismanagement have to be for a territory smaller than Connecticut to get $72 BILLION in debt?
Puerto Rico’s GDP is $103 Billion. See here:
Their debt is $72 Billion Over $30 Billion LESS than their GDP and they can’t pay.
Now think about the USA.
The GDP of the USA is $17 Trillion.
Our Debt is $18 Trillion as of June 2015 ( and counting ). HIGHER than our GDP!
The difference is we can PRINT money.
But then, What makes people think we won’t eventually go the way of Puerto Rico whose debt is SMALLER that its GDP?
Part of it is because they have a bizarre system that puts them partly between independent and US state. And of course, another part is leftwing politics, since the Dems have been romping around PR for ages now.
They had a very good GOP governor a couple of terms ago who did a lot to stabilize their finances and start working on making it a productive place. It has everything it needs: not only is it a beautiful vacation spot, full of history, but most of its residents speak English and Spanish, and it also has the potential for small manufacturing, production of certain tropical crops (vanilla, coffee, etc.) and even perhaps being a Caribbean financial hub.
The thing that defeated the good governor, btw, was the presence of the civil service unions (yes, SEIU), since he wanted to reduce government employment and in fact make government jobs and benefits just like any other jobs, paying on the basis of skills and promoting on the basis of merit. The Dems don’t like that because probably about 50% of their constituency is composed of government employees or lives from government income.
Except that PR doesn’t want to be a state (all the benefits, no responsibilities)...and becoming a state could be a condition for the feds paying that debt off. The Obama might be happy to write a $72,000,000,000 check (bounce? nah, he’ll just borrow $72B from the Federal Reserve) if PR residents vote for statehood, boosting the voter base just before November 2016.
If the Obama is lucky, Texas will secede (taking a comparable chunk of the opposition’s voter base with it), obviating the problem of deciding how to cram 51 stars on the flag.
Democratic candidate wins, Wall Street sighs with relief, the Left is happy, the Right is diminished...sounds like a plan if you’re so inclined (which I’m not).
Actually, the USA belongs to Wall St.
Bad news for Wall Street
YEs, but who cares? The Supreme Court said Same Sex Marriages are legal in all 50 States including PR! That’s what’s realy important (sarc)....
Democrats tax and spend and blame Republicans.
When Republicans try to address the problem, they are accused of starving babies, hating women and beating up old people.
It’s just a matter of time, now.
Somebody should put those numbers side-by side in a bar chart. Maybe a pie chart too.
Might help serve as a wake-up call.
Not that a citizen can do much except try to brace themselves.
Over half the population is on public assistance and the median IQ is 85. The only thing that could help PR is to deport its current inhabitants to the Dominican Republic and repopulate the island with Germans.
No, not really. I know a lot of Puerto Ricans and have spent time there. The place could be great if they broke the connection with the Democratic Party.
Incidentally, many Puerto Ricans actually are of German descent. There was a big migration there in the 19th century.
Puerto Rico doesn’t “belong” to Wall Street. It belongs to all the special interests and government hand out constituencies who demanded more and more spending beyond the tax revenue that was coming in. It still belongs to these constituencies.
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