Free Republic

It’s not just the chickens that have come home to roost in Puerto Rico. It’s the hacks as well. The whole thing can be summed up in two words – Hack City. There were the public-sector union hacks whose contracts drove the Commonwealth into what is now estimated at $72 billion in debt. There were the government officials who encouraged this profligacy with indulgent hiring. There are the hacks in Washington who just want to send a big check and forget the whole thing, rather than insist on the reforms that put Puerto Rico in these straits in the first...

The Obama administration plans to forgive $7.7 billion in federal student loans held by nearly 400,000 permanently disabled Americans. By law, anyone with a severe disability is eligible to have the government discharge their federal student loans. The administration took steps four years ago to make the process easier by letting people who are totally and permanently disabled use their Social Security designation to apply for a discharge, but few took advantage.

Congress is expected to begin consideration of federal legislation to grant Puerto Rico extraordinary powers to escape a looming debt crisis. The island territory, home to just 3 million people, is faced with a massive $70 billion debt burden. During negotiations of the omnibus budget deal at the end of 2015, House Republican Speaker Rep. Paul Ryan (R-WI) promised House Democrat Leader Rep. Nancy Pelosi (D-CA) that Congress would consider legislation to grant the Island with bankruptcy protection from its debts. The tentative deadline to begin action was March 31.

Sen. Ed Markey (D-Mass) brushed off fears that a runaway national debt could pose a threat to America. "Look, a debt of whatever amount merely records resources that have already been acquired by the government," Markey argued. "The government has already gotten and spent that money for the benefit of America. Whether it ever pays this money back is basically irrelevant." "Let's imagine that, 'horror of horrors,' the government defaults on this debt," Markey continued. "Who's hurt? The people who lent the money to the government by buying bonds can obviously afford to lose this money. People who need their...

The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies. According to academic research shared exclusively with FTfm, the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger. Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.” Mr Nunes, who put forward a bill to the House...

Does anybody believe this is possible?

An auditor for the Government Accountability Office told the Senate budget committee that in the next 15-25 years, the amount of public debt will exceed all the goods and services produced by the entire U.S. economy.  Without action on the debt, the auditor said the percent of debt to GDP could rise to 200% or 300%. Washington Free Beacon: Gene Dodaro, the comptroller general for the Government Accountability Office, testified at the Senate Budget Committee to provide the results of its audit on the government’s financial books. “We’re very heavily leveraged in debt,” Dodaro said. “The historical average post-World War II...

Over 40 percent of those in student loan programs have stopped making payments. Many borrowers have never made any payments.The department of education (a useless body that I would eliminate in one second if given the chance), cannot figure out why this is happening.“We obviously have not cracked that nut but we want to keep working on it,” said Ted Mitchell, the Education Department’s under secretary.The Wall Street Journal reports More Than 40% of Student Borrowers Aren’t Making Payments. More than 40% of Americans who borrowed from the government’s main student-loan program aren’t making payments or are behind on...

As president, Donald Trump would sell off $16 trillion worth of U.S. government assets in order to fulfill his pledge to eliminate the national debt in eight years, senior adviser with the campaign Barry Bennett said. "The United States government owns more real estate than anybody else, more land than anybody else, more energy than anybody else," Bennett told Chris Jansing Sunday on MSNBC. "We can get rid of government buildings we're not using, we can extract the energy from government lands, we can do all kinds of things to extract value from the assets that we hold." In a...

America has too much junk in the trunk. That’s the assessment of Standard and Poor’s credit rating agency. Their average rating on United States corporate debt just sagged to almost a 15-year low. According to the agency, America faces a debt diet that many companies will not survive. And guess who is to blame? “We believe corporate default rates could increase over the next few years,” warn S&P credit analysts Jacob Crooks and David Tesher. “Lower-quality speculative-grade issuers seeking refinancing or new financing will likely face more onerous terms, conditions and funding challenges, especially in a more nominalized credit environment....

Fitch Ratings downgraded the City of Chicago’s credit rating to just one step above “junk bonds” on March 28.

Chicago's credit rating has been downgraded to one step above junk grade by Fitch Ratings after the Illinois Supreme Court struck down Mayor Rahm Emanuel's reform plan for two city pensions. Fitch lowered Chicago's rating from BBB+ to BBB- on Monday, increasing the cost of borrowing.

It’s a presidential election year so the quadrennially-maligned U.S. trade deficit is taking its lumps. Donald Trump says the trade deficit means the United States is losing at trade, and it’s losing because U.S. trade negotiators aren’t smart enough. Bernie Sanders believes the trade deficit deprives the economy of production and good jobs. Meanwhile, some of the economics commentariat argue that trade deficits are bad because they represent a burden on future generations – a debt that must be repaid. Trump and Sanders are both wrong... ...the debt argument is being used to wrap trade skepticism in a moral sheen...

It’s no secret by now that China has a rather serious debt problem.Although getting a precise read on it is next to impossible, all told the debt pile probably sums to something like $30 trillion. Various reports put the figure at between 250% and 300% of GDP all-in and as we reported back in January, that may have swelled to more than 340% by the end of 2015.Corporate debt-to-GDP was around 125% in 2014 and probably sits above 150% now. Depending on what business you’re in, servicing that debt has become all but impossible. As Macquarie discovered last autumn,...

For the first time ever, total credit card debt in the United States is approaching a trillion dollars. Instead of learning painful lessons from the last recession, Americans continue to make the same horrendous financial mistakes over and over again. In fact, U.S. consumers accumulated more new credit card debt during the 4th quarter of 2015 than they did during the years of 2009, 2010 and 2011 combined. That is absolutely insanity, because other than payday loans, credit card debt is just about the worst kind of debt that consumers could possibly go into. Extremely high rates of interest, combined...

In a bid to raise cash, foreign central banks and government institutions sold $57.2 billion of U.S. Treasury debt and other notes in January, according to figures released on Tuesday. That is up from $48 billion in December and the highest monthly tally on record going back to 1978. It's part of a broader trend that gathered steam last year when central banks sold a record $225 billion of U.S. debt. "Foreigners have no longer been our BFF when it comes to buying U.S. Treasuries," Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a client note. So...

New data released Monday by the Federal Reserve shows U.S. federal debt has reached a post-WWII record high, now at 104.3% of GDP in Q4 of 2015. The previous record was set in Q1 of 2014 at 103.6% of GDP. In Q4 of 2008, the last full quarter before President Barack Obama came to office, federal debt was 73.5% of GDP -- 31% of GDP below its current value. Obama has, by far, overseen the largest increase in federal debt as a share of the American economy among all presidents during the past half-century. George W. Bush is in...

The global economy is heading for a storm as faith in policymakers dwindles, according to a stark warning from one of the world’s most respected financial institutions. The uneasy calm in financial markets last year has given way to turbulence, the Bank for International Settlements, known as the central bank for the world’s central banks, said in its latest quarterly report. Financial markets are losing faith in the healing power of central banks and their latest policy weapon - negative interest rates - to boost the world's main economies, the bank said.

The world's credit boom is beginning to show dangerous signs of unraveling, ushering in a period of fresh turmoil for the over-indebted global economy, the Bank of International Settlements has warned. The globe's top financial watchdog called time on the world's debt binge, noting that debt issuance and cross border flows in emerging economies slowed for the first time since the aftermath of the global credit crunch at the end of last year. With financial markets thrown into fresh paroxysms in 2016, oscillating between extremes of "hope and fear", the over-leveraged world was finally approaching a day of reckoning, said...

Central Banks Have Signed Their Death Warrants During the past year U.S. consumption spending for health care rose by 5%. Spending at restaurants and bars were up by 9%, while spending for gasoline and other energy products was down by 22%. This was Mr. Market at work--millions of households reallocating their spending in response to relative price changes. It had nothing to do with a macroeconomic abstraction called "weak demand". Actually, the medical care component of the CPI rose 3.3% last year. Housing and shelter were up by 3.2%, while gasoline prices were down by 7.3%. It all added up...