Puerto Rico files for biggest ever U.S. local government bankruptcy
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Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#2Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#3I feel like local governments are going to be the first to really be affected by significant pension overlays that are not properly accounted for -- a lot of pension funds assume rates of return that are historically farcical. I think the industry average used to be about 8%.
"During the 20th Century, the Dow advanced from 66 to 11,497. This gain, though it appears huge, shrinks to 5.3% when compounded annually."
http://davidgcrane.org/?page_id=702
It doesn't auger well for the future of stable financial markets. Weak localities will fail, and eventually the states that have to support them. Puerto Rico is the canary in the coal mine.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#4Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?
Cities and states have access to debt restructuring methods (per this article), which PR does not.
http://www.cnbc.com/2015/12/01/crunch-time-for-puerto-rico-d...
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#5I have lived all my life in Puerto Rico, and as you can imagine, this issue is quite controversial.
We owe money to the creditors... and what you do with a debt is to you pay it off.
Yet the amount is so staggering, that I wonder if it's actually possible.
As is typical, decisions by politicians placed us in this situation. Decade after decade, 4-year term after 4-year term, the government has spent money it does not have. Be one political party or the other, it is the same thing.
There was a big manifestation this past Monday, where various Unions, groups, and students did a "Paro Nacional". Truthfully, I don't think they accomplished anything, other than various idiots vandalizing property they don't own. We are in deep shit, and it's going to get worse.
Lots of people are leaving the island, which just compounds the problem (less revenue).
I don't leave because: it's where I was born, where I have lived my entire life, and it is, honestly, paradise.
Obligatory John Oliver's Puerto Rico segment: https://www.youtube.com/watch?v=Tt-mpuR_QHQ
What will happen? I have no idea. Good to see this in HN.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#6Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?
They would have been able to filibuster and stop congress from removing the pharma subsidy that then resulted in pharma companies fleeing the island. This in turn lead to the underfunding of pensions and general budget shortfalls on the island. So... maybe they'd have made out better as a state. Who know though, they had all their eggs in 2 baskets basically.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#7I feel like local governments are going to be the first to really be affected by significant pension overlays that are not properly accounted for -- a lot of pension funds assume rates of return that are historically farcical. I think the industry average used to be about 8%. "During the 20th Century, the Dow advanced from 66 to 11,497. This gain, though it appears huge, shrinks to 5.3% when compounded annually." htt…
I think the concern is overblown. States will need to backstop local governments, and the federal government will backstop the states.
Benefits will get (mostly paid); taxes will go up (they have to, they're at unsustainable historic lows). This is not the end of the world.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#8I have lived all my life in Puerto Rico, and as you can imagine, this issue is quite controversial. We owe money to the creditors... and what you do with a debt is to you pay it off. Yet the amount is so staggering, that I wonder if it's actually possible. As is typical, decisions by politicians placed us in this situation. Decade after decade, 4-year term after 4-year term, the government has spent money it does not…
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Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#9Should I cash my USD now or should it be safe for few more months?
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#10I have lived all my life in Puerto Rico, and as you can imagine, this issue is quite controversial. We owe money to the creditors... and what you do with a debt is to you pay it off. Yet the amount is so staggering, that I wonder if it's actually possible. As is typical, decisions by politicians placed us in this situation. Decade after decade, 4-year term after 4-year term, the government has spent money it does not…
> We owe money to the creditors... and what you do with a debt is to you pay it off.
That's not the case. Sometimes, you pay your debt off. Sometimes, you default, and file for bankruptcy. For lenders, it's the cost of doing business. If they don't want to deal with the possibility of bankruptcy, they shouldn't lend out money.
Lenders charge creditors a premium, because of the risk of default. It's as much on them to be careful about who they lend money to, as it is on the creditor to be careful about being able to pay off their debts.