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Puerto Rico files for biggest ever U.S. local government bankruptcy

reuters.com

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Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#81

Post by maxerickson »

maxerickson wrote: post #48
savanaly wrote: post #23

Earlier quoted context omitted.

That's true in any individual case. But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't…

Some people argue for jubilees. Which has the effect of limiting the sorts of loans people are willing to write. I think some limit is a good idea. The idea that a city can borrow from the people living there in 20 years is sort of dangerous. Maybe not for durable infrastructure that will still have much value, but for present day services? That's a horrible deal.

(And of course, bankruptcy has much in common with jubilees; not everything, but it implements the idea that debt shouldn't be forever)

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#82

Post by DaiPlusPlus »

kchoudhu wrote: post #76
Animats wrote: post #25

Earlier quoted context omitted.

There's a statehood faction, an independence faction, and a big "don't upset the gravy train" faction that likes the status quo. If Puerto Rico became a state, US Federal personal income taxes would be imposed. If Puerto Rico became an independent country, immigration to the US would be stopped. There have been referendums on this. The next one is June 11, 2017.

I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden. Of course, as the current situation demonstrates, not being under the Federal taxation umbrella has certain disadvantages.

Wouldn't he still have to pay the income tax if he repatriates the money?

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#83

Post by 23443463453 »

knob wrote: post #5

I 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…

I may get lambasted for this, but reality is that PR is simply the canary in the coal mine of a Liberal mentality regarding government finance and government benefits without realizing their finance drug dealers on Wall Street don't have their best interest in mind. This is clearly a self imposed problem caused by and perpetrated by Puerto Ricans against Puerto Ricans. I don't get what people who want to make excuses and rationalize this or similar consequences to Liberal policies are expecting.

You overspend and blow money on credit cards, what do you think will happen when you then just keep on taking on debt with ever less savory entities.

It's never going to change until a means for holding people to account who had the fiduciary responsibility to serve PR. All the politicians who kept on voting for ever more debt should be rounded up, all their assets seized, and throw them in jail for 20 or so years. We don't have any real consequences for those in charge of our government and politics, therefore there is zero incentive to do the right thing.

To quote one of many throughout history who have noted similar: Alexander Tytler on Democracy "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship."

Now PR has the USA to leech off of as all the rats jump ship to the USA, where they will inevitably only add to the mentality that led them to the self-imposed disaster they fled, but eventually all the pieces will start falling eventually.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#84

Post by dragandj »

vkou wrote: post #44
ythn wrote: post #28

Earlier quoted context omitted.

Exactly. Do we really want to create a society where the lenders have to do an inordinate amount of background research to determine whether you are a default risk? Bad for everyone in that case.

We already live in that society. What do you think the millions of people working in finance do, if not try to quantify risk? Do you want to live in a society where you and your family can be sold into slavery if you fail to pay off your debts? Because that's the logical consequence of not allowing debts to be discharged from bankruptcy, regardless of your ability to pay. Being a money-lender shouldn't be a license t…

There are other models other than two extremes. For example, in (at least some) European countries there is not such thing as private person going bankrupt. However, of course that that person won't be sold to slavery. Simply, if you can not repay the loan, your property will be confiscated and sold to repay it. You can dodge that by not having any property on your name, of course, and most such people do that, but that also means having no flow on your bank account (everything over a small life-sustaining minimum would be taken every month).

That is at least in theory. Since a considerable part of the economy is in the gray zone, there are ways of dodging that. Large part of the law system is corrupt, so well connected people always find a way to be untouchable. The system is also inefficient so lots of those debts exist just on paper. Basically, you can't go bankrupt as a person, and you wont be sold to slavery, but you will effectively still own the debt and the only way to not repay it is to work in the black zone outside of the system, or wait so long that the lenders write it off themselves (after a few decades or so?).

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#85

Post by ericd »

CJefferson wrote: post #32
savanaly wrote: post #23

Earlier quoted context omitted.

That's true in any individual case. But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't…

Limited companies go bankrupt all the time. Do we consider it an "ethical failure" when some VC funded company folds, leaving a whole bunch of people they owe money to with nothing?

A little bit, yeah. The leaders of those businesses made promises to people, and they failed to uphold them.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#86

Post by InitialLastName »

ythn wrote: post #28
savanaly wrote: post #23

Earlier quoted context omitted.

That's true in any individual case. But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't…

Exactly. Do we really want to create a society where the lenders have to do an inordinate amount of background research to determine whether you are a default risk? Bad for everyone in that case.

We have 3 major companies who do the work for the lenders, giving every financially active human in our society a score of how much of a default risk they are.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#87

Post by dluan »

creaghpatr wrote: post #11

A few months ago I discussed this with friends and suggested the government subsidize cheap flights to Puerto Rico, say $30 for a round trip flight from Atlanta, scaled up depending on domestic distance. This would cost taxpayer money but would drive a ton of tourism to Puerto Rico (albeit temporarily) and pump a bunch of money into their economy, defibrillator style. I've never been there but given a cheap round tri…

PR doesn't need more tourists, they need to see a chance at a strong and healthy economy without a massive guillotine hanging over its head.

Bumping tourism would help relieve just a few drops but it's a swimming pool, not just a glass of water.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#88

Post by notfromhere »

masterleep wrote: post #45

Illinois badly needs to do this as well.

Illinois has a stronger economy than PR. Illinois's problem is that pensions are underfunded and the state constitution mandates a flat tax. The utter dependence of local gov't on property taxes also doesn't help

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#90

Post by bilbo0s »

masterleep wrote: post #45

Illinois badly needs to do this as well.

When you're looking for states that might be in trouble, you're looking for places with certain attributes. For instance, high debt per capita and low per capita income. Add to that low or decreasing populations and a few other metrics and you can get a really good picture of which states will end in the most trouble.

Illinois wouldn't be terribly high on that list. Your best bets for gaming collapses would be places like Rhode Island, Mississippi and Louisiana. In the next tier would be places like Kansas and Alabama. These are the places that I'd wager will have the most trouble in the future.

But I'm not sure how you'd game any of this... because we're talking about States, so bankruptcy protections would work differently.

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