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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

#131

Post by dmix »

mgbmtl wrote: post #71
emodendroket wrote: post #30

Earlier quoted context omitted.

Probably recreating the tax climate that attracted pharmaceutical manufacturers and was allowed to lapse would be more effective than trying to gin up tourism (although in my opinion probably that wouldn't be all that helpful either).

Lowering taxes only works if you can combine it with something else that will keep the companies in place afterwards, such as a critical mass of specialized workers, infrastructure, etc. Otherwise it's just playing the downward-spiral game in a saturated market. The federal government should create a 10-year plan to subsidize PR and fix its economy/democracy from the ground up. If you look at Eastern Europe, it takes…

> that's magical thinking, and usually from corrupted politicians turfing their funders.

Subsidization is the game that corrupt politicians love. Not so much lowering taxes (and therefore their power to choose the beneficiaries among their friends/special interests). Unless of course the tax reduction is via a myriad of specialized loopholes and deductions, then it could be directed at a chosen few.

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

#132

Post by desdiv »

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…

>The CDC has issued an alert for travel to areas where Zika virus is spreading, which now includes Miami-Dade County, Florida, Puerto Rico, American Samoa, and the US Virgin Islands. Travelers who are pregnant or considering pregnancy should consult a doctor.[0]

Let's just send cash over instead of tourists. Less chance of unintended consequences.

[0] https://www.cdc.gov/zika/

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

#133

Post by azernik »

dragandj wrote: post #110
vkou wrote: post #47

Earlier quoted context omitted.

Nobody forces lenders to buy up PR bonds, or accept the terms at which they are issued.

EU institutions force them by controlling the policy. Sure, if you have a few millions to invest, you can go elsewhere, but if you have billions, you are most usually working with other people's or institutional money, and are fairly limited by various laws and policies, and large part of that money practically has to go in some sort of government bonds. Then, you can not just disregard those AAA ratings at return *…

Which is why people are so angry at the ratings agencies - they are private institutions that were supposed to be giving honest information, and they have misleading AAA ratings to investments that did not merit them.

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

#134

Post by [deleted] »

cjalmeida wrote: post #113
dragandj wrote: post #84

Earlier quoted context omitted.

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 t…

Ok. In this model, you keep one of your basic rights (freedom) but forever loses another (right to have any property). I'd call this a "semi-slavery" model. At least in some "debtor's jail" systems you could get your rights back after spending some time incarcerated.

[deleted]

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

#135

Post by anigbrowl »

savanaly wrote: post #73
jlg23 wrote: post #54

Earlier quoted context omitted.

> 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 it be a better equlibrium? What makes you think Puerto Rico did not try? How much longer will the poor have to suffer until you accept they've learned their lesson? Some facts about Puerto Rico: Puerto Rico is poor, almost half of the people live below the poverty line. The…

I wasn't making commentary about Puerto Rico, except in taking exception to the poster above me who was pushing the line that not only should Puerto Rico default on their debt, they shouldn't even regard it as a bad thing that they have to, since after all the people lending them the money knew it might never get paid back and built it into the interest they charge.

Well, they did. There's nothing morally superior about being the lender vs. the borrower. Rich people are not better simply by virtue of having money.

It's just business.

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

#136

Post by SEJeff »

eagletusk wrote: post #111
SEJeff wrote: post #65

Earlier quoted context omitted.

What are your thoughts on Puerto Rico becoming the 51st State of the USA? I ask this as a native (mainland) born American who always thought this would be an interesting approach to solve the problem of finances in PR. Is it even well supported or is it a crazy idea?

Why would USA want PR as 51? What benefit is there? PR has more debt that California, and zero industry except for Bacardi rum. Name one thing made in PR?

Well by that logic, what would the USA want with PR as a colony? Why not let them be free? Because it is the USA. You could say the same about what would you want with $ALL_POOR_STATES_IN_THE_SOUTH, but we want them too!

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

#137

Post by thaumasiotes »

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.

> I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden.

Based on a couple of minutes of reading from wikipedia ( https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico ), it sounds like the federal income tax is only eliminated as to income from sources in Puerto Rico. If your income is mostly capital gains from your vast stockholdings, what's the "source"? How exactly is this working? Do you have to be invested exclusively in stocks listed in Puerto Rico? (Do those exist?) Do you have to be exclusively invested in Puerto Rico government bonds? Is his hedge fund incorporated in Puerto Rico, and that's enough?

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

#138

Post by gwbas1c »

savanaly wrote: post #23
vkou wrote: post #10

Earlier quoted context omitted.

> 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…

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…

"Default" is what disincentives giving loans to people who can't pay them off.

Remember that interest on loans that's higher than inflation is effectively profit for the lender; the lender needs to weigh the profit of the loan over the risk of default.

The goal is that every loan is paid off; that's what keeps interest rates low.

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

#139

Post by cbr »

ryandrake wrote: post #108
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…

> But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly I don't know about "taken lightly" but bankruptcy and defaulting on a debt should not be something to be "ashamed" of, for an individual, a company, or a government. Default is an option specifically written into every debt contract out there. There should be no more shame in choosing to default as there would be f…

I'm pretty sure taking out a loan that you intend to default on is fraud, but making a contract with someone that you expect to be very profitable to you is not.

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

#140

Post by anigbrowl »

cjalmeida wrote: post #69
myrryr wrote: post #40

Earlier quoted context omitted.

That isn't how it works. It is never how it worked. Plenty of countries have defaulted, and they can still borrow money. And yeah, it does effect other lender-borrower relationships. It's all people, and people get nervous.

Brazil in late 80s and Argentina in early 2000s default. Both spent a decade with no access to foreign debt whatsoever and prompted a massive crisis. In Argentina it let to the populist Kirschner govt. Brazil is once again facing mounting debt due continuous budget deficit. This time the govt is pushing for austerity reforms that, if not approved, will lead once again to default. The govt approved ratings are abismal…

OK. Now tell me about the other side of the coin.
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