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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

#141

Post by naasking »

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…

> won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on?

Either there's money to be made, or there isn't. There are penalties for defaulting too, like greater difficulty securing future loans, or higher premiums. It's not like defaulting is free of consequences.

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

#142

Post by ue_ »

EpicEng wrote: post #128
ue_ wrote: post #114

Earlier quoted context omitted.

>If they can't produce enough value to justify minimum wages There are alternative views on this. Marx's theory for example says that workers are not paid according to the value they create, or what their labour creates, rather they are paid at the rate which is required to sustain them. The commodity which the worker produces and sells is termed 'labour power', requiring among other things food, enough to support a…

Yet Puerto Ricans don't live in a Marxist society, so I'm not sure how his ideas apply here.

Marx was describing capitalism in his critique of political economy, Capital. Puerto Ricans definitely live in capitalism.

A Marxist society (or, Communist) does not have wage labour at all.

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

#143

Post by gwbas1c »

fiatjaf wrote: post #24
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…

Absolutely. Governments are stupid to borrow money and waste it, but banks were supposed to be even more stupid to lend money to these reckless institutions called governments, and it's not wrong if these banks pay the price of their stupidity.

It's called greed

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

#144

Post by [deleted] »

ThrustVectoring wrote: post #31
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…

>Lots of people are leaving the island, which just compounds the problem (less revenue). This is one of the effects of Puerto Rico being subject to US minimum wages. Since it's illegal for large portions of the population to receive pay commensurate to the value they're able to produce, and it is legal to move to the US, guess what folks do?

[deleted]

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

#145

Post by anigbrowl »

ThrustVectoring wrote: post #102
dragonwriter wrote: post #59

Earlier quoted context omitted.

> Since it's illegal for large portions of the population to receive pay commensurate to the value they're able to produce, and it is legal to move to the US, guess what folks do? If they can't produce enough value to justify minimum wages, why would they move to places with a higher cost of living? They move to the States because the States are better able to attract businesses that will pay them what they are capab…

>If they can't produce enough value to justify minimum wages, why would they move to places with a higher cost of living? Mopping a floor produces economic value because there's a difference in how much a dirty store sells versus a clean one. If all you can do is mop floors for this thought experiment, this difference in how much the store sells directly effects the economic value of your labor. In Puerto Rico, this…

Exactly. If you'll excuse me highlighting the obvious, the floor-mopper in Puerto Rico is having to work just as hard as in some other place where the economy is better, so there is a transfer of wealth from that person that's generally not accounted for.

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

#146

Post by eropple »

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…

Bankruptcy is only considered something "to be ashamed of" when it's personal and when you're poor. How many startup founders around here are positively feted after they have ridden one or more rockets into the hillside?

Bankruptcy is a legally accepted aspect of economic transaction and you need to establish that there are moral means before you start talking about moral hazards.

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

#147

Post by [deleted] »

pishpash wrote: post #106
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…

That is a kind of slavery. Plus as a lender you still have to quantify that risk, so what does it buy you?

[deleted]

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

#148

Post by desdiv »

pboutros wrote: post #4
djsumdog wrote: post #2

Puerto 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...

States do not have access to chapter 9 bankruptcy. If Puerto Rico were a state then it would not have the bankruptcy protections that it currently enjoys right now. Things would be much much worst for them in that case.

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

#149

Post by anigbrowl »

EpicEng wrote: post #128
ue_ wrote: post #114

Earlier quoted context omitted.

>If they can't produce enough value to justify minimum wages There are alternative views on this. Marx's theory for example says that workers are not paid according to the value they create, or what their labour creates, rather they are paid at the rate which is required to sustain them. The commodity which the worker produces and sells is termed 'labour power', requiring among other things food, enough to support a…

Yet Puerto Ricans don't live in a Marxist society, so I'm not sure how his ideas apply here.

Well maybe they should. I'm not a communist, but the idea that there is only one valid economic model that is true and best for all sizes and stages of society sounds just a little bit convenient for the people promoting said model.

You don't feed a baby steak. That doesn't mean steak is bad, it means it's not what a baby needs or can use until its older.

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

#150

Post by zepto »

Terr_ wrote: post #118
klipt wrote: post #94

Earlier quoted context omitted.

The other end of the spectrum is debtors' prisons, which are such a terrible idea for multiple reasons that we've mostly gotten rid of them (except for situations like child support debt where self righteous indignation overrides good policy).

From a ruthlessly clinical evolutionary game-theory perspective... It's also that someone who spreads their genes by creating a child is obtaining a kind of "asset" for themselves, one which society can't transfer and won't morally destroy in retribution. If A and B both invest in, say, a house, and B disappears leaving debts behind, at least A can sell the house and B isn't getting any ongoing utility from it.

Assets provide return on investment. Children do not. Using this term just muddies the water.
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