Puerto Rico files for biggest ever U.S. local government bankruptcy • Hacker News Board

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

#151

Post by Shivetya » Wed, May 03, 2017, 10:18 PM UTC

zeteo wrote: post #80

ThrustVectoring wrote: post #31

Earlier quoted context omitted.

>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?

Minimum wage only causes unemployment if the labor market is competitive. This is not currently the case in the US as a few big companies (Walmart, McDonald's) have disproportionate market power, and most economic sectors are becoming even more concentrated. Under such oligopsony conditions, increases in minimum wage will generally come out of profits (which are at historically high levels of the GDP [1]). Since wage…

but they don't. studies have shown that increases in minimum wage laws tend to benefit those who are in not poor families and a 10% increase in minimum wage can cause prices in the local area to increase four percent.

throw in that even as recently as 2011 President Obama had to sign into law a bill postponing minimum wage laws and increases in America Samoa because it was literally destroying their economy after being force to accept such in 2007 and 2009.

It isn't just competitive labor markets but mobility of those who can fill the jobs that exist. then throw a likelihood of employers to increase work loads to compensate, penalties for tardiness, and such, it does not always turn out to be a boon.

with regards to Puerto Rico, this is simply an example of politicians selling out their populace to retain power and actually being around to be there when the hammer falls. it has happened in a few American cities and there are some states with very excessive and dangerous pension obligations that will be forced to vacate them or seriously reduce them .

Puerto Rico should stand as a warning to anyone who sees politicians promising the moon.

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

#152

Post by anigbrowl » Wed, May 03, 2017, 10:21 PM UTC

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?

We own you but we don't want to give you more rights because we can't figure out how to profit enough of you. Ha! Ha! Ha!

Assuming you were born in the USA, why were you born there rather than in Puerto Rico? Was this a matter of skill and judgment on your part, or just luck? If so, what basis do you have for denying the rights you enjoy to others who live in a territory rather than a state?

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

#153

Post by Ericson2314 » Wed, May 03, 2017, 10:23 PM UTC

jerf wrote: post #37

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…

"it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on?" Well, one of the questions is whether the modern definition of "efficient amount of lending" is in fact the correct value. If we're undervaluing the risk of a fat tail of defaults, and worse, correlated defaults, then the true "efficient amount of lending" may in fact be less than it i…

In the case of greeece the austerity is far worse than the debt. In America you have to wonder how bailing out the home morgages themselves (including hypothetical haircuts) would have compared in cost and economic effects to bailing out the banks.

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

#154

Post by e0 » Wed, May 03, 2017, 10:24 PM UTC

cbr wrote: post #139

ryandrake wrote: post #108

Earlier quoted context omitted.

> 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.

Who said anything about taking out a fraudulent loan?

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

#155

Post by icebraining » Wed, May 03, 2017, 10:24 PM UTC

dragandj wrote: post #84

vkou wrote: post #44

Earlier quoted context omitted.

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 t…

For example, in (at least some) European countries there is not such thing as private person going bankrupt.

In many there is, though it's more restricted in some countries than others, which leads to https://en.wikipedia.org/wiki/Bankruptcy_tourism

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

#156

Post by klipt » Wed, May 03, 2017, 10:26 PM UTC

dluan wrote: post #79

6stringmerc wrote: post #35

All that text about Puerto Rico's financial difficulties and not one mention of the rampant fraud that spun up the debt from a reasonable amount to the $XB that is likely to default is the result of graft, corruption, and fraud enabled by many US and international actors. Want to take a guess how many of those responsible for the transactions, debt issues, and back-office fund transfers are in jail and all their asse…

its moral hazard by many parties, but after what happened in 2008 and the lack of punishment that should have come to wall street, the financial system learned that they could get away with anything.

Just wait until Trump gets rid of the Dodd-Frank Act and other regulations designed to prevent 2008 from re-occurring.

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

#157

Post by anigbrowl » Wed, May 03, 2017, 10:27 PM UTC

thaumasiotes wrote: post #137

kchoudhu wrote: post #76

Earlier quoted context omitted.

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…

Shell companies are your friend. You can move a lot of money around faster than the authorities can follow the paper trail in many cases. That's why some people refer to delaware as the world's biggest tax haven - Delaware is extremely friendly to corporations and it's trivially easy to set one up. So if you are skilled in the technicalities of company formation and business administration, you can make your audit trail very difficult to follow.

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

#158

Post by ceejayoz » Wed, May 03, 2017, 10:27 PM UTC

ericd wrote: post #85

CJefferson wrote: post #32

Earlier quoted context omitted.

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.

If I promise to meet you for coffee, it's understood that there's a silent "but not if my wife winds up in the ER".

If I promise to pay you back a loan, it's understood that the interest rate you'll charge me is related to the risk of my defaulting and that the option exists.

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

#159

Post by hardtke » Wed, May 03, 2017, 10:27 PM UTC

vkou wrote: post #10

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…

> 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…

Much of the Puerto Rican debt has been sold at a discount by the original lenders. The risk of default was already priced into those purchases.

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

#160

Post by dragonwriter » Wed, May 03, 2017, 10:28 PM UTC

ue_ wrote: post #114

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 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…

> There are alternative views on this.

Since in the post you were responding to, I was challenging the premise you quoted, I think that I am quite aware that there are alternative views to it.