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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

#211

Post by blackbagboys »

SEJeff wrote: post #136
eagletusk wrote: post #111

Earlier quoted context omitted.

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!

I think the United States would happily not deal with Puerto Rico and it's tens of billions of dollars of debt, but almost no one in Puerto Rico wants to be 'free' (independent).

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

#212

Post by saimiam »

njovin wrote: post #194
enraged_camel wrote: post #179

Earlier quoted context omitted.

>>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. It totally depends. There is nothing shameful about declaring bankruptcy because you got into an accident and your insurance company refused to pay your six-figure hospital bill. But if you take out a big loan to build a new hotel and blow it all on ho…

That sounds more like fraud. What if I take out a loan, am perfectly capable of paying it off, but the asset backing the loan has lost sufficient value so as not to be worth the continued investment? Is there any shame in defaulting and letting the lender suffer some of the consequences? In my personal opinion, no. Especially with secured or collateral-backed loans, the lender knew there was risk going in and there's…

While I agree with everything you said, I feel your argument should stand on its own merit. Just because a corporations screw people isn't a good enough reason for people to screw them back.

Your point that the risk premium you pay while taking a loan implies that the lender is willing to take some pain from your failure is sufficient in itself.

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

#213

Post by gertef »

ellius wrote: post #202
vkreso wrote: post #197

Earlier quoted context omitted.

Apples and oranges. The effect of a government bankruptcy on the economy and the society (present and future) is not really comparable to the effect of a bankruptcy amongst individual economic agents. Those are completely different scales. Also, morality is always attached to anything which involves society and its institutions. For example, good faith in contracts (bona fides) which has evolved all the way from the…

Without bankruptcy protections, what prevents companies from lending out an unlimited sum of money? Countries don't die. You can't send them to debtors' prison. A lender could effectively sell a corrupt or stupid government unsustainable amounts of debt and then effectively put a lien on the country in perpetuity to get its money back. That hardly seems just towards the citizens, who committed no crime other than ele…

Spot on. You reinvented the World Bank

https://www.one.org/international/issues/debt-cancellation/

http://www.huffingtonpost.com/marcelo-giugale/does-debt-forg...

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

#214

Post by Consultant32452 »

vkreso wrote: post #197
Pxtl wrote: post #93

Earlier quoted context omitted.

Bankruptcy is perfectly normal for business institutions. Limited liability is the foundation of the entire stock market. It's a basic economic tool used for navigating choppy waters. We only attach a moral value to it when individuals and governments use the tool.

Apples and oranges. The effect of a government bankruptcy on the economy and the society (present and future) is not really comparable to the effect of a bankruptcy amongst individual economic agents. Those are completely different scales. Also, morality is always attached to anything which involves society and its institutions. For example, good faith in contracts (bona fides) which has evolved all the way from the…

Not always. The US technically defaulted on its debts when we dumped the gold standard. Luckily for us, we were still the biggest global super power so we were able to tell everyone to just suck it. For reference, there's an estimated $7 Trillion in gold in the world and the US is now $19 Trillion in debt.

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

#215

Post by tanderson92 »

ericd wrote: post #195
ceejayoz wrote: post #158

Earlier quoted context omitted.

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.

That interest rate doesn't in any way relieve you of your moral responsibility to pay back that loan, in my opinion, just because you run into financial trouble. People defaulting just because it's legal causes interest rates to rise on others, and imposes costs on the rest of society. Of course, it's important for social reasons for there to be legal ways to get out of inescapable debt, but you're not off the hook m…

> It's both your fault and that of the lender if you borrow more than you can handle.

Then why does the borrower have moral culpability in addition to financial culpability, while the lender only takes a financial haircut.

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

#216

Post by gertef »

zepto wrote: post #150
Terr_ wrote: post #118

Earlier quoted context omitted.

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.

The only investment a human can make is in their genetic future. Everything else (money, power) is in service of that.

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

#217

Post by Spooky23 »

grandalf wrote: post #181

When issues of local government financial problems come up, I think it's important to remember that local governments are typically not able to undertake deficit spending the way the Federal government is. If the US Federal government were prevented from running a budget deficit, we'd likely see a lot more solvency issues and financial failures of many sub-organizations within government due to bad budgeting. It woul…

Very true.

Puerto Rico is a look into the future. Illinois and other states are <20 years away from the same fate.

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

#218

Post by foobarrio »

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…

Any change in equilibrium will be expressed as "higher risk to default" and will make interest rates higher no? Seems like everything will continue to work as intended.

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

#219

Post by rootusrootus »

Consultant32452 wrote: post #214
vkreso wrote: post #197

Earlier quoted context omitted.

Apples and oranges. The effect of a government bankruptcy on the economy and the society (present and future) is not really comparable to the effect of a bankruptcy amongst individual economic agents. Those are completely different scales. Also, morality is always attached to anything which involves society and its institutions. For example, good faith in contracts (bona fides) which has evolved all the way from the…

Not always. The US technically defaulted on its debts when we dumped the gold standard. Luckily for us, we were still the biggest global super power so we were able to tell everyone to just suck it. For reference, there's an estimated $7 Trillion in gold in the world and the US is now $19 Trillion in debt.

And the upside is that the economy is much larger than it could ever have been while stuck on gold.

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

#220

Post by seanmcdirmid »

zeteo wrote: post #171
Shivetya wrote: post #151

Earlier quoted context omitted.

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 bei…

I'm not familiar with American Samoa, but generally states and countries with high minimum wages are doing pretty well economically, see e.g. [1]. States that have recently increased the minimum wage have seen higher economic growth than those that haven't [2]. [1] http://www.scholarsstrategynetwork.org/brief/evidence-higher... [2] http://www.npr.org/sections/thetwo-way/2014/07/19/332879409/...

I'm pro minimum wage, but states that have higher minimum wages tend to already have their heads on straighter economically. E.g. Washington state invests heavily in education and caters to high tech more than other states, while California has of course always been a gold mine. Correlation is not causation.
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