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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

#221

Post by everybodyknows »

SEJeff wrote: post #65
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…

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?

US states are in big financial trouble too -- Illinois. Statehood is a distraction, not a solution.

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

#222

Post by ericd »

tanderson92 wrote: post #215
ericd wrote: post #195

Earlier quoted context omitted.

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.

I think lenders have an ethical responsibility to not put borrowers in a bad position as well.

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

#223

Post by everybodyknows »

digitalneal wrote: post #58

Wonder how bad it would be if they didn't subsidize rum production so heavily.

How much is rum production subsidized? Hiding tax breaks for export industries is hypocritical politics, but logical economics.

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

#224

Post by _delirium »

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…

Hasn't that ship long since sailed? One of the first "shameless" local bankruptcies of significant scale in the U.S. was that of Orange County, CA, a wealthy conservative suburb of Los Angeles, in 1994. They could have paid off their debts if they had wanted to, but their voters did not want to, and repeatedly voted down tax hikes to rapay the bonds. So they defaulted in 1994. This county is still one of the richest in the USA, and can today borrow without any problems, having suffered no real long-term consequences from their default.

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

#225

Post by tropo »

toomuchtodo wrote: post #39
DamnYuppie wrote: post #33

Earlier quoted context omitted.

My biggest concern and issue with the federal government backstopping pensions is that the vast majority of people would now be paying for benefits for people who rendered services in areas they didn't live. Because the populace of one city voted to give certain benefits to public sector employees why should I be held accountable for that decision? I neither had a vote nor partook of their services. I am sure I am be…

The EPA is going to spend millions of dollars to clean up Flint, Michigan's water supply lines; you don't get a say in that either. "Representation" is a bit of a vague concept in US governance.

Neighboring towns near Flint took care of the problem at their own expense. Is it fair to them that Flint doesn't have to pay? Perhaps we should pay those neighboring town back, with interest, for the work that they did? Aren't we encouraging irresponsible behavior if we pay for Flint but not the other towns?

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

#226

Post by enraged_camel »

vkou wrote: post #204
enraged_camel wrote: post #187

Earlier quoted context omitted.

I'm not sure why you are being downvoted (probably for ideological reasons). You are totally correct. Socialism hasn't really been tried in countries with diverse, abundant resources and powerful economies.

It has been tried, we call that country 'The United States' - at least, if you're over the age of 65.

Not sure what you mean. The "socialist" programs, such as Social Security and Medicare, have been massively successful. But they are the tip of the iceberg in terms of what is possible. We're talking things like Medicare for All and, at the extreme end of the spectrum, Unconditional Basic Income.

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

#227

Post by ericd »

tormeh wrote: post #180
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.

>Plenty of countries have defaulted, and they can still borrow money. That's the lenders' fault. Bleed the suckers dry. Lenders like that shouldn't get to manage money.

Many of those lenders are pension fund managers, who are responsible for managing normal people's retirement funding. This is not a good thing for anyone.

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

#228

Post by enraged_camel »

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…

>>That sounds more like fraud.

What do you mean "more like fraud"? Immoral behavior and fraudulent behavior are not mutually exclusive. It is possible for something to be both immoral and fraudulent, such as the example I gave in my post.

>>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?

No, I don't think there is any shame in that. Like you said, the risk for that is known upfront and is therefore built into the interest rate.

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

#229

Post by toomuchtodo »

maxxxxx wrote: post #56
toomuchtodo wrote: post #39

Earlier quoted context omitted.

The EPA is going to spend millions of dollars to clean up Flint, Michigan's water supply lines; you don't get a say in that either. "Representation" is a bit of a vague concept in US governance.

I am fine with bailouts as long as systems are being put in place to avoid repeating it in the future. That's for Flint, pensions or banks. Obviously the prevention step never happens....

Run for office. Help fix the problem. That's what I'm doing.
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