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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

#231

Post by pryelluw »

bluetwo wrote: post #122
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…

So the (selfish) question is: Is now a good or bad time to take a vacation in PR?

Same as always. If you do visit make sure to email me. Ill take you out to a nice dinner.

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

#232

Post by enraged_camel »

martinald wrote: post #209
dustinmr wrote: post #198

Earlier quoted context omitted.

Here's a local law where if you meet all the criteria (income made off the island, spend > 180 days per year here, various other criteria), you're exempt from income taxes here. And since you're a resident, all your income is here. Effectively exempting you from federal income taxes. The idea was to attract high net worth individuals to spend money here. Every analysis I've seen says it has worked quite well.

Crazy. So if you move to PR but making money from other US based interests you get exempted from US federal income tax, but if you move and work permentantly in say Germany, you still get charged US Federal Income tax?

Here's the relevant IRS rule:

https://www.irs.gov/taxtopics/tc902.html

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

#233

Post by throwanem »

rootusrootus wrote: post #219
Consultant32452 wrote: post #214

Earlier quoted context omitted.

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.

Will it stay that way? What happens if it doesn't?

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

#234

Post by cgio »

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.

Why would you tie an economy's capacity with the limited supply of a good? These trillions of debt (could) have created equivalent value in infrastructure, education, military power etc. The fact that the gold equivalent of what amounts to a whole economy does not exist is not an indication that the value is not there in the economy.

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

#235

Post by tanderson92 »

tanderson92 wrote: post #210
ellius wrote: post #202

Earlier quoted context omitted.

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…

Well, credit ratings prevent them.

This is objectively true, so the downvotes are a bit baffling. Credit ratings are directly related to the rate premium bond holders demand for the extra credit risk. It is simply a fact that if the credit ratings are lowered to a sufficient extent, the rate that investors demand for the borrowing will make it no longer feasible.

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

#236

Post by cmdrfred »

saimiam wrote: post #212
njovin wrote: post #194

Earlier quoted context omitted.

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.

I think there a "tragedy of the commons" sort of moral responsibility here to only take out loans you have a good chance of paying off as you theoretically raise interest rates for everyone else.

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

#237

Post by foobarrio »

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…

If a bank is making loans at rates that do not cover defaults they should go out of business because they are crappy at their job.

If I take my car to a mechanic am I expected to know as much about my car as the mechanic? Do I tear down and redo/inspect any work they do to my car? If I go to a mechanic and ask them if it's okay to do something dangerous to my car and they go ahead and do it, I'd say the mechanic is way more on the hook morally than the idiot driver.

Similarly if I go and ask for a 1,000,000 USD mortgage when I'm only making $20,000 USD a year and have no savings or investments and the bank gives it me... You're saying both me and bank are on equal moral footing? You would then have to ask what incentive the bank had to give me the money. Either they are greedy and wanted to charge a super high rate or they intended to pass the buck and sell the loan which can be fraud if they lie about my credit worthiness to the next buyer of the loan.

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

#238

Post by zanny »

blackbagboys wrote: post #211
SEJeff wrote: post #136

Earlier quoted context omitted.

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).

Puerto Rican statehood and / or independence is not up to the citizens of PR by themselves, its up to the whole of the US.

The reasons for the civil war demonstrate why state / territory autonomy are subservient to the will of the majority.

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

#239

Post by Consultant32452 »

cgio wrote: post #234
Consultant32452 wrote: post #214

Earlier quoted context omitted.

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.

Why would you tie an economy's capacity with the limited supply of a good? These trillions of debt (could) have created equivalent value in infrastructure, education, military power etc. The fact that the gold equivalent of what amounts to a whole economy does not exist is not an indication that the value is not there in the economy.

I didn't make any value statements on whether or not I think an asset backed currency is preferable. I just pointed out that the US defaulted on its debt when we told the world we weren't going to pay them back what we promised.
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