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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

#251

Post by koolba »

rburhum wrote: post #247

For the Spanish speakers of HNs, NPR's Radio Ambulante has an excellent episode (called "deuda") that they did last year explaining the complexity of the situation. The short version is that a lot of the debt is held by the people of PR themselves in form of bonds that were sold when the economy was good. The reason it was artificially good is that for a long period it had great US tax benefits when compared with oth…

What percentage of the debt is held by private individuals and what percentage is bets by traders?

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

#252

Post by BenoitEssiambre »

vkou wrote: post #205
cnnsucks wrote: post #95

Earlier quoted context omitted.

Well that's not the precedent. When these mismanaged governments finally throw in the towel and hand the reins over to grownups what happens is the pensions and retiree benefits get cut. Detroit just had this happen after the state stepped in and dealt with that mess. Cleveland is in the process of cutting benefits before it goes bankrupt. CalPERS cut pensions last December for retirees from Loyalton. Same thing in t…

> When these mismanaged governments finally throw in the towel and hand the reins over to grownups what happens is the pensions and retiree benefits get cut. What makes it appropriate to cut obligations to creditors we call pensioners, but inappropriate to cut obligations to creditors we call 'bondholders'? (The answer is, obviously, that our politicians are quite happy to push our elderly under the bus, in order to…

These are usually the same people. Pension funds hold bonds.

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

#253

Post by ceejayoz »

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…

> But people love to put all the blame on the banks, and none on themselves for not being prudent.

Yes, I blame the supposed experts, not the folks they suckered.

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

#254

Post by selectodude »

Consultant32452 wrote: post #242
rootusrootus wrote: post #219

Earlier quoted context omitted.

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

I'm sure it matters, but not as much as a surface analysis would lead you to believe. If we had to hoard a bunch of gold to back up the size of our economy, and further demanded our trade counterparts do the same, then the price of gold would've risen and our ownership proportion of the total sum of gold would've matched our proportional global wealth. I don't have a strong opinion on asset backed currencies, but mos…

There's more people in the country, so there's proportionally more dollars + a little more as an incentive to spend your money. If dollars gained value faster than economic growth (which you just effectiveally capped at the amount of gold your country possesses) nobody would ever spend it. I know I wouldn't.

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

#255

Post by [deleted] »

Consultant32452 wrote: post #242
rootusrootus wrote: post #219

Earlier quoted context omitted.

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

I'm sure it matters, but not as much as a surface analysis would lead you to believe. If we had to hoard a bunch of gold to back up the size of our economy, and further demanded our trade counterparts do the same, then the price of gold would've risen and our ownership proportion of the total sum of gold would've matched our proportional global wealth. I don't have a strong opinion on asset backed currencies, but mos…

[deleted]

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

#256

Post by [deleted] »

Consultant32452 wrote: post #242
rootusrootus wrote: post #219

Earlier quoted context omitted.

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

I'm sure it matters, but not as much as a surface analysis would lead you to believe. If we had to hoard a bunch of gold to back up the size of our economy, and further demanded our trade counterparts do the same, then the price of gold would've risen and our ownership proportion of the total sum of gold would've matched our proportional global wealth. I don't have a strong opinion on asset backed currencies, but mos…

[deleted]

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

#257

Post by jshaqaw »

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…

Not trying to be a troll about this but in a democracy is it really honest to say "it wasn't the people who spent all this money it was the politicians"? Yes we can caveat that no democracy is perfect but PR isn't North Korea either.

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

#258

Post by anigbrowl »

tanderson92 wrote: post #235
tanderson92 wrote: post #210

Earlier quoted context omitted.

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.

About 10% of HN downvotes I see are applied on ideological rather than rational or grounds (leaving out those for rudeness or other inappropriate behavior). I take an irrational downvote as a small victory, albeit after making sure that it wasn't just for being a smartass or missing the point.

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

#259

Post by dmix »

enraged_camel wrote: post #187
InitialLastName wrote: post #107

Earlier quoted context omitted.

Venezuela tried petro-socialism, backing their welfare state with a single resource that they happened to be swimming in. Price of that resource false -> no more monetary value -> money is worthless and welfare state fails.

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.

Venezuela was having serious issues even before the price of oil took a nose dive. One example is the food shortages. They were happening well before the crisis. Centralized food markets with price controls always creates shortage. It's simple economics.

If your economic system can't efficiently feed people, more complex industries will be even harder. Not to mention building new industries.

The failures of their socialist experiment go far deeper than simply a non diversified industry. The drop in the petro industry showed immediately how fragile the massive spending schemes and nationalization was.

As Thomas Sowell said (paraphrasing), the problem with redistribution is that you can only take someone's money/property once, you can't take their ability to continually produce goods. So when that well dries up the cracks in the system become apparent.

The wikipedia article on the Venezuelan economy is a good read about the risks of centralized planned economies.

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

#260

Post by imjustsaying »

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…

> and what you do with a debt is to you pay it off

No, there is no "you" here. Politicians accrued those debts on something else's bill in exchange for legal bribe schemes.

Nobody owes those debts, legally or morally.

The people and the creditors both were trolled by professional hustlers exploiting the public liability and private benefit design features of socialism.

Democratic leaders, who are human and subject to economic incentives, almost inevitably play the game of trading the future earnings of another administration for the benefit of their own administration.

Government leaders have 130+ IQs[1], the populace has 100 if it's lucky. It's relatively trivial for them to craft a spin to consistently leverage these vulnerabilities.

https://www.quora.com/How-accurate-were-the-IQ-scores-of-the...

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