Earlier quoted context omitted.
You can default on student loans.
Ooop, yeah, you are right. Was thinking bankruptcy.
You can discharge them in bankruptcy, too, it's just harder than most other debt to do so.
Puerto Rico files for biggest ever U.S. local government bankruptcy
341–350 of 481 posts
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#342Earlier quoted context omitted.
Brazil in late 80s and Argentina in early 2000s default. Both spent a decade with no access to foreign debt whatsoever and prompted a massive crisis. In Argentina it let to the populist Kirschner govt. Brazil is once again facing mounting debt due continuous budget deficit. This time the govt is pushing for austerity reforms that, if not approved, will lead once again to default. The govt approved ratings are abismal…
Defaulting worked pretty well for Iceland. It worked poorly for Brazil and Argentina. Not defaulting worked extremely poorly for Greece. It all depends on the particular circumstances of a country. If you're going to be building massive amounts of infrastructure, then yeah, you may want to consider not defaulting. On the other hand, if the foundations of your economy are sound, you may do well to default, and live wi…
No defaulting and instead trying to rough it out and pay off a crippling debt is massively more harmful for a country. Because they have to basically cut all services and investments into the economy, which causes GDP to contract heavily, which causes a huge decrease in taxes, which causes yet more cuts in government investment.
You get a Greece like deflationary spiral that basically totally destroys your economy, and any hope you ever had of paying off the debt.
Bring on the defaults.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#343Earlier quoted context omitted.
How far does the graft and corruption have to take from us before we start publicly hanging them by their genitals?
All through history, the feeble voice of economically rational people has been no match for vociferous demagoguery. What I mean is, people will actually identify the source of the problem 50 years too late, and usually when all the primary actors are long gone. During the problem, everyone will vaguely sense that something is going wrong, rarely listen to the voices of restraint while the problems are being created,…
Maybe the AI overlords will learn from history. One can only hope.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#344Earlier 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…
Exactly. Do we really want to create a society where the lenders have to do an inordinate amount of background research to determine whether you are a default risk? Bad for everyone in that case.
Do we want to create a society where you are essentially enslaved by the money choices people made before you were born?
Rich banks losing money vs poor people being exploited for the rest of their lives.
I think I know which one I prefer.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#345Earlier 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…
Spot on. You reinvented the World Bank https://www.one.org/international/issues/debt-cancellation/ http://www.huffingtonpost.com/marcelo-giugale/does-debt-forg...
YES, thank you
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#346I feel like local governments are going to be the first to really be affected by significant pension overlays that are not properly accounted for -- a lot of pension funds assume rates of return that are historically farcical. I think the industry average used to be about 8%. "During the 20th Century, the Dow advanced from 66 to 11,497. This gain, though it appears huge, shrinks to 5.3% when compounded annually." htt…
There weren't any public pension funds at the start of the 20th century. If we instead look at time periods during which the industry average was considered to be 8%... https://dqydj.com/dow-jones-return-calculator/ 1960-1990 = 9.5% average return. 1960-2000 = 11.5% average return. It's largely pointless to talk about inflation-unadjusted average-rate-of-return for long time periods. A 12% YoY return when inflation i…
You're overfitting. This is exactly the problem I'm describing. Case in point, you've omitted 2000-2010.
Real (CPI as inflation) averaged annualized return on the DJIA 2000-2010: -2.219%
This is with relatively mild inflation.
Of course, 1960-2000 looks better when you literally put in the apex of the software bubble when P/E ratios shot skywards...part of which corrected over the decade following.
Expecting a 8% nominal or real return is simply nuts in my opinion because you are staking yourself on a really small sample size with crazy inflation to boot. Nominal or real is a nuanced distinction to what is plainly just bad overfit thinking. The introduction of just one decade with low inflation and bad returns can wreck you -- case in point: Dallas Firefighters/Puerto Rico ($43bn + of unfunded pension obligations)/Detroit etc. etc. etc.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#347Earlier quoted context omitted.
There weren't any public pension funds at the start of the 20th century. If we instead look at time periods during which the industry average was considered to be 8%... https://dqydj.com/dow-jones-return-calculator/ 1960-1990 = 9.5% average return. 1960-2000 = 11.5% average return. It's largely pointless to talk about inflation-unadjusted average-rate-of-return for long time periods. A 12% YoY return when inflation i…
You're overfitting. This is exactly the problem I'm describing. Case in point, you've omitted 2000-2010. Real (CPI as inflation) averaged annualized return on the DJIA 2000-2010: -2.219% This is with relatively mild inflation. Of course, 1960-2000 looks better when you literally put in the apex of the software bubble when P/E ratios shot skywards...part of which corrected over the decade following. Expecting a 8% nom…
Also, to add another wrinkle to this discussion, most pension funds won't weight themselves 100% in stocks (corresponding positions in cash/bonds average much lower real or nominal return), and most pay significant management/consulting fees on top...
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#348Earlier quoted context omitted.
>The CDC has issued an alert for travel to areas where Zika virus is spreading, which now includes Miami-Dade County, Florida, Puerto Rico , American Samoa, and the US Virgin Islands. Travelers who are pregnant or considering pregnancy should consult a doctor.[0] Let's just send cash over instead of tourists. Less chance of unintended consequences. [0] https://www.cdc.gov/zika/
I don't plan on having kids soon, > Q: I was in a place with risk of Zika recently. How long do I need to wait after returning to get pregnant? > A: Men who have traveled to a place with a CDC Zika travel notice should wait at least 6 months after travel (or 6 months after symptoms started if they get sick) before trying to conceive with their partner. Women should wait at least 8 weeks after travel (or 8 weeks after…
If you catch Zika and return home, any mosquito that bites you will get infected as well, and will in turn infect other people[0], some of whom might be pregnant.
Granted, someone from the continental U.S. dying of Zika is about as likely as them being eaten by sharks (less than 1 death per 300 million people per year[1][2]).
[0] https://www.cdc.gov/zika/transmission/
[1] http://www.cnn.com/2016/07/08/health/utah-zika-death/
[2] https://en.wikipedia.org/wiki/List_of_fatal,_unprovoked_shar...
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#349Earlier 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…
Sovereign states eponymously don't need bankruptcy protection, as banks cannot collect from them. Countries pay back loans because they like to keep a good reputation for future loans, but this does not work in a situation where there is nothing to lose since you can't service loans anyway. (Of course banks can enlist other states to do strong-arming: See eg Greece who were pressured to accept a deal worse than defau…
> See eg Greece who were pressured to accept a deal worse than default to benefit foreign EU banks
how are they being pressured?
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#350Earlier quoted context omitted.
The answer to pension problems is real socialism. Produce in bulk, provide in bulk, eliminate the waste and middle-person profit by providing as much of the pension as possible directly so that the allowance for other items can be of a much smaller serviceable size.
Which is why Cuba, Venezuela, and North Korea are doing so well. I'm astounded people still think the idea of central production control has any juice left in it after such a thorough debunking in the 20th century.
Which is why Norway, Denmark and Sweden are doing so well with all their socialist programs.... so what now...?
I personally feel the right answer is in the middle. Socialise whats required like health, education, emergency services, roads, pensions, etc And leave the luxuries of life as free market.
As an extra touch, I would make politicians and civil servants required to use public services rather than private alternatives. Because when they and their families have to use public schools and hospitals etc they will care a bunch more about how they run than if they are choosing private alternatives, which is common in Australia at least.