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

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

#361
post #268
post #180

Earlier quoted context omitted.

>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.

The question is "what are the chances they will default (again?) within the time period of the loan?". That determines the interest rate and the change you will loan it to them. If after the default, they are in a reasonable state, then yeah, people will lend them money, because there is a good chance they will make a big enough profit. You WANT to be a lender which balances the risk with the rewards. You don't want…

Of course, but if the lenders miscalculate the risk then that's on them.

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

#362

Earlier quoted context omitted.

Sorry but what you are saying is since people are too stupid to understand the contract they signed and to do some math it is the companies fault? My wife and I at one point were in the hole nearly 1m. The crash put my house way under and the job money fun time went away. It sucked. You know what we did. We canceled the cable TV, we stopped eating out. We watched every penny. I work jobs I hated, hated, hated. We got…

The companies are more than capable of doing the math as they are signatories on the same contract. They interest rate they charge on the loaned money is based on their own internal algorithm that determines the risk of default on a particular borrower. Risk is priced into the loan. I am glad you and your family were able to work your way out of the debt you found yourself and I commend you for it. Many others are no…

I agree but that is not the case for most of this. People spend to much and run up to much debt because they are trying to keep up with the Jones. My wife was property manager for a large company. One of the properties in Orange County, New Port Beach area, had the highest rate of late payments and evictions. This is a A+ complex and has some of the highest rents for the units in the area. Guess what, those people that were late came in to the office with their bags from Nordstrom that they just came from in their BMW or MB asking for extendtions because they did not have the cash (but still had the CC to run up shopping). We as a country over all have made it okay for people not to be responsible for their actions and it will be our downfall. I agree with having the bankruptcy laws but we need to make it harder to get a reset whenthe cause of the situation was your own stupidity. I personally know people (Not friends) that have gone through bankruptcy 2 times, doing the same stupid shit the 2nd time as the first and it does not look like anything has changed with the last.

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

#363

Earlier quoted context omitted.

>If they can't produce enough value to justify minimum wages, why would they move to places with a higher cost of living? Mopping a floor produces economic value because there's a difference in how much a dirty store sells versus a clean one. If all you can do is mop floors for this thought experiment, this difference in how much the store sells directly effects the economic value of your labor. In Puerto Rico, this…

Exactly. If you'll excuse me highlighting the obvious, the floor-mopper in Puerto Rico is having to work just as hard as in some other place where the economy is better, so there is a transfer of wealth from that person that's generally not accounted for.

That assumes that the person's work has an inherent value, and further that this inherent value is equal to the highest amount it can be paid in any market. That hardly seems reasonable.

Consider two countries, A and B. A has limited economic development, low technology, poor infrastructure, low education. B is far more advanced. A and B lie on opposite sides of the globe and have essentially never had trade or direct contact. (This is an accurate scenario before the Age of Exploration, where travel was far more limited than now, and there were already large differences in the relative level of development of various lands.)

Person Pa mops the floors in country A and gets paid $0.25/hr. Person Pb mops the floors in country B and gets paid $5.00/hr. (You may wonder how we can define both of their incomes in dollars if the two countries have no contact; you can define a virtual exchange rate based on respective purchasing power, for instance).

Your interpretation states that there is a transfer of wealth from person Pa to... person Pb? Everyone in country B? Everyone in country A? It's not clear, but any of those conclusions seems unreasonable. There is no causal connection between country A and country B, so there can be no wealth transfer between them. And how can the existence of country B, at the unknown and unreachable recesses of the earth, cause a wealth transfer within country A?

The more reasonable interpretation is the opposite: it is person Pb who is receiving a transfer of extra wealth. From whom? From the past and present inhabitants of country B, who have created the wealth, technology, infrastructure and knowledge that allows Pb to receive more for the same amount of work. This interpretation, unlike yours, is backed by clear causal connections.

I do agree, however, that people often fail to account for this transfer of wealth.

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

#364
post #54

Earlier quoted context omitted.

> 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 it be a better equlibrium? What makes you think Puerto Rico did not try? How much longer will the poor have to suffer until you accept they've learned their lesson? Some facts about Puerto Rico: Puerto Rico is poor, almost half of the people live below the poverty line. The…

I wasn't making commentary about Puerto Rico, except in taking exception to the poster above me who was pushing the line that not only should Puerto Rico default on their debt, they shouldn't even regard it as a bad thing that they have to, since after all the people lending them the money knew it might never get paid back and built it into the interest they charge.

The joy of the contract is that it is a non-moral document.

Its a contract. Success or failure in being able to meet the conditions are all mapped in.

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

#365

Earlier quoted context omitted.

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 alt…

All three of the mention countries have pretty much free, capitalistic enterprise - which is the total opposite to what mjevans suggested.

That said, there is a huge government ("public") sector and the taxation is high on most things. Especially income and consumption.

Basically, all of the socialist programs that's currently going on in the Nordic countries rely heavily on taxing free enterprises (private sector) and would work a lot less without them.

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

#366

Earlier quoted context omitted.

I think the concern is overblown. States will need to backstop local governments, and the federal government will backstop the states. Benefits will get (mostly paid); taxes will go up (they have to, they're at unsustainable historic lows). This is not the end of the world.

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…

I've been paying attention to the situation in Illinois. All signs point towards things getting worse.

More people are moving out of Illinois than any other state. In polls residents of Illinois are most likely to say they're planning on moving to a different state. The state hasn't passed a budget in over two years, a US record for any state. Average income difference between families moving in and out of Illinois is over $20,000. The property taxes are second highest in the nation relative to COL and everyone agrees that they need to be increased to maintain the current budget. The state cut funding for all college grants programs and the average freshman class size at state schools has shrunk an average of more than 20% in two years. Illinois is the biggest exporter of students, and many never return. Pension costs are already 25% of the state budget and this is projected to increase.

The state is so deeply corrupt that bankruptcy seems inevitable. If not for the whole state at least Chicago. Madigan literally runs the state from the shadows and gov. Rauner has no real power.

The budget problems are accelerating at a frightening pace as anyone that can afford to leave the state does. The most severe issue is brain drain of the most bright and educated young people. Illinois will experience the fallout from this for decades.

If I had any money invested in Illinois I would watch this case closely. If Puerto Rico is allowed to proceed with bankruptcy to shed pension obligations Illinois will follow

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

#367
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…

Sorry but what you are saying is since people are too stupid to understand the contract they signed and to do some math it is the companies fault? My wife and I at one point were in the hole nearly 1m. The crash put my house way under and the job money fun time went away. It sucked. You know what we did. We canceled the cable TV, we stopped eating out. We watched every penny. I work jobs I hated, hated, hated. We got…

Whole countries are in huge debt that affect people that were not even born when the debt was established because of US economic hitmen [0]. I feel that all these countries should default and the corporatocracy fof the US should be ashamed of itself.

[0] http://www.goodreads.com/book/show/26593431-the-new-confessi...

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

#368

Earlier quoted context omitted.

I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden. Of course, as the current situation demonstrates, not being under the Federal taxation umbrella has certain disadvantages.

Wouldn't he still have to pay the income tax if he repatriates the money?

No. Puerto Rico is part of the US.

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

#369
Ok, So China's economy is on the verge of collapse ( as the media likes to paint it), it is not sustainable, but they are carefully trying to control it.

EU is, Brexit, Greece ( tiny compared to P.Rico ).....

And now U.S.

It seems we have more problems then we had after the Money Printing machine turned to full power in 2008.

This may sound naive, do we actually have a recession in the past 20 - 30 years? We may have contraction, but actual recession? 2008, was like a come and go event in such a short time frame.

And an even more stupid question, is a constant GDP growth, sustainable? Or if we include the lowered value of currency we have been in negative already?

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

#370
post #360

Earlier quoted context omitted.

But everyone is definitely not lumped together into a commons. If their is information to delineate people, it will be used. That is what credit scores are used for. Also, of some interest, it was when banks sullied the information, that the housing market really went off the rails. BTW: We've got to watch out for these financial guys, they'll try it again if they have the chance.

It's not the "financial guys" forcing everyone to sign up for the huge amounts of per-capita debt we're now up to. People are doing that themselves out of their utter lack of self-discipline to save money instead of buying a stupidly overpriced SUV or pickup truck. And the housing market really went off the rails because people were making stupid bets. Does the casino enable stupid bets? Damn right. But we don't blam…

> Does the casino enable stupid bets? Damn right. But we don't blame them when a gambler loses all their money on a stupid bet.

I think the only reason for that is follow the money. Casinos pay taxes. I'm trying to follow a machine learning mooc and I'm just realizing how much humans (specifically me) suck at classification and at pattern matching.

Planet money I think asked the question: if sugar is addictive, why isn't it regulated?

My questions are Why is alcohol regulated? Why is tobacco regulated? Why is cocaine banned? Why can't we have kinder surprise in the us?

Why is gambling a state monopoly? Why does a casino need a license?

We all don't agree on everything but there's plenty of blame to go around if you think of gambling as an addiction (and addiction as a disease to be treated rather than an excuse to kill people). I think of gambling is a disease, casinos are a "guilty until proven innocent". Sort of like Google's famous " don't be evil" motto which recognizes that an organization in this position is likely to steer towards being evil by default and only by constant vigilance can we prevent ourselves from being evil. In the case of many casinos, I think it is just a matter of cover my ass when they have programs against gambling addiction.

tl;dr I love the idea of personal responsibility but we can't throw people in prison for victimless crimes.

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