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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

#441

Post by thomnottom »

ericd wrote: post #360
state_less wrote: post #265

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…

When I got my mortgage (c. 2006) I had an idea of what I could afford. I went to the bank hoping they would approve me for that much. Not even taking into account my wife's salary, they approved me for at least $100k more than that. There is no way we would still have our home if we took the bank's advice.

Sure, people make bad decisions. But how can they be expected to make better ones when the people that are supposed to be relied on for good advice give such bad advice.

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

#442

Post by EliRivers »

gertef wrote: post #216
zepto wrote: post #150

Earlier quoted context omitted.

Assets provide return on investment. Children do not. Using this term just muddies the water.

The only investment a human can make is in their genetic future. Everything else (money, power) is in service of that.

I'm not convinced. I make investments in the hope that I will end up getting back from it more than I started with; ideally by enough of a margin to cover the time I had to wait.

My genetic future isn't any kind of investment. I'm never seeing any return on that.

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

#443

Post by ChemicalWarfare »

colefichter wrote: post #438
basseq wrote: post #421

Earlier quoted context omitted.

There's a difference in perception between personal, corporate, and government bankruptcy. Personal bankruptcy is seen as a black mark of either poor personal discipline or a string of bad luck. Corporate bankruptcy is largely ignored, held up in rare cases as a source of embarrassment (but little else), or more often in startup-land, a signal of "experience". Government bankruptcy is something else entirely, and gen…

You make a really good point. HN seems to venerate startups that fail, which isn't very different from defaulting on a loan (and in many cases these startups are defaulting on loans as they shut down). Yet, in any thread where Greece, Puerto Rico, etc come up there's this strong backlash against defaulting as being somehow immoral (as though it's not written into the lending agreements). What exactly is the differenc…

>> HN seems to venerate startups that fail, which isn't very different from defaulting on a loan (and in many cases these startups are defaulting on loans as they shut down).

I don't subscribe to the notion that "bankruptcy is immoral", it's just a business transaction within the established framework with checks and balances in place.

That said though - situation with startups and business development loans in general is a little different because startups are by definition attempting to turn the idea they present to investors into reality with investors' money. So unless they fail because of a blatant mismanagement of funds (which does happen of course) - in a typical startup failure situation where something is built but there's no more runway and no more money coming in and no buyers to take over the operation - this just feels like it's easier to justify the less negative vibe around that situation.

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

#444

Post by squeaky-clean »

Brockenstein wrote: post #426
saimiam wrote: post #212

Earlier quoted context omitted.

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.

Not quite. You make the mistake of adding significance to individual each loan. The reality is a lender might loan to 100,000 people and they know some of those loans are going to fail. If they had a process to only lend to people who would never default, well, impossible. The interest rates you're being charged aren't tailored specifically to you. But they look at everyone else with similar income and credit and loo…

> But they look at everyone else with similar income and credit and look a the default rate and figure out what they need to charge to make a profit.

But don't these number take into account the fact that the average person is scared/ashamed of defaulting? If personally declaring bankruptcy were much more common, would interest rates be where they are right now?

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

#445

Post by chimeracoder »

giancarlostoro wrote: post #410
chimeracoder wrote: post #15

Earlier quoted context omitted.

> Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation? Puerto Rico's economy has been crippled by the Jones Act, which affects all US states/territories that rely solely on sea transportation for trade with the US. Hawaii is the only state that fits that description, and the…

Jones Act and a couple of other things: https://www.bna.com/demise-puerto-rico-n57982074653/ Used to be that Puerto Rico was once upon a time #1 in manufacturing, Japan was #2. The USA and England followed. Something to think about. Puerto Rico exports out of the US more pharmaceuticals than California currently, or at least it did in 2015[0]. There's so much potential for Puerto Rico. We also have a lot of engineers…

> I think all Puerto Ricans are to blame as much the people as the politicians. We all always blame politicians but as a people we don't do enough.

I can't think of a single thing Puerto Ricans could reasonably and legally do that would have fixed this problem.

The inability to import/export things at reasonable rates has crippled the economy, and nothing short of federal policy changes (which Puerto Ricans cannot directly influence, short of moving to the mainland) would impact those fundamental economic realities.

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

#446

Post by basseq »

colefichter wrote: post #438
basseq wrote: post #421

Earlier quoted context omitted.

There's a difference in perception between personal, corporate, and government bankruptcy. Personal bankruptcy is seen as a black mark of either poor personal discipline or a string of bad luck. Corporate bankruptcy is largely ignored, held up in rare cases as a source of embarrassment (but little else), or more often in startup-land, a signal of "experience". Government bankruptcy is something else entirely, and gen…

You make a really good point. HN seems to venerate startups that fail, which isn't very different from defaulting on a loan (and in many cases these startups are defaulting on loans as they shut down). Yet, in any thread where Greece, Puerto Rico, etc come up there's this strong backlash against defaulting as being somehow immoral (as though it's not written into the lending agreements). What exactly is the differenc…

The answer, as I see it, is big dollars and moral focus. A VC investing a couple million bucks in a long-shot startup? You expect risk. Ditto, say, a $300k mortgage to a family of four, but that's more portfolio statistics.

Multi-billion dollar governments go bankrupt because of mis-management. Less "Uber For Dogs" and more "Enron", minus the intentional criminality. Governments go bankrupt because its citizen "shareholders" vote for continued debt accrual and negative EBITA. But citizens don't care. It's OPM: Other People's Money. Since they're also "customers", their goal is to get as much possible out.

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

#447

Post by Bartweiss »

dangerlibrary wrote: post #298
seanmcdirmid wrote: post #220

Earlier quoted context omitted.

I'm pro minimum wage, but states that have higher minimum wages tend to already have their heads on straighter economically. E.g. Washington state invests heavily in education and caters to high tech more than other states, while California has of course always been a gold mine. Correlation is not causation.

The classic paper on minimum wage hikes and employment rates is Card and Krueger. On April 1, 1992 New Jersey's minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast food restaurants in New Jersey and Pennsylvania before and after the rise in the minimum. Comparisons of the changes in wages, employment, and prices at stores in New Jersey relative to stores in Penn…

There's a criticism of Card and Kreuger that seems devastating, though.

They assessed Full Time Employment (FTE), a statistic which counts full time work as 1 'unit' and part time work as 0.5 'units'. That's really alarming, because we want to assess hours worked, and they used a metric that can't differentiate 30 hours / week from 10 hours / week. It's even worse because cutting hours while hiring more workers is a known way to reduce benefit costs and increase flexibility.

Neumark and Wascher redo the analysis using hours worked, and find a nonsignificant downward trend instead.

I don't think this settles the minimum wage question, but I've never heard a defense of Card and Krueger's result against this charge.

http://www.nber.org/papers/w5224

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

#448

Post by undersuit »

aryehof wrote: post #337
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…

It is truly sad. However don't shift all the blame to the politicians. You live in a democracy where you the people are responsible for the actions your representatives take. Years of demands for more services, more facilities, more money, more wage rises, beyond your willingness to pay for them in taxes have led to this.

I work in my state's government. My friends poke fun at my salary, but still vote for the representatives that waste time by proposing Transgender bathroom bans and fight against 1% wage increases for government employees.

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

#449

Post by Bartweiss »

frgtpsswrdlame wrote: post #424
ThrustVectoring wrote: post #102

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…

It sounds real nice which is why this idea is so pervasive but it just doesn't hold up to reality. The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The we…

> to modest increases in the minimum wage

"Modest" here seems like an unproven assumption. The gap between the Puerto Rican economy and US state economies is much larger than the gap between, say, Pennsylvania and New Jersey.

As far as I know there's no real disagreement on the direction of the labor demand curve. If you put the minimum wage at $40/hour (or $10/hour in China) it would have massive consequences.

So even granting the 'little or no' result, we haven't proved the "modest increase" charge for Puerto Rico.

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

#450

Post by jpttsn »

frgtpsswrdlame wrote: post #423
jpttsn wrote: post #311

Earlier quoted context omitted.

> Minimum wage only causes unemployment if the labor market is competitive. Where did you hear that?

Probably someplace like this: The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to m…

Some of the same words are indeed found in there
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