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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

#321

Post by n_ »

givinguflac wrote: post #307
ryandrake wrote: post #108

Earlier quoted context omitted.

> But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly I don't know about "taken lightly" but bankruptcy and defaulting on a debt should not be something to be "ashamed" of, for an individual, a company, or a government. Default is an option specifically written into every debt contract out there. There should be no more shame in choosing to default as there would be f…

|Default is an option specifically written into every debt contract out there. Except student loans :(.

My mind immediately went to that too. Smh.

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

#322

Post by wonderwonder »

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…

While I agree we should do our best to pay our debts, morality shifts with circumstances. If I have an enough debt where it is affecting the lives and future of my children and I have an option to declare bankruptcy to give them a better life, am I not morally obligated to do so as a parent? I would argue that I am.

Morality is a human defined concept. We also only seem to apply it to individuals, a company declares bankruptcy, fires a large number of employees and then rights itself society shrugs but if a person does it we cast shame on them.

Life is short, if I dig myself into a whole with the best of intentions, I am not going to spend years living a lesser life and condemning my kids to that same lesser life if there is a reset button.

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

#323

Post by n_ »

brandonmenc wrote: post #316
givinguflac wrote: post #307

Earlier quoted context omitted.

|Default is an option specifically written into every debt contract out there. Except student loans :(.

You can default on student loans.

Ooop, yeah, you are right. Was thinking bankruptcy.

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

#324

Post by prostoalex »

fiatjaf wrote: post #27
savanaly wrote: post #23

Earlier 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…

If someone has already defaulted on a loan, that will make you not want to lend to him anymore, perfect. If the Puerto Rico government defaults now, no banks should lend money to it again ever. Perfect. This outcome doesn't affect other lender-borrower relationships.

If you're a mutual fund or an ETF with exposure to PR municipal bonds, you're looking at somewhat of a loss come tomorrow morning.

If you have any spare cash on hand (investor inflows, interest payments and bonds redemptions on other bonds) your choices are:

1) Hold cash, the more the better, in order to prop up the value of the fund.

2) Lend it to another borrower.

I'd say that if you expect a smooth sailing or are in a situation where investors cannot liquidate, strategy (2) is reasonable. But even then you might want to extract some better terms from the borrower by quoting PR as a scare factor.

Most funds, however, will expect either investor outflows or markdowns in other municipal bonds with similar characteristics. For better or for worse, the municipal market is frozen for a new borrower, at least for the next few days.

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

#325

Post by rovr138 »

coddingtonbear wrote: post #190
vkou wrote: post #170

Earlier quoted context omitted.

> Why would USA want PR as 51? What benefit is there? Wasn't the USA founded on the principle of no taxation without representation? On a principle of enfranchisement? On a principle of self-determination?

Although Puerto Ricans do pay certain local and federal taxes, they do not pay income taxes like citizens of US States do.

Some*

First, not all states pay income tax.

On the other side, you have people with federal jobs that are taxed federally.

Then you have other people with registered companies in the US which pay federal taxes in the US, the state it's registered in, then also pay taxes locally.

-- It's complicated.

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

#326

Post by prostoalex »

myrryr wrote: post #40
fiatjaf wrote: post #27

Earlier quoted context omitted.

If someone has already defaulted on a loan, that will make you not want to lend to him anymore, perfect. If the Puerto Rico government defaults now, no banks should lend money to it again ever. Perfect. This outcome doesn't affect other lender-borrower relationships.

That isn't how it works. It is never how it worked. Plenty of countries have defaulted, and they can still borrow money. And yeah, it does effect other lender-borrower relationships. It's all people, and people get nervous.

> Plenty of countries have defaulted, and they can still borrow money.

They're shut off from [cheap] public markets though. So while your statement is technically correct, they are usually stuck with lenders of last resort, such as IMF or direct country-to-country loans, which generally come with pretty harsh terms.

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

#327

Post by rovr138 »

debacle wrote: post #290
pryelluw wrote: post #275

Earlier quoted context omitted.

Absolutely. Go to the west side to Cabo Rojo. Eat some great fresh seafood. Then head to Lajas (15 min drive) at night to see the bioluminiscent bay (wear jeans and bring mosquito repelent). Then go to the east side and end up in Fajardo. Visit El Yunque and then eat some local delicacies in los kioskos. After all that, call me, and Ill take you to my dads hacienda where Ill serve some rice and beans while you relax…

How much Spanish should I try and pick up? Will it help?

In touristy areas you'll be fine.

Most people will be able to understand you. If not, you'll figure it out quick by their expression and you can adjust your words/speed.

While we have local music/tv, most of the media is from the US. We are taught both languages from kindergarten, but like everywhere, some schools are better than others.

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

#329

Post by prostoalex »

erikpukinskis wrote: post #305
prostoalex wrote: post #302

Earlier quoted context omitted.

> If they don't want to deal with the possibility of bankruptcy, they shouldn't lend out money. While a reasonable idea in abstract, it's of little value to Puerto Rico and its residents. For the next few decades no one will lend money to them unless backed by some kind of collateral like government land or revenue proceeds from tolls, and their ability to raise money via other means is highly questionable, as servic…

> For the next few decades no one will lend money to them unless backed by some kind of collateral like government land or revenue proceeds from tolls Sounds like normal debt raising. No one will give you money unless you have a plausible story of how it gets paid off. Why do you consider it a good thing to be able to borrow money you have no plan to pay off?

I don't. I was just pointing out that laissez-faire business-as-usual nothing-to-see-here-folks attitude is rarely suitable for municipal bankruptcies.

None of the recently bankrupt municipal entities in the US - Stockton, Detroit, San Bernardino - are fun to live in, and most are in a downward spiral of cutting government services, which leads to employers leaving, which leads to residents moving, which leads to cutting government services, etc.

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

#330

Post by rovr138 »

entwife wrote: post #312
creaghpatr wrote: post #11

A few months ago I discussed this with friends and suggested the government subsidize cheap flights to Puerto Rico, say $30 for a round trip flight from Atlanta, scaled up depending on domestic distance. This would cost taxpayer money but would drive a ton of tourism to Puerto Rico (albeit temporarily) and pump a bunch of money into their economy, defibrillator style. I've never been there but given a cheap round tri…

Cheap flights would work even better if (1) given to people with portable/remote jobs that can be done in Puerto Rico and (2) it is actually a paradise, or at least in the view of people with portable jobs. I could remote work from PR; have never been there, and it's likely not my style. But some of my co workers moved back home once it was allowed. What are income taxes in PR?

If you work remote for a company and are filing in PR, you need to pay Medicare, Social Security and taxes to Hacienda.

http://www.hacienda.gobierno.pr/sites/default/files/tablas_r...

Simple one, http://www.hacienda.gobierno.pr/individuos/contribucion-sobr...

Last column translates to,

> In excess of $61,500; $8,430 + 33% in excess of the $61,500

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