by Terresa Monroe-Hamilton | June 29, 2015 7:55 am
Greece basically defaulted over the weekend with bank runs. Their banks are closed today and a limit of 60 Euros in withdrawals is being mandated. Their stock market is closed for at least a week and the Asian stock markets were a bloodbath last night. Now on the debt hit parade comes Puerto Rico. Puerto Rico is a US territory, so if it defaults, this time the contagion will be personal. You can’t go on forever spending other people’s money, building up debt and blithely thinking the piper will never come calling, because inevitably they will. All you have to do is look at Greece’s bank runs, the gas and food hording, the violence… and you see what is on the menu for Puerto Rico and soon for the US. We will reap what we have sown.
From CNN Money:
Puerto Rico can no longer make payments on its $73 billion in debt, according to Governor Alejandro Garcia Padilla, who warns the island is perilously close to entering a “death spiral”
“The debt is not payable … there is no other option. This is not politics, this is math,” Garcia Padilla told the New York Times in an interview published Sunday evening. “But we have to make the economy grow. If not, we will be in a death spiral.”
The warning comes just one day before the governor is expected to release a report, conducted by former officials at the International Monetary Fund and the World Bank, that paints a very bleak picture of the commonwealth’s finances. According to media reports, the governor will deliver a major speech Monday following the report’s release.
Puerto Rico’s economy has been in hot water for years, due to government overspending, high energy costs and dependence on debt. Now, the U.S. territory is dangerously close to default.
In an attempt to avoid a missed payment, the Puerto Rican government is now seeking concessions from its creditors, including deferring some debt payments, or extending the repayment schedule. It seems no one will emerge from this crisis unscathed: Garcia Padilla is now urging the island’s creditors to “share the sacrifices.”
One flashpoint is a $400 million debt payment that government-run electricity provider, PREPA, must make on July 1. It’s a debt that PREPA almost certainly can’t pay in total — Moody’s has rated the electricity company’s bonds in the lowest possible category.
PREPA itself has about $9 billion in total debt — by comparison, when Detroit went into bankruptcy, it shed $7 billion.
Things have gotten so bad that Puerto Ricans of all social classes have left in search of jobs elsewhere.
Between 1980 and 2000, the average annual migration of Puerto Ricans to the mainland United States was 12,000 people. From 2010 to 2013 — when the economy started tanking — that figure jumped to 48,000 people per year.
Every time someone leaves Puerto Rico, it only exacerbates the situation. It shrinks the island’s tax base, which the government needs to pay for itself and its debts. In recent years, the government just issued even more debt to pay off its current debt.
Unless Obama prints more faux money and bails out Puerto Rico, I don’t see this ending in any other outcome than default. And because of how the international markets work, we are all connected until death do us part. Everyone wanted to pretend that there would be a miracle to solve all our debt problems… but much like Obama’s unicorns and platitudes, it’s all bull crap. And for those out there calling for Puerto Rico to now be made the 51st state due to the crisis, you must be on some really good drugs. That’s nuts. All of this stems from corruption and a lack of ethics and morality. This is yet another instance where Progressive Marxist policies have failed and the US is careening down the very same hellish path.
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