Puerto Rico failing financially

Posted by xthinker88 4 years, 7 months ago to Government
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Seems to me they are just following the same fiscal policies of the U.S. government.
SOURCE URL: http://money.cnn.com/2015/06/29/news/economy/puerto-rico-default/index.html?iid=TL_Popular

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  • Posted by $ richrobinson 4 years, 7 months ago
    Typical government thinking. The economy is bad so they raise taxes and deficit spend to get out of it. I'm guessing they are shocked that it didn't work.
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    • Posted by scojohnson 4 years, 7 months ago
      Keynesian Economics... while I don't subscribe to the BS myself, does 'sometimes' appear to work. If you look at the Reagan economy for example, Reagan 'primed the pump' by massive military spending, which we both needed to catch up to the Russian/Soviet Bloc, but also put a lot of money into key US businesses - aerospace, shipbuilding, space systems, research and development, etc., that arguably led to the development of technology that put America into a leading position worldwide that we still enjoy. (Silicon Valley may not have happened without the defense spending of the 80s).

      In most cases though, such as 'shovel ready road projects', I think it's a pile of horse manure. Spending millions you don't have to make a few jobs of guys holding flags & shovels seems stupid to me.

      In the case of Puerto Rico, it was incredibly dumb. You have the best & brightest leaving the sh*thole in droves, never to pay a dime of taxes again, while allowing crime & filth to fester to chase off the tourism and potential ex-pat retirees that could grow the economy.

      I work in the hydro power industry... anyone ever heard of a 'broke' utility company? Neither of I... hell, we're quasi government-owned and we have more money that we know what to do with and we don't take a penny in taxpayer resources.

      The difference is you have to do it in smart ways that really do prime the pump to lead to exports... like buying 120 F16's but also leads to selling so many fighter jets overseas that the tax revenue that McDonnell Douglas pays for the next 30 years will dwarf what you spent on the first 120 to be designed & built 20 times over.. or just the fact that we -are- the arsenal of the free world, so our own defense spending usually leads to multiple magnitudes of sales around the world (and we collect the tariffs and tax revenues accordingly) for decades after we release it to foreign government technology transfer/sale.

      Building a road or a bridge doesn't do any of that, it just buys a bunch of steel and concrete from China. There is also the side thing that we wouldn't ever want to be in the position of buying -our- weapons from China... that could be bad.
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      • Posted by $ MichaelAarethun 4 years, 7 months ago
        Keynes himself says his borrow from the future works only if you can afford to service the interest on the debt load and only if the future is grown large enough to swallow the debt.

        The left wing has corporatists and statists alike figured a way around Keynes admonishment. Inflate, devalue and repudiate. Trouble is they didn't grow the future and it's no longer the great great great whatevers it's now mom and dads retirement.

        The left then went back to the tried and true method - start a war - divert attention - and go further in debt again.

        It aint rocket science it's just a jumped up version of the cycle of repression with the government cast in the role of the revolutionaries this time. Which suits the left wing socialst fascists just fine - The third revolution is now over. They won the Constitution lost, we lost.

        Next is accept it and give up or counter-revolution. Just like we war gamed it out back in the sixties and seventies .
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        • Posted by scojohnson 4 years, 7 months ago
          Well, that's where Keynesian theory diverges from liberalism. Liberals love to cite Keynes as a justification for their tax & spend stuff, but they -never- acknowledge the other half of Keynes ideas where you CUT BACK once the pump has been primed and let the market economy take over.

          As a person that has been through at least 4 economic cycles during my adulthood, the empirical evidence is what it is - when things get bad, people tend to stop spending and save more, things get worse, and they save more. When no one is spending, entrepreneurs shrink as well and life gets really, really hard for small business (I've been through that more times than I care to count as well). About 90% of the economy is small business, so it gets worse and worse. Things would eventually straighten out, but usually the government gets too worried to wait it out - so spending is a natural knee-jerk reaction. When targeting high growth businesses like high tech, military-industrial, heavy exports, etc., this can have a many-multiple effect as I discussed above. Those tend to be Republican-supporting businesses though, so the libs would really rather help out their union buddies in construction - so we end up buying a bunch of concrete and steel from China and creating a few $30 / hr jobs that don't really have that much of a multiplier either.

          Unfortunately - the whole concept is too political, so it normally fails in actual implementation.
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  • Posted by BrettScott 4 years, 7 months ago
    Mrs Thatcher was right: "The trouble with Socialism is that eventually you run out of other people's money." Even in The End they don't see the folly of their ways.
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  • Posted by Herb7734 4 years, 7 months ago
    Much of the money and resources poured into Puerto Rico never got to where it was intended to go. It was skimmed off in order to make fat cats fatter. Putting any wealth into that Island is akin to simply handing it over to those who need it least.
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  • Posted by woodlema 4 years, 7 months ago
    Well, if they really want to see how well socialism works, then they need to just pay everyone who lives there the equivalent of $15.00/hr with free healthcare, with no expectation they should have to work at all.

    Let the liberals PROVE how well that will work. Oh wait, Greece!!! never mind.
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  • Posted by 4 years, 7 months ago
    Greece is going down the tubes even faster. The US will probably bail out PR since it is a US territory.


    I loved this quote:

    "Tsipras went on Greek TV late Monday to repeat his scathing criticism of the cash-for-reform offer, saying it would enslave the Greek people."

    Well, no, you already enslaved the Greek people by building up this debt. And they voted for the process along the way.

    An earlier article actually blamed recent "austerity" measures for the problem. Right. If they'd only be allowed to borrow more. It's soooo unfair.
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    • Posted by $ root1657 4 years, 7 months ago
      I would prefer any money to PR be tied to a final vote on being a state. Time for them to choose, be a state, or stand alone. They've had all the perks with none of the responsibility for WAY too long.
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      • Posted by jdg 4 years, 7 months ago
        On the contrary. PR's primary problem right now is that they are subject to the federal minimum wage even though the median income in the territory is only about 10% more than that. Result: 40% unemployment. PR is an excellent example of why raising the wage screws the poor. It also would be a good place to try out a policy of no minimum wage, or at least a much lower one.

        If this doesn't happen, well, sucks to be anyone who bought PR's muni bonds.

        The really strange thing about all this is the bind they're in. Federal law doesn't allow a state or territory to declare bankruptcy. On the other hand, PR has a territorial constitution and it says that bond payments come before any other spending. So unless some miracle prevents them from defaulting, PR may end up furloughing its entire civil service and its police too, or at least not paying them on time. After that, most likely chaos.
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  • Posted by $ allosaur 4 years, 7 months ago
    Let's ask Obama to send Puerto Rico a trillion dollar stimulus that they have to pay back with interest.
    That way, wouldn't that be a win-win situation.?

    Do I hear crickets?
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  • Posted by eckert16 4 years, 7 months ago
    Free money...the root of all ________

    The Social Security Administration (SSA) approved disability benefits for hundreds of Puerto Ricans because they do not speak English, despite the fact that Puerto Rico is a predominantly Spanish-speaking territory.

    According to a new audit by the Office of Inspector General (OIG), the agency is misapplying rules that are intended to provide financial assistance to individuals who are illiterate or cannot speak English in the United States. Under the rules, Puerto Ricans are allowed to receive disability benefits for their inability to speak English as well.
    Hundreds of Puerto Rico’s residents qualified for federal disability benefits in recent years because they lacked fluency in English, according to government auditors.

    The Social Security Administration’s inspector general questioned the policy this month in light of the fact that Spanish is the predominant language in the U.S. territory.

    Under Social Security regulations, individuals are considered less employable in the United States if they can’t speak English, regardless of their work experience or level of education. [ http://oig.ssa.gov/sites/default/files/a... ]
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  • Posted by jdmatthew 4 years, 7 months ago
    A major crash is eminent. At this point there is no way out of it. The whole world economic system is built on nothing but unstable debt. Every country is wrapped up in one way or another, ether owing more than they can ever repay with no will or desire to reform the policies that created the debt in the first place, or they are holding so much worthless debt that their own systems will collapse as the debtor nations default on the payments.
    One thing that has been troubling me and I hope someone can shed some light on this for me.
    When an individual or corporations fail to pay for their debt they file for bankruptcy. There hard assets are then sold off to pay the creditors, ie; the bass boat, snowmobile and summer cabin. The only real assists that a nation has is its territory and people, what is the collateral for a national debt, what or who gets sold to pay the creditors?
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    • Posted by jdg 4 years, 7 months ago
      Puerto Rico isn't an independent nation, but the question deserves an answer anyway (because of Greece, for one thing).

      Historically, when a nation defaults on its debts, there isn't much anyone can do about it. A lawsuit won't work -- even if they don't invoke sovereign immunity, once you win your case the police aren't going to start seizing government property. The legislature still has the sole right to appropriate funds, and if they don't do so, you don't get paid.

      A creditor nation might impose sanctions, up to and including a trade embargo, or even declare war. (In the times when there were colonial empires, war was cheap enough, for them, that this might actually be profitable. This was because the empire had a huge lead in military tech over the rest of the world. Without that lead, which nobody has today, it can't possibly pay to start that kind of war, or to have colonies.)

      About the only other thing a creditor nation MIGHT do is seize deposits in its banks belonging to citizens of the debtor country, thus holding them responsible to pay their government's obligations. But if this became common it would destroy the trust that makes international banking work.

      No, the most likely outcome for Greece is that its debts go unpaid, it is forced to leave the Euro, and it becomes a poor country. Which may or may not mean it has to leave the EU and/or that its neighbors will close their borders.
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  • Posted by $ Sgtill 4 years, 7 months ago
    Free Stuff and unfunded mandates. Pensions, healthcare, welfare, etc. Puerto Rico is toast! But Obama will probably find a way to bail them out. The debt will just be thrown onto the 19 trillion dollar pile, of his, that already exists.
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  • Posted by $ MichaelAarethun 4 years, 7 months ago
    Change the rules and require a vote of the states to approve a new state or a vote of the states in initiative form would cut them loose. No lost value there and a lot of savings.
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  • Posted by wmiranda 4 years, 7 months ago
    If I remember correctly, the previous governor (a pro statehood Republican governor) made the unpopular choice and got rid of the deficit and started attracting jobs to the island. That unpopular action action galvanized the unions and the opposing party (pro status quo Democrat supported) and unlike Walker in Wisconsin, the unions put their candidate back in the governorship. So, there is no surprise. One more thing. Puerto Rico has a similar problem with illegal aliens that the U.S. has in the southwest. The difference is that being an island 100x35 miles, with limited resources, the effects is much more severe.
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  • Posted by smichael9 4 years, 7 months ago
    Puerto Rico is just the tip of the iceberg as far as the United Stated goes. Check out Illinois with their $6.2 billion deficit and an unfunded $11 Billion retirement liability. With a Democratic super majority in the state legislature and a newly elected Republican governor, Illinois is on target for bankruptcy also. Our family recently left the state because of continual tax increases at every turn. With local sales tax at 10%, property taxes increasing each year beyond reason and the overall cost of living, we were forced to find a lower cost alternative.

    There are other states that are in rocky condition also. California is another one that is on a steady march toward financial crisis. This list probably goes on and on, but the bottom line is that as a country, we spend more than we make. The answer has to be something other than taxing our citizenry into oblivion.
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    • Posted by $ MichaelAarethun 4 years, 7 months ago
      inflate, devalue-repudiate been doing it since the gas crisis of 1973. This time they added food and housing to fuel and then small banks.nothing new there just stronger, more arrogant. It's now public and in your face.

      I've got a hundred says the same people get voted back into office.
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  • Posted by BaritoneGary 4 years, 7 months ago
    Here we go again!!! Check out Golvercard. Ie will work everywhere. Even Greece and Puerto Rico! Why? Because it's REAL money! Not debt notes.
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    • Posted by 4 years, 7 months ago
      Actually there is nothing about Golvercard that doesn't scream scam. And, even if it's not, there's nothing about it that seems like a good idea.

      I have yet to see an ATM that spits out bullion. So every time you do any transaction you are subject to whatever the market rates are at the time for bullion.
      Do they move the bullion when you withdraw cash?

      Do they buy more when you deposit it?
      What trading fees do they charge you?
      What is their reserve ratio (very unlikely that they can maintain 100% even with the obvious lag times between transactions and bullion trading)?
      This might work if there were actually a currency backed by gold. However, so long as you need to conduct day to day business in dollars, this is not a good solution.
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      • Posted by BaritoneGary 4 years, 7 months ago
        Here is the response that I received from Golvercard concerning your concerns:

        The answers to your questions as follow:

        1) Do you move the bullion when I withdraw cash? Do you buy more bullion when I make a deposit? What is your reserve ratio (very unlikely that you can maintain 100% even with the obvious lag times between transactions and bullion trading)?

        The creation and subtraction of GolVerCoins will depend on the amount of gold and silver stored in our vaults by both users and us. That means, all GolVerCoins in circulation will be a 100% backed and redeemable in physical gold and silver. As our CEO, Charles Chang says: “We are here to help people create their own gold and silver standard.”

        Therefore, whenever you exchange fiat currency for GolVerCoins, we immediately increase the amount of gold and/or silver holdings under your name in our vaults. And thanks to our partners, you could be able to own any quantity of physical gold and silver in about 2 hours.

        When it comes to cash withdraws at ATM's, you will have two choices, either with a prepaid or a debit card. All customers who decide to use a prepaid card, will have to exchange their GolVerCoins into fiat currency before using their card.

        2) What trading fees do you charge?

        Trading fees are very small, the percentages will range between 0.1% to 0.5%, depending on the quantity you wish to trade. However, is worth mentioning that all transactions equivalent to US$100 or lower will be free of charge. And we are working to expand such benefit towards US$500 and beyond.

        3) How would transactions in bullion (instead of a local fiat currency) take place?

        We believe a choice of storage jurisdictions is important – as is the ability to switch. We let you choose between any of our locations, which are:

        North America:

        USA: New York and Salt Lake City

        Canada: Toronto and Montreal

        Asia-Pacific: Singapore, Hong Kong and Sydney Australia

        Europe: The Zürich Switzerland and London England

        Now, all transactions between users in the same or different locations are conducted without physically shipping neither the gold or the silver, to avoid unnecessary expenses to our users. This transactions where two parties agree to exchange GolVerCoins (gold or silver) with each other are called GolVerSwaps.

        GolVerSwap exchanges are only possible with accredited, assayed, pre-vaulted and privately owned professional grade gold and silver; in recognized and insure vaults.

        And if that wasn't enough, with our fast speed of settlement you gain enormously in flexibility if ever you need to act quickly - for example to redeem your GolVerCoins in gold and silver, and move it urgently across international borders. That means, can switch your tangible property between vaults in seconds. That's much faster than your bank.
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