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Puerto Rico is Uncle Sam’s Greece

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Last year I pointed out that Puerto Rico is our Greece. Over the last year, this problem was allowed to fester so that indeed the suffering Puerto Rico has now started big time. You have pointed out many times how MR predicts this situation. Like Greece, Puerto Rico is a money user, but unlike our states, these folks are at the mercy of the banks and creditors. Question: How do they pay the interest on their credit without continuous investment in that Island by their overarching government’s deficit spending? Where does their “money” come from?

This sounds EXACTLY like Greece to me: The basic structure of their economy is faulty.

“U.S. Treasury Sec. Jack Lew wrote a letter to Speaker Paul Ryan and warned that a taxpayer bailout for Puerto Rico will end up being the only option if Congress cannot pass legislation allowing Puerto Rico to restructure its debt before July 1.”

“Lew last wrote a letter in January to press Ryan and Congress to pass legislation allowing the island to restructure its $72 billion debt. Now that Puerto Rico has missed the critical May 1 payment deadline, Lew wrote Monday that “a series cascading defaults” could, and would, intensify.”

“Going forward, Puerto Rico’s $70 billion of debt is unsustainable by any measure,” Lew writes. “It simply cannot afford to pay its debt. And, with a shrinking economy because of people leaving Puerto Rico, further reductions in government spending will be difficult to implement.”

“Puerto Rico Gov. Alejandro García Padilla announced the island would not be able to pay the full $400 million debt payment that was due Monday. While the Puerto Rican government attempts to finance the first loans, the island is bracing for the looming $2 billion payment due July 1.”

“Lew warns that a taxpayer bailout may be the only option for Congress if legislation lags on the House floor.”

QED: “A recent bill proposed by House Republicans has stalled and Congress went on recess without a vote on Puerto Rico.”

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Posted by Dennis
Posted on 05/03/2016 4:56 PM
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A good scapegoat is nearly as welcome as a solution to the problem.

“Congress has been debating, for months, a plan that would give Puerto Rico the power to restructure its debts, but, despite a promise by Paul Ryan that the issue would be resolved by March 31st, representatives don’t seem all that close to a solution. Indeed, on Friday, with the debt-payment deadline looming, members of the House went home for a weeklong recess, leaving the situation unaddressed”.

http://www.newyorker.com/business/currency/on-puerto-rico-congress-once-again-fails-to-do-the-obvious

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Posted by Dennis
Answered on 05/04/2016 1:12 AM
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    Yeah, this is a real mess. PR is treated like a foreign country by the USA in many ways. I’d argue that Greece is probably in a worse mess because they don’t get any Federal aid, but it’s a very similar mess. I am going to try to write something on this in the coming days if I can….

    Stay tuned…

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    Cullen Roche Posted by Cullen Roche
    Answered on 05/04/2016 2:55 AM
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      Thanks, Cullen. This is pure MR that few seem to understand, none that could make a positive difference.

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      Posted by Dennis
      Answered on 05/04/2016 3:14 AM
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        PR gets its money from taxpayers that haven’t fled the island in good sense. Its a lot like a pegged rate situation with the USD. Like was in Argentina where you have to pay back the foreign debts with USD and not your local peso. That’s very deflationary because how the hell do you do that when no one wants what you’re selling and your economy continues to deteoriate and destroy businesses offer goods due to braindead populist and socialist policies?

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        Posted by MachineGhost
        Answered on 05/10/2016 11:52 PM
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          …or Venezuela. That’s an even bigger clusterfuck than Greece, Argentina or PR. There is nothing that can save that country short of CTRL ALT DEL. It’s far too gone.

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          Posted by MachineGhost
          Answered on 05/10/2016 11:53 PM
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