Monday, May 2, 2016

Puerto Rico Will Default Today

Puerto Rico is not the 51st state...but this may be some foreshadowing to watch what happens when states spend way more money, year after year, than they take in.

SAN JUAN, Puerto Rico (AP) -- Gov. Alejandro Garcia Padilla announced that Puerto Rico's government will not make nearly $370 million in bond payments due Monday after a failure to restructure or find a political solution to the U.S. territory's spiraling public debt crisis.

Garcia said Sunday that he had issued an executive order suspending payments on debt owed by the island's Government Development Bank, a default that will likely prompt lawsuits from creditors and could be a prelude to a deadline to a much larger payment due July 1.

The governor said Puerto Rico can't pay the bonds without cutting essential services.

Island officials spent the weekend trying to negotiate a settlement that would have avoided the default but apparently came up short. The development comes as Congress has so far been unable to pass a debt restructuring bill for Puerto Rico.

"Let me be very clear, this was a painful decision," Garcia said in a speech. "We would have preferred to have had a legal framework to restructure our debts in an orderly manner."

Puerto Rico has been suffering through more than a decade of economic decline since Congress phased out tax cuts that had made the island a center for pharmaceutical and medical equipment manufacturing. Garcia's predecessors and the island legislature borrowed heavily to cover over budget deficits, causing a debt spiral that has already prompted several smaller defaults.

Creditors have accused the government of exaggerating the crisis to avoid upcoming payments of more than $1 billion due July 1 that includes general obligation bonds, which are guaranteed by the constitution.


Spending other people's money to buy things we want today is always fun!....until you run out of other people's money to spend.

Things then get really ugly because not only do you not have any more money to spend (no one will loan you any more) BUT you have to start taking money out of your pocket to pay back the first people your borrowed money from.  It's like burning the candle at both ends!!

NO FUN for Puerto Rico!!  (which ironically means "Rich Port")

Now start looking into the U.S. State's balance sheets and see how miserable they are.  Notice also of which states are in the worst financial shape (think Illinois) and then ask yourself what political party has been in charge of those states?

Here ins MN, our state is in pretty darn good financial shape.  We are actually trying to figure out how to spend all of our budget surplus and are even going to put some of the money away for a rainy day when we might have a deficit.  Even though we are thick with Democrats/liberals in this state, they seem to be socially liberal but fiscally conservative.

The real danger comes to a state when the socially liberal AND fiscally liberal politicians get elected into office.

It's crazy that Socialist Bernie Sanders is still drawing the crowds and millions of supporters.  What kind of delusion could they be under?  Maybe the delusion given to them at their college campus?

 BUT...while I say that, I must confess that I also believe Hillary supporters, Donald supporters and Cruz supporters may be under a delusion as well.  How else can you explain the love affair so many supporters are having with such lousy candidates?


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