Puerto Ricos $123 Billion Bankruptcy Will Impact More Than Your Wallet
Puerto Rico just triggered the biggest bankruptcy in the history of the American public bond market. On May 3, the island announced that its debts would not be paid, and it filed for bankruptcy protection under a new law written specifically for the island territory. A federal judge will now determine who gets how much of the $123 billion debt Puerto Rico and its public corporations owe to both investors and union pensions.
The total amount defaulted on by Puerto Rico dwarfs all U.S. precedents. The Detroit bankruptcy in 2013, for example, totaled $18 billion. Jefferson County, Alabama’s, 2011 filing totaled $4 billion.
What the ultimate consequences will be is unknown.
What is known is that a lot of people are going to lose money—investors, pensioners—and probably you too!
The promesa control board, which is the group appointed by the U.S. federal government to oversee Puerto Rico’s finances, has warned that the island’s situation is so dire that even its 10 year projections leave the island $25 billion short of what is needed to cover its debt payments. And the promesa plan assumes rising revenue from higher taxes—even though Puerto Rico’s governor has said that taxes have been raised so many times that higher rates are now self-defeating. It also assumes spending cuts so drastic that it could lead to dramatic civil unrest. As the Intercept’s Yuan Gonzalez recently wrote, conditions are already so dire they would “never be tolerated among U.S. citizens in any other jurisdiction, yet they are allowed to persist in Puerto Rico.”
Read more: https://www.thetrumpet.com/15792-puerto-rico-s-123-billion-bankruptcy-will-impact-more-than-your-wallet