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Related: About this forumPuerto Rico says it cannot pay its debt, setting off potential crisis in the U.S.
Last edited Mon Jun 29, 2015, 12:24 AM - Edit history (1)
Puerto Rico says it cannot pay its debt, setting off potential crisis in the U.S.
By Michael Fletcher June 28 at 10:43 PM
The governor of Puerto Rico has decided that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.
Puerto Ricos move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.
For many years, those bonds were considered safe investments but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.
Those defaults at least offered investors the protection provided by Chapter 9 of the U.S. bankruptcy code, which sets out an orderly process by which investors can recoup at least some of their money. But like states, Puerto Rico is not permitted to file for bankruptcy. A failure to iron out an agreement with creditors could ignite an unwieldy, uncharted and long-lasting process to sort out the islands financial obligations.
More:
http://www.washingtonpost.com/business/economy/puerto-rico-says-it-cannot-pay-its-debt-setting-off-potential-crisis-in-the-us/2015/06/28/cbae1bc4-1e05-11e5-84d5-eb37ee8eaa61_story.html
TreasonousBastard
(43,049 posts)it looks like we might be entering a brave new world where governments can't just walk up to the ATM any more.
Of course there will be a loud chorus of plans to solve the problems but a large part of the problem is democracy itself where politicians' jobs are too often dependant upon doing the wrong thing.
Judi Lynn
(160,707 posts)for the masses, anyway.
What a loathesome shame. They simply get stuck with paying off the loans while they continue to live in poverty.