Puerto Rico will default — again — on some of its bonds payments. The island owes about $1 billion to creditors on January 4.
Governor Alejandro García Padilla said Wednesday that the island will make all payments except for $37.3 million. He claims the debts that will go unpaid were never guaranteed by Puerto Rico and the creditors should know this.
It will be the second default in the island’s history. The first default occurred in early August.
Puerto Rico is trying to figure out how to deal with about $73 billion in debt. Governor Padilla has called it a “death spiral” for the island. The economy is in recession and people are migrating to the mainland U.S.
The apocalypse does not begin with a bang, when the US economy/banking system spectacularly crashes, and the waves from that spread out to more economically unstable nations like Puerto Rico, Portugal, Spain, Greece, and so on. It begins at the margins with the little tremors of small defaults on loans which “really weren’t that guaranteed to begin with, and the creditors should have known that,” so it doesn’t matter that much that those creditors are getting stiffed.
What will be interesting is if we see any amygdala acclimatization to defaults, which dulls the importance of state defaults in the minds of lenders. For example Puerto Rico is about to default, but it won’t collapse the system. So now “default” is not a red line anymore. The next default will be bigger, and that will probably not have as much of an effect, so amygdalae will be trained to not ascribe emotional valence to it. Then when Portugal defaults, maybe that won’t have as much of an effect, because in the brain there has been conditioning to assume that won’t have an effect. And so on.
It seems as if both the economic mechanisms, and the neurological mechanisms beneath, are all designed to keep everything going full-tilt ahead right up until all of the entire mess drops, all at once.
If Trump or Cruz do win, expect it to happen “to” them, on their watch, and not by chance.
[…] By Anonymous Conservative […]
November 9, 1989 was one of history’s breaking points. As crowds surged through the Berlin Wall in one direction only, the legitimacy of every communist prison state in the world was shattered forever.
Now the democratic social welfare state model is on its last legs, and survives only by printing and borrowing money. The bankruptcy of one such state would destroy the credibility of all the rest, so marginal states like Greece get “bailouts”, each with a solemn announcement that the recipient is only getting a “loan” to put its fiscal affairs in order, and will repay all its debts with no further bailouts.
Obviously, this can only delay the inevitable. Fortunately, places with mass gun ownership don’t need a state to maintain law and order, just the rule of “you loot, we shoot”.