Tuesday, May 2, 2017

Shed a tear for Puerto Rico

They will declare bankruptcy to day, unless some last minute deal is made.  Over the years Puerto Rice managed to borrow $73 billion dollars from bone headed Wall Street bankers, who should have known that the island didn't have and never would have the revenues to pay off the debts.  Wall St bankers must have been taking stupidity lessons from the Euro bankers who lent to Greece. 
   The money ran out last year, and to complicate matters, Puerto Rice as a territory had been left out of the bankruptcy law.   You have to be a real US state to declare bankruptcy.  Territories don't count.   So last  summer Congress passed a law to allow the island to go bankrupt.  Being Congress, they put a few bells and whistles and a committee to negotiate into the law, but today the red tape unwound and bankruptcy is going to happen. 
   Anastasia O'Grady, writing on the Wall St Journal's op-ed page is all kinds of indignant about this.  She never really says just what gets her all riled up, but riled up she is.  Puerto Rico got access to a lot of credit, her politicians took advantage of that to borrow when they had no way of paying off the loans.  Politicians are like that.  And the banks deserve to loose their money.  Those were stupid loans, and loosing the money might smarten up the next generation of bankers.
   Capitalism depends upon intelligent distribution of capital.  Capital used to build businesses, employ people, grow the economy, is intelligent.  Capital used to pay government workers, politicians, and pensions is wasted.  It's clear that Wall St wasted $73 billion that it loaned to Puerto Rico.  Let's have the banker's smart for it. 
   It will take a few years (five maybe ten) for bankers to forget a bankruptcy and begin to loan again.  That will be a little tough on Puerto Rico, but that's the way the world works. 

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