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PUERTO RICO’S ECONOMY IS IN SHAMBLES...
It’s completely impossible for them to pay off this debt. Especially since it’s the poorest and most socialist-leaning part of the U.S. So, yes. Puerto Rico will default, one way or another. And it should default. Justin: What about Puerto Rican bondholders? Are you sympathetic toward them? DOUG: These people were paid handsomely to subsidize the Puerto Rican government in a co-dependent relationship for many years. And they were very well paid with high tax- free income for years to facilitate San Juan politicians bribing local voters to re-elect them. They assumed that the U.S. government would step in and bail them out, rather than allow sovereign default. So these bondholders should be punished for subsidizing the stupidity of the Puerto Rican government for all these years. I have zero sympathy for them.
Justin: Doug, what do you make of Trump’s suggestion? Could he really wipe out Puerto Rico’s debt? DOUG: I don’t know about the legality of Trump – as opposed to the Puerto Rico legislature – defaulting on the debt. But it’s not just a reasonable suggestion, but a good idea, and probably inevitable. I mean this tiny island of 3 million people owes more than $100 billion – about $70 billion in balance sheet debt plus another $30 billion of off-balance sheet pension liabilities. And probably a lot more in contingent liabilities, guarantees, and what have you. How are they supposed to pay that back? Let’s do the math on this. Divide 3 million into $100 billion, and you come up with around $33,000 per person. But that’s sugarcoating it... because only a million people on the island work – being very liberal with the concept of employment. If you use this figure, the debt comes to about $100,000 per person.
American Consequences | 33
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