Wednesday, October 9, 2013
The chickens are coming home to roost these days. The latest sinking ship to make headlines is Puerto Rico. Affectionately known as "Welfare Island".
Conservative estimates place welfare and aid payments from the U.S. at around 4.6 Billion annually and some financial perks the Federal government has bestowed on their Muny Bonds making them tax free for all U.S. investors has allowed this island to rack up the public debt to the tune of some 70 Billion.
To put that debt load into perspective consider Detroit is going bankrupt with roughly a million people (I think it is down to 850K now) and 19 Billion in debt while Puerto Rico has around 3.5 Million people and 70 Billion in debt. I think we are beginning to see a pattern here for about when the debt load starts to become a real burden. Keep in mind here that debt is over and above all the aid sent by the U.S.
Over a third of the entire population is on food assistance alone and I read reports that state a large percentage of the food assistance money is actually still handled as cash payments down there as well.
Can we say fraud out the waahzoo boys and girls?
Not only are Puerto Rican bond yields tax free no matter where you live but they also paid out a pretty good percentage so most retirement account vehicles are heavily invested in them.
I smell another bailout coming soon as the Fed will have little choice. Either bail em out or suffer a much sooner pension crisis.
Good thing we are in a recovery isn't it?
I hafta admit a bit of personal bias here. I haven't met many people from Puerto Rico but I can report that I haven't met one yet that didn't end in physical blows being thrown. I even used to have a stalker/troll on this blog a few years back from there. Charming woman let me tell you.
Why I realize blogging about financial matters makes many readers eyes glaze over and click away it is important to at least generally know these things are coming about. With all the possible Financial Black Swans flying around these day's things could fall apart very quickly. I am going to be interested to see how things play out now.
Keep Prepping Everyone!!!