From the NYT
The Bonds That Broke Puerto RicoBy MARY WILLIAMS WALSH JUNE 30, 2015… Government spending and debt service became a Rubik’s cube of interrelated, crisscrossing payments. In 2012, Moody’s decided to solve the puzzle and found there were about $10 billion more bonds outstanding than it had counted before….
Good job, Moody’s! Well, except for the part about losing track of $10 billion before 2012 …
In May, Puerto Rico made the remarkable announcement that its main pension system was down to just seven-tenths of a penny for every dollar the retirees are due. A properly funded pension system has 100 cents on the dollar. It is not clear how the pension system is paying retirees, but when its remaining seven-tenths of a penny is spent, it will become a pay-as-you-go system, with hundreds of millions of dollars of new claims on the central government.
As with the example of Greece and the EU, Puerto Rico’s ill-defined borders with the United States encourage irresponsibility.
These two similar financial fiascos illustrate the ironies of cosmopolitanism vs. nationalism. Cosmopolitanism is seen as smarter because cosmopolitans tend to have more confidence in their own intelligence:
Then: “Sure, those Greeks and Puerto Ricans speak different languages than us and have different cultures and different customs, but I’m not some backward provincial. I’m so smart I can understand all that tricky little stuff, so I feel completely confident lending them a billion dollars each.”
Now: “Help! We need a bailout! Who could possibly have foreseen that the Greeks and Puerto Ricans weren’t going to be good credit risks?”
Tomorrow: “Sure, lending 100 quadrillion credits to Alpha Centauri may seem worrisome to Earthling bumpkins who have never been beyond Pluto, but you wouldn’t want to sound like one of them
, would you?”