Pay attention to this article from Investors Business Daily if you have investments.
It says:
With the financial world transfixed by Greece’s debt-driven meltdown, Puerto Rico announces it can’t pay its $73 billion in debt. Once again, we’re learning that welfare statism is no replacement for fiscal responsibility.
Compared to Greece’s $353 billion in debt, Puerto Rico’s $73 billion doesn’t sound so big. On a per capita basis, it’s about a third less.
But appearances deceive. Puerto Rico is in deep, owing actually much more than that amount.
We learned this after a report on Monday, co-authored by former International Monetary Fund No. 2 Anne Krueger, revealed the island’s finances are a shambles.
The devastating analysis noted that some 150 agencies ran up deficits that couldn’t even be accurately counted, so the true indebtedness might be even higher — as much as $100 billion by some estimates.
Now Republicans favor privatizing state-owned organizations because the private sector is more efficient. Democrats want to nationalize private sector services so that they can control access to it and use their monopoly to buy votes.
What does Puerto Rico do?
The government has funneled public money to state-owned enterprises that are supposed to be financially independent. Worse, the report said, many workers no longer even look for jobs, since welfare benefits pay more than actual work.
Now guess whether a Republican or a Democrat is to blame for this. Which party likes to borrow money from future generations in order to buy votes with spending right now?
In short, the government has been horrendously mismanaged.
[…]The problem is, Puerto Rico’s dysfunctional economy means the debts only piled higher, with no way to pay them. Deficits grew, too, since spending was never really cut.
Now, as a commonwealth, it can’t declare bankruptcy. It can default, however. That would be messy, creating a financial crisis in the territory, causing businesses to close and sending thousands fleeing to the U.S. mainland. Yet the Democrat-led government has said that, while it hopes to avoid default, it won’t cut either pensions or spending. So disaster looms.
Wow, just like Greece – they refused to cut pensions, raise retirement ages and cut spending, too. There is some good news – we probably won’t have to bail them out:
A bailout? Even President Obama rules that out. If the White House couldn’t bail out union-run Detroit, it sure couldn’t do it for Puerto Rico.
And, despite Padilla’s denials, politics is very much a part of the equation. Just like Greece and dozens of other financial basket cases, Puerto Rico has become a welfare state run by leftist bureaucrats and politicians that overspends on public pensions without having the money to pay for it all.
It’s a story repeated over and over around the world.
If Puerto Rico defaults, it won’t suffer alone, however. As the New York Times notes, “much of Puerto Rico’s debt is widely held by individual investors on the United States mainland, in mutual funds or other investment accounts, and they may not be aware of it.”
So better check your 401(k). Or your hedge fund. Because virtually all of that $73 billion is held by the U.S.
This is not to time for you to quit your job and go on vacations or focus on fun in any way. There is a world-wide financial crisis brewing. It’s nothing to panic over, but this is serious enough for us all to focus on our careers and savings, and cut our own spending. It’s not just Greece or Puerto Rico either, there are other warning signs from other countries, e.g. – China, Japan, etc.
Look:
Meanwhile, across the globe, we’re headed toward a reckoning on excessive debt, and it won’t be pretty. The welfare state model with big pensions for all and lavish unemployment benefits is dead. We’re watching its death throes now. Only the politicians don’t get it.
Even here, many states have severe debt problems with underfunded public sector obligations, as well as other problems. There’s just this problem with people wanting to depend on government. There are too many people wanting a free ride, and too few people willing to work and raise the next generation of workers.
WINTERY KNIGHT 