With Hurricane Maria, Puerto Rico has moved beyond the problems imposed by bankruptcy to meeting the basic requirements of survival. From James Howard Kunstler at kunstler.com:
Welcome to America’s first experiment in the World Made By Hand lifestyle. Where else is it going? Watch closely.
Ricardo Ramos, the director of the beleaguered, government-owned Puerto Rico Electric Power Authority, told CNN Thursday that the island’s power infrastructure had been basically “destroyed” and will take months to come back
“Basically destroyed.” That’s about as basic as it gets civilization-wise.
Residents, Mr. Ramos said, would need to change the way they cook and cool off. For entertainment, old-school would be the best approach, he said. “It’s a good time for dads to buy a ball and a glove and change the way you entertain your children.”
Meaning, I guess, no more playing Resident Evil 7: Biohazard on-screen because you’ll be living it — though one wonders where will the money come from to buy the ball and glove? Few Puerto Ricans will be going to work with the power off. And the island’s public finances were in disarray sufficient to drive it into federal court last May to set in motion a legal receivership that amounted to bankruptcy in all but name. The commonwealth, a US territory, was in default for $74 billion in bonded debt, plus another $49 billion in unfunded pension obligations.
So, Puerto Rico already faced a crisis pre-Hurricane Maria, with its dodgy electric grid and crumbling infrastructure: roads, bridges, water and sewage systems. Bankruptcy put it in a poor position to issue new bonds for public works which are generally paid for with public borrowing. Who, exactly, would buy the new bonds? I hear readers whispering, “the Federal Reserve.” Which is a pretty good clue to understanding the circle-jerk that American finance has become.
Some sort of bailout is unavoidable, though President Trump tweeted “No Bailout for Puerto Rico” after the May bankruptcy proceeding. Things have changed and the shelf-life of Trumpian tweets is famously brief. But the crisis may actually strain the ability of the federal government to pretend it can cover the cost of every calamity that strikes the nation — at least not without casting doubt on the soundness of the dollar. And not a few bonafide states are also whirling around the bankruptcy drain: Illinois, Connecticut, New Jersey, Kentucky.
To continue reading: In the Murk