Puerto Rico: A Lesson in Bankruptcy
Feb 6, 2014

Which one of these entities is in Bankruptcy?

                                                      United States                  Puerto Rico     U.S./Puerto Rico
                                                                                                                             Dollar   Income adjusted
                                                                                                                              ratio             ratio

Number of Citizens                            317,483,419                     3,670,000

Per Capita Income (2012)                        $42,693                        $18,499           2.31

Unfunded Liabilities(PV)      $76,500,000,000,000          $32,663,000,000
Unfunded Liabilities(PV)/Citizen            $240,958                          $8,900          27.1    11.7        

Debt                                     $17,300,000,000,000          $70,000,000,000
Debt/Citizen                                             $54,491                        $19,073            2.9      1.3           

Obligation                            $93,800,000,000,000         $102,663,000,000
Obligation/Citizen                                  $295,449                         $27,974      10.6   4.6

Obligation=Debt+Present Value of Unfunded Liabilities
PV=Present Value
Puerto Rico Debt data from USA Today
Puerto Rico Unfunded Liabilities (Pension) data from Reuters
Data as of February  6, 2014

Table 1:  United States and Puerto Rico; Their Debt and Unfunded Liabilities

Puerto Rico Municipal Debt Downgraded to Junk!

Puerto Rico municipal debt of $70 Billion was downgraded to junk on February 5, 2014.   The above table shows that The United States of America has 2.9 times as much debt per citizen as does Puerto Rico, has 27.1 times as much Unfunded Liabilities per citizen as does Puerto Rico, and has 10.6 times as much Total Financial Obligation per citizen as does Puerto Rico.

Of course these financial obligations need to be adjusted for the relative average incomes of these entities.  The right most column in Table 1 makes that adjustment and shows that even with that adjustment the U.S. Federal Debt is more per citizen than that of Puerto Rico and our Unfunded Liabilities are more than 10 times that of Puerto Rico.

Also the economic situation in Puerto Rico is dramatically more dire than that of the United States as a whole which has caused the per capita income to decline rather rapidly over the last few years which is at least part of the reason their debt was downgraded since Standard and Poors recognizes that the recession in Puerto Rico is continuing to worsen.

That should give us some comfort that what is happening in Puerto Rico might not happen in the United States.   I say just the opposite!   Our situation is ONLY 4.6X that of Puerto Rico because we have not yet entered the deep recession/depression that will occur when USAPonzi implodes.  My prediction is that when USAPonzi implodes our GDP (and our per capita income) will decline by 1/3rd to one half and then our liabilitiy ratios will move back closer to the dollar ratio (unadjusted) shown in Table 1.

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