Timely and Inspiring Prophetic Analysis so you can Prepare.

Did you know that Puerto Rico failed to make a $58 million debt payment, which significantly escalates its debt crisis? It’s true. And it just happened. The legislature did not appropriate the funds because it doesn’t have them. Since Puerto Rico is a U.S. territory, it uses the U.S. dollar, which means that it cannot create more dollars to inflate its way out of debt, like it’s parent government does.

Puerto Rico is an U.S. island territory located in the Caribbean sea. It only made a partial payment of $628,000, which is only one percent of the interest that is due on its $72 billion in loans. It could not afford to make the rest of the interest payment. Puerto Rico is technically in default.

The government argues that not making the payment should not be considered a default under a technical definition of the term. But Moody’s rejected the argument. “This event is consistent with our belief that Puerto Rico does not have the resources to make all of its forthcoming debt payments,” said Emily Raimes, a Moody’s vice president. “This is a first in what we believe will be broad defaults on commonwealth debt.”

So, Moody’s thinks this is only the beginning and that there is more to come. Puerto Rico has been warning since July that it cannot repay its debt. The U.S. territory is struggling with a decade-long economic slump. It is essentially bankrupt.

The governor, Alejandro Garcia Padilla, has asked the U.S. Congress, which oversees the territory, to approve a plan for Puerto Rico’s public agencies to file for bankruptcy so that they can conduct an orderly restructure of their debt. But support for such a bill doesn’t appear likely at this point in time. And the White House is not planning a bailout either.

Perhaps Puerto Rico is going to suffer something like Greece in the Euro zone. While the circumstances are different, bankrupt governments are still bankrupt governments. And unless they have control of their own currency, there isn’t much Puerto Rico can do to mitigate the effect of an exploding debt crisis. The days of spendy living are over in Puerto Rico.

“There are not many, even among educators and statesmen, who comprehend the causes that underlie the present state of society. Those who hold the reins of government are not able to solve the problem of moral corruption, poverty, pauperism, and increasing crime. They are struggling in vain to place business operations on a more secure basis. If men would give more heed to the teaching of God’s word, they would find a solution of the problems that perplex them.” Testimonies for the Church, Vol. 9, page 13.

Source Reference

• Puerto Rico confirms it failed to make $58M debt payment