The Numbers Add Up...To Disaster

Once again, from Cate Long's insightful blog MuniLand, comes this numerical picture of Our bond issues. The report, written by Alan Schenkel, ws posted on MuniLand on July 27, 2012. Bringing this up right now is just perfect for the upcoming farce of Our elections:

"About half of the ($60 billion) debt is general obligation or otherwise tax backed, while most of the remainder is secured by revenues, including electricity sales, water and sewer utility charges and highway tolls, with all bonds to varying degrees dependent on the fortunes and stability of the island’s economy." (All emphasis Mine.)

Wondering why Our "electrical savings" this month are nothing but a 20% credit, to be charged to Us after the elections? Just read that quoted paragraph again.

"Current general obligation credit spreads, with yields about 200 basis points above AAA benchmarks, do not reflect bondholder risk.

(Cate Long) Translation: An investor is not getting paid enough interest to cover the risk of owning these bonds. Prices need to come down, and yields need to go up."

See that gap, with a green arrow going up and one going down? That gap means that the risk of Our bonds is rising and the revenue backing them is dropping. Which means We'll have to offer more interest to investors = more debt = bigger disaster down the road if Our economy doesn't get stronger... a lot stronger.  Not that The Larva give's a slug's ass: he'll be long gone by 2013.

"The pace of debt growth exceeds that of economic growth, an unsustainable proposition."

You know what it's called when your debt growth exceeds your income growth? Bankruptcy. Or suicide.

Ms. Long then comments:

"I have one quibble with Schankel and the broader market in how they view Puerto Rico’s debt and pension liability load. This data is always presented as debt per capita, but I think it’s more realistic to examine debt per worker, since ultimately the debt must be repaid with revenues generated by the state. Debt/pension liability per capita is $13,449, but per worker, the debt/pension liability figure is about $90,000. This is more than triple the average 2010 wage of $26,870. How are the citizens of Puerto Rico ever going to pay back all this debt?"

If you work in Puerto Rico, think about having a $90,000 you didn't ask for slamming your future earnings. Rough, right? If you don't work because you get welfare, what the hell do you care, right? Here's the thing, worker and parasite: when the economy collapses, We all get slammed. And all of Us are to blame because the thieves We elected are escaping while We have to pay...again.

The numbers keep adding up against Us. You'd think We'd note the tally and do something about this, right?

You'd think.



The Jenius Has Spoken.


[Update: 17 Oct 2012: Huge investment brokers are dumping Puerto Rico bonds.]