Could Puerto Rico be the next Lehman-crisis?

| January 9, 2014 | 6 Comments

Larry McDonald interviewed on CNBC’s “Talking Numbers”

McDonald is professional risk advisor, speaker/writer and Senior Director at Newedge, a global agency broker and clearing firm. He thinks that the entire $3.7 trillion municipal bond market could be steering into huge trouble triggered by what is happening in Puerto Rico.

The Interviewer asks “but Larry, if I am maxed out on my creditcards, getting another creditcard with an even higher interest rate to transfer my balances onto, is not going to kick the can. I don’t see how Puerto Rico is solving any of its problems” – and McDonald answers “I completely agree.”

Too much debt on that little island with only 3.6 million inhabitants and a quickly eroding base of tax payers and very little to show for those billions and billions of obligations.

McDonald thinks that the planned sale in February of new PR papers will go through but not as planned by the government, “(the)  government thinks they’re selling $2 billion in papers, I think they’re selling more like $500 million. But it’s a  real watershed-moment because if they don’t sell, the market is gonna lose all confidence.”

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Category: Current Affairs

  • Jose from PR

    Don’t try to be inocent and blame the poor islander for this debacle. Wall Street with the support of Washington have known about this mess for years. Every body jumped on the wagon of the triple exempt bonds of PR and while the going was good never complained. Now that you feel threatened of loosing several billiones you want to blame us. Well though luck. As lender and professinal you are responsible for your decisions. This is the same situation as lending a mortgage to unqualified buyers, remember the housing bubble. Well this bubble about to burst prepare to suffer.

    • http://www.henryfreeman.com/ H.A. Freeman

      No doubt that Wall Street has profited from the PR bonds and it will continue to do so as long as there are governments or organizations who want to issue bonds. They may also have abused, because Wall Street’s nature is based on greed.
      However, some 30% or more of PR bonds are held by Puerto Ricans. So nobody’s without guilt here and in so far (again) I’m saying the blame game doesn’t work. We need constructive collaboration free from political views to quickly solve the problems of the island.

      • Jose from PR

        Yes 30% of the bonds are held by PRicans. I am one of them, and I am very worried. But the constructive collaboration has to come from Wall St and DC. You are part of the problem. You enjoyed he benefits of this Pyramid for many years and now it is about to crumble. Well, you have to step up and do your share of fixing. We can’t fix it alone. And with the depopulation increasing soon their will be no one in the island to pay. IT IS WALL ST AND WASHINGTON PROBLEM ALSO.

        • http://www.henryfreeman.com/ H.A. Freeman

          Just for clarification: i have not been involved in bond investments nor their promotion or sales. So I take the “you” in your text referrs to Wall Street/United States…

          • Jose from PR

            Please, be assured that I don’t mean you personally. YOU refers to Washington and WSt. (Discussing using this media is complicated) 🙂

  • SIXgunBANDIDO

    In Whose Hands Does PR Depends To Fix The Looming Debt Crisis ??? When You Realize Most Of It Is In The Hands Of The Politicians Who For Decades Have Exploited The System Without Remorse… Then.. And Only Then… You Know Where This Runaway Train Is Headed… The People Don’t Even Have A Clue… They Are Fighting A Loosing Battle For Survival… The Educated Middle Class Bears The Brunt… Exploited By Low Wages And Low Job Security From The Elites… And Being Targeted Daily By An Unstoppable Wave Of Crime…. Tired, Stressed, Underpaid, Overtaxed & Fearful… The Middle Class Plays Their Last Card… Emigration… Selling Their Houses At Ridiculous Prices for The Chance Of A Safer Life Out Of The Fight For Your Life Island Jungle… Some Say 94 People Leave The Island A Day.. I Say This Rate Will Increase As Utilities Prices, Taxes & Crime Keep Rising… In The End… Mark My Words… A Banana Republic… A Mockery Of It Ancient Self… Its People Divided, Broken And Fearful Will See The Passing Of The Regional Islands… While They Stay More Behind… As I See In Its Future… Images Of Haiti Cloud My Mind… The END ??? Yes… The End.