Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Please Support CounterPunch’s Annual Fund Drive
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We only ask you once a year, but when we ask we mean it. So, please, help as much as you can. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. All contributions are tax-deductible.
FacebookTwitterGoogle+RedditEmail

Silent Run in Puerto Rico

In June 2015, Puerto Rico’s Governor Garcia announced that $73 billion in debts ‘cannot be paid’. In August 2015, Puerto Rico went into default with Governor Garcia’s Chief of Staff, Victor Suarez stating ‘we don’t have the money’ to pay back our debts. Puerto Rico (PR) became expendable years ago, and has since fallen into an economic death spiral. Why, what’s next and who’s next are 3 questions that the corporate media is avoiding, despite the fact that these debt bombs bursting, elephants in the room, are getting bigger each time a new debt bomb bursts – Stockton CA, Detroit MI, Puerto Rico PR – and that the same causes of PR’s economic collapse exist at all levels – local, state and national – all across the USA. The underlying causes for debt collapses, geopolitical and economic, are intensifying nationwide.

The USA propped up Potemkin Places around the Soviet empire during the Cold War to say ‘look, see how great US style capitalism looks? Come to the side of US capitalism and adbandon your Soviet socialism.’ We, the US, didn’t have the money to make really appealing looking Potemkin Villages all around the Soviet block, but former President Reagan calculated that we could finance it. Confessions of an Economic Hit Man style, US money lenders spread out all over the ‘Free World’ with loan papers to sign, for example, to Sweden, the UK, France, Spain, Italy, Greece, Turkey, Asia and Latin America, including PR.

Czarina Katherine the Great, 1729 to 1796, was shown only what all the queen’s horses and all the queen’s men wanted her to see, beautiful make believe prosperous villages, named ‘Potemkin’ villages, to make her think that all of Russia was one big beautiful make believe prosperous place. During the Cold War, people visiting from the Soviet Union’s empire were shown beautiful make believe prosperous parts of the West, to try to trick them into thinking that all the West was one big beautiful make believe prosperous place. Looks like the trick worked, because the United States’s empire has, so far, outlived the Soviet Union’s empire.

To contrast US style capitalism with Soviet style socialism in Cuba, the US government wrote IRS Section 936 to make products made in PR tax free. Gigantic government pensions including generous health care benefits were promised in PR, as they have been all over the USA. A US binge borrowing spree began in 1982. Like jam spread out on toast, tens of trillions of borrowed dollars got spread out all over, including PR, into housing, shopping malls, office towers, long-term temporary jobs, corporate profits and more. PR looked better with all that borrowed money and an extra couple hundred thousand jobs from IRS Section 936 making PR a Caribbean tax haven for rich factory owners.

The Russians and the other Soviet style socialists saw what glittered from tens of trillions of borrowed dollars worth of cosmetic improvements in nearby places like Spain (a 1930’s Cold War battleground), Italy, Greece and Turkey. And the part of the Soviet empire in the Caribbean, Cuba, didn’t glitter half as much as PR did after tens of billions of borrowed dollars in cosmetic makeovers to make that island look prettier, for a little while.

The US government hoped in the 1990’s and beyond, to ‘convert’ Cuba too, which accounts for IRS Section 936 on the books till 2006 and PR’s binge borrowing spree being allowed to fester until 2014. Certain elements of the US government became convinced about ten years ago, that Cuba either didn’t have weapons of mass destruction, as George Bush claimed in 2002, or that agentsbiothey wouldn’t use them offensively. The government’s biggest fear alleviated, they shrugged Cuba off to a more distant part of their to do list, while they tried to create more clever ways to try to convert Cuba and they let Puerto Rico go. In the legacy of the Cold War ashes, yesterday’s Potemkin Village, Puerto Rico, became expendable.

China became the top priority. The Trans Pacific Partnership (TPP) is a union that Washington and wall street want to prop up to combat China, Cold War style. Now, the US push is on to construct Potemkin Places around China to try to convince the Chinese that US style capitalism looks better. Proposed members of TPP include Australia, Canada, Chile, Colombia, Japan, Malaysia, Mexico, Peru, the Philippines, Singapore, South Korea, Taiwan, Thailand, the USA and Vietnam.

Living Well is the Best Revenge. More borrowed trillions plus IRS Section 936’s in different names – like FreeTrade Agreements, World Trade Organization membership, tariff tax cuts, eliminating US government quota’s on imported goods – try to make manufacturing and the economy in TPP states look glittering and attractive to China. So that, Washington and wall street hope, China collapses and breaks up just like the Soviet Union’s empire collapsed and broke up. With the spotlight on China, Latin America has become a less important backwaters, complete with occasional side shows, to the Washington – wall street elite.

As wall street bankers and the hedge fund vultures make their moves to flush, they hope Puerto Ricans will just ‘go with it’ and be flushed down a toilet of wall street’s choosing. In Detroit, the Washington – wall street elite set the example of pensions being cut to 11 cents on the dollar, after decades of promises of generous pensions to government workers. People working for the government in the US are becoming increasingly doubtful, angry even, at having been lied to about their pensions, creating a divide between government people.

In PR, an island 110 x 40 miles (180 x 65 km) with 3.5 million people, the Washington – wall street elite hope to set an example of lowering the minimum wage closer to the minimum in poorer TPP states, like $5 an hour or less. With the example made of paying only 11 cents on the dollar to retirees and a first ever example of lowering the minimum wage in PR, they hope, they can then expand on that to cheating people all over the USA out of pensions and wages, cutting government expenses and boosting wall street profits. If the Washington – wall street elite get their way by lowering the minimum wage in PR to a minimum wage ‘more competitive’ with China’s minimum wage of $2 an hour, then where’s next?

Puerto Ricans are awakening to proposals from the 3-headed Goliath, the Western Hemisphere’s troika – the government, wall street bankers & hedge fund vultures – that mean 11 cents on the dollar for pensions, lower wages, giving away assets (e.g. airports, seaports, roads, mines, utilities) to hedge funds, destroying the educational system and lethal health “care” cuts to life saving medicines and medical procedures. Which would result in Puerto Ricans who worked hard, like cops and teachers, getting poverty as a payback for decades of hard work, employees getting $5 an hour or less (instead of PR’s current average $9.42 an hour wage), destroying the quality of education for the children, deadly health care cuts that will kill (negligent manslaughter) thousands of Puerto Ricans each year and much higher costs for everything. Electricity bills, for example, are already an average of $436 a month in PR. How much higher will that go? Rolling water outages, the water getting shut off 2 days a week, are now in effect throughout PR. How many days a week can the water get shut off?

The largest government pension fund in PR ran out of money in 2012. The government of PR now has $20.3 billion in ‘unfunded liabilities’ to pay for that insolvency. The PR Teacher’s pension plan will go belly up later this decade, leaving the government of PR with an extra $10.5 billion in ‘unfunded liabilities’ to pay. PR’s annual budget was about $12 billion a year the past decade, about $9 billion a year from taxes and $3 billion a year from borrowing for routine government expenses like roads, police and teachers. PR’s $73 billion debt includes $25 billion borrowed to pay for past monthly pension payments and $25 billion borrowed to pay for past public health care expenses.

Costs continue to escalate as tax revenues continue to decline and fall. PR’s in an economic death spiral. Making the death spiral worse to Puerto Rico, a colony of the USA, is the Jones Act which makes it illegal for PR to ship to foreign countries or to receive shipments from foreign lands. Cargo must be shipped by more expensive US cargo boats and must stop in a US port first before going to foreign lands. This added shipping cost all but guarantees that products made in PR cannot be competitive with foreign made products, post IRS Section 936 and that Puerto Ricans pay higher prices. US cargo corporations, however, make more profit because of the Jones Act.

A ‘silent run’ on the banks has been in progress for 8 years. Money on deposit in banks in PR was $214 billion in 2007 and was $149 billion by March 2015. Puerto Ricans have, so far, pulled $65 billion out of Puerto Rican banks to protect themselves and to protect their money. A silent run is when people slowly take their money out of banks, over years, leading to banks slowly closing down one by one. Doral Bank in PR, for example, closed down in February 2015. Anecdotal evidence suggests people in PR are accelerating their bank withdrawals to protect themselves and to protect their money. A silent run turns into a bank run when everyone goes to the banks at once to withdraw all their money.

Secret government talks are lingering on with hedge fund vultures and wall street bankers, the 3-headed Goliath, that wants everything on the table including capital controls like limiting ATM withdrawals to $60 a day until the ATM machines run out of money. Closing down banks for a few weeks (a tactic used in Greece) and then there’s one of the scariest scare tactics used in Greek debt talks: “haircuts” whereby government would seize a cut of everyone’s bank accounts, like a third or half of your money in the bank, to pay down some of the government’s debt.

Time will tell whether PR’s current silent run will accelerate into a bank run as more people protect themselves and their money from the 3-headed Goliath of vultures, bankers and their own government in lingering negotiations on how to devise ways to make people pay back the money that the government borrowed. The Krueger Report, authored principally by Anne Krueger, 81, a ‘front woman’ for the hedge funds, calls for higher taxes on the poor and middle class, rationing health care which will lead to the negligent manslaughter of thousands of American citizens each year, firing 20,000 teachers, firing 15,000 cops, Detroit like 60-minute+ waits for a response to 911 calls, etc. The mood on Main Street is that Puerto Ricans are not going to be screwed over by this 3-headed Goliath monster. While higher taxes on Anne Krueger, healthcare rationing Krueger’s healthcare needs, putting Krueger’s great-grandchildren into Detroit or PR public schools, cutting off 89% of Ms. Krueger’s monthly pension payments and cutting off Ms. Krueger’s water 2 days a week are good ideas to save money, her Report, however, is full of bad ideas.

Krueger Report recommendations would lead to higher unemployment, less tax money for the government, more debt, worse education for the youth, lethal health care rationing, picking and choosing who gets to live and who gets negligently manslaughtered by neglecting vital healthcare and higher rates of crime. 40% of adults in PR are employed. 60% of adults in PR are unemployed. The situation will get worse as PR craters and tens of thousands of mostly younger Puerto Ricans flee each year to nearby swing state Florida as PR becomes Detroit with palm trees. PR’s current emigration rates are on a par with emigration rates from war torn failed states like Somalia and Syria.

As the USA craters with progressively bigger debt bombs bursting like Snowden CA, Detroit MI and Puerto Rico PR, it’s like each domino that falls is getting bigger and bigger as the debt collapses in the USA get bigger and bigger. Names are circulating of who’s next, for example, Yonkers NY, Atlantic City NJ, Kanakee County IL, Perry County KY, Chicago IL, Los Angeles CA; entire states like Illinois, Michigan, New Jersey, Connecticut, California, etc., which is yet another installment due in the USA debt bombs bursting story.

Coming soon.

More articles by:

William Edstrom graduated from Columbia University in 2003. He has worked as a scientist for ten years, has co-authored publications in scientific journals such as Nature and the Journal of Biological Chemistry, and co-authored Agents of Bioterrorism: Pathogens and Their Weaponization, a Life Sciences textbook (Columbia University Press, 2005). William is a member of the Educational Writers Association.

October 17, 2018
John Steppling
Before the Law
James McEnteer
Larry Summers Trips Out
Frank Stricker
Wages Rising? 
Muhammad Othman
What You Can Do About the Saudi Atrocities in Yemen
Binoy Kampmark
Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson
Karen J. Greenberg
Justice Derailed: From Gitmo to Kavanaugh
John Feffer
Why is the Radical Right Still Winning?
Dan Corjescu
Green Tsunami in Bavaria?
Rohullah Naderi
Why Afghan Girls Are Out of School?
George Ochenski
You Have to Give Respect to Get Any, Mr. Trump
Cesar Chelala
Is China Winning the War for Africa?
Mel Gurtov
Getting Away with Murder
W. T. Whitney
Colombian Lawyer Diego Martinez Needs Solidarity Now
Dean Baker
Nothing to Brag About: Scott Walker’s Economic Record in Wisconsin:
October 16, 2018
Gregory Elich
Diplomatic Deadlock: Can U.S.-North Korea Diplomacy Survive Maximum Pressure?
Rob Seimetz
Talking About Death While In Decadence
Kent Paterson
Fifty Years of Mexican October
Robert Fantina
Trump, Iran and Sanctions
Greg Macdougall
Indigenous Suicide in Canada
Kenneth Surin
On Reading the Diaries of Tony Benn, Britain’s Greatest Labour Politician
Andrew Bacevich
Unsolicited Advice for an Undeclared Presidential Candidate: a Letter to Elizabeth Warren
Thomas Knapp
Facebook Meddles in the 2018 Midterm Elections
Muhammad Othman
Khashoggi and Demetracopoulos
Gerry Brown
Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy
Christian Ingo Lenz Dunker – Peter Lehman
The Brazilian Presidential Elections and “The Rules of The Game”
Robert Fisk
What a Forgotten Shipwreck in the Irish Sea Can Tell Us About Brexit
Martin Billheimer
Here Cochise Everywhere
David Swanson
Humanitarian Bombs
Dean Baker
The Federal Reserve is Not a Church
October 15, 2018
Rob Urie
Climate Crisis is Upon Us
Conn Hallinan
Syria’s Chessboard
Patrick Cockburn
The Saudi Atrocities in Yemen are a Worse Story Than the Disappearance of Jamal Khashoggi
Sheldon Richman
Trump’s Middle East Delusions Persist
Justin T. McPhee
Uberrima Fides? Witness K, East Timor and the Economy of Espionage
Tom Gill
Spain’s Left Turn?
Jeff Cohen
Few Democrats Offer Alternatives to War-Weary Voters
Dean Baker
Corporate Debt Scares
Gary Leupp
The Khashoggi Affair and and the Anti-Iran Axis
Russell Mokhiber
Sarah Chayes Calls on West Virginians to Write In No More Manchins
Clark T. Scott
Acclimated Behaviorisms
Kary Love
Evolution of Religion
Colin Todhunter
From GM Potatoes to Glyphosate: Regulatory Delinquency and Toxic Agriculture
Binoy Kampmark
Evacuating Nauru: Médecins Sans Frontières and Australia’s Refugee Dilemma
Marvin Kitman
The Kitman Plan for Peace in the Middle East: Two Proposals
Weekend Edition
October 12, 2018
Friday - Sunday
Becky Grant
My History with Alexander Cockburn and The Financial Future of CounterPunch
FacebookTwitterGoogle+RedditEmail