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The case against govt borrowing

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If there was ever an argument against government borrowing to stimulate growth, it would have to be Puerto Rico, a US possession that is subject to many of the same laws as US states (but with only 3.5 million residents).

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It “suddenly” discovered this year that it has more than $70 billion of debt that it cannot pay off.
US President Barrack Obama a few days ago proposed a “radical” way of dealing with the debt (basically, allowing bankruptcy and pretending the debt never existed).
Beginning in 1973, Puerto Rico, through debt, did experience economic growth, but then it started borrowing more money to pay off older loans.
Ten years ago, Puerto Rico went into economic depression but it took “someone” ten years to figure out that its debt was non-payable.
Welcome to the new world of miraculous, debt-induced economic growth and radical fiscal solutions (which we used to call incompetence and irresponsibility, if not just plain theft).
Guy Baker

Published : October 31, 2015