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Silent Run in Puerto Rico

By       Message William Edstrom     Permalink
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From Protest in San Juan, Puerto Rico
Protest in San Juan, Puerto Rico
(Image by Solana)
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Silent Run in Puerto Rico, Yesterday's Potemkin Village

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 three 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 -- 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.

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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 abandon 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 1930s 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.

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The US government hoped in the 1990s 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 they 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 Free-Trade Agreements, World Trade Organization membership, tariff tax cuts, eliminating US government quotas 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 backwater, 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 three-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 5 days a week, are now in effect throughout PR. How many more days each 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.

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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 eight 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.

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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 (more...)

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