Debt… Greece and Puerto Rico

Economics, History, Politics

How many Puerto Ricos does it take to equal Greece’s debt? 5

As of today two different political leaders are in the public square shouting for help and clout in the midst of economic bankruptcy.

Greece is going to default on loans Wednesday because the payments are due but was given a five day reprieve so they could have a national vote, which seems ridiculous. Either the Leftist government is the government or just an empty puppet of popularism. Now, if they say ‘No,’ then they are out of the Eurozone. Both sides of the coin seem bias but here is a great read on the NO side. Considering it owes roughly $400bn to the ECB, European Banks, and IMF, this is going to hurt no matter how it turns out.   If the vote goes the way of a default, a Grexit would hurt the EU and multiple national economies. Daily Mail estimates on the British outcome are grim. Sadly, the more I read about this the more it seems like 2007 all over again.  At the same time the lenders put the money out there and took the risks. Of course to add in a little bit economic spice in the sense of Russia and its economic sanctions, Greece could withdraw and run to Russians for help. The Russian Finance Minister hinted as much in January. Of course there is no evidence that Russia would do such a thing, or is there. However, I can’t image that they somehow still wouldn’t want Greece as the Balkan satellite they never had, and of course there is always China.

Puerto Rico on the other hand is only $75bn in debt. Really! Of course sitting on the fence about becoming a state is now starting to hurt them in the bailout issue. Their special status limits access to US bonds and also requires Congressional intervention approval. Even the White House has said no to a bailout. The shocking honesty of the Governor Padilla is what strikes me as being genuine and also disheartening. For all intents and purposes he has “tried” to make some economic changes but these have been slow and essentially ineffective thus far. Additionally an exodus of young talent to the mainland has drastically damaged viable labor pools and possible entrepreneurial investments. His coordinated trade polices with Colombia are very interesting and as Cuba begins to fold back into a psuedo-American sphere, one can only wonder what PR can do.


>BO tells Chrysler they are just screwed…


>For years Chrysler has been the low man of the Detroit three, soon it will just be the Detroit two. I haven’t been a fan of Chrysler, but I must admit that I did enjoy my time in a Dodge Avenger two weeks ago. A friend of mine and I were chosen to present at a teaching conference in Kalamazoo, MI. To my surprise I received an Avenger for my rental and enjoyed all 1000 miles of the weekend. Of course why not drive: $400  per tix plane ride($850total after tax), $250 for rental car and gas. Duh! 

But now that the domestic car market is in a pseudo panic, I wont be buying American for awhile. Think about it this way, all the 2010 that are being sold were made by workers who don’t know if or when they will be laid off. Ask yourself this, Do you do your best work when you think you are goin to be fired?

W.H.: Chrysler small enough to fail – Eamon Javers –

It turns out that Chrysler might be just small enough to fail.

In the end, the Obama administration decided to back General Motors — at least for 60 days — but to effectively wash its hands of the much-smaller Chrysler after only 30 days. Barring a last-minute rescue by Italian automaker Fiat, U.S. taxpayers won’t put up another penny to back the company.

For all the times President Barack Obama’s been told he must prop up companies that are “too big to fail” — think Citigroup and AIG — he’s finally found one that he’s decided he can let go, if he has to.

White House sources said Chrysler isn’t viable as a stand-alone company, and without Fiat or more tax dollars, might go into some kind of “structured” bankruptcy. But auto industry analysts say a bankrupt car company isn’t much of a company at all — simply because shoppers don’t want to buy cars from a bankrupt company.

It’s not a step Obama would take lightly, for sure. But politically, it seems a step he’s seriously contemplating in the face of “bailout fatigue” in the heartland — but also Chrysler’s own specific situation.

The ailing automaker, home to such storied American brands as Dodge and Jeep, just isn’t “systemically important” enough — in the new vernacular of bailout-era Washington — to warrant extraordinary measures to save, the administration declared. The hard numbers are these: Chrysler, in 2008 employed 58,000 people. But General Motors employed many more: 252,000.

“They are, of course, much smaller,” explained a senior administration official Sunday night.
See also

* Obama to shake-up GM, Chrysler
* Budget, Britney dim Cantor’s star
* Obama gets personal

If Chrysler should fade, Obama also could argue that the company brought it on itself.

White House sources bashed Chrysler’s plan for recovery, saying that it contained overly optimistic and flat-out unrealistic economic assumptions.

Not only that, these sources said in no uncertain terms, its cars aren’t very good either.

In a conference call with reporters, a senior administration official cited several awards recently presented to General Motors cars, but could think of no industry recognition for Chrysler vehicles. “Chrysler has no cars that are recommended by Consumer Reports,” the official said.

Still, such a move could cause massive pain in Detroit and the Rust Belt states where Obama succeeded in 2008 — hitting hard at those blue-collar families he struggled to win over in the first place. He’s worried enough about the economic displacement to appoint a recovery director for that region alone.

And Obama was careful to give General Motors — a far more iconic American company anyway — a clear escape hatch to survivability in his plans announced Sunday night.

In fact, it’s telling that Obama is not even bothering to fire Chrysler CEO Robert Nardelli, who has been at the company since 2007. That could be a sign that no one at the White House thinks Chrysler will be around long enough for it to matter. General Motors CEO Rick Wagoner, by contrast, was asked to step down, and he will be replaced by the company’s president, Frederick Henderson. The administration official said Wagoner’s departure was orchestrated to give General Motors a “start with a clean sheet of paper.” But Chrysler’s not getting the same chance.

One other factor that likely weighed on the Chrysler decision — though no administration officials said so explicitly — is that Chrysler is owned by the secretive private equity firm Cerberus Capital Management. That firm, which is headed by former Bush administration Treasury Secretary John Snow, is presumably sitting on billions of dollars in cash, yet has declined in recent months to provide additional financing to its own portfolio company. That means either that Cerberus is much poorer than most investors assume, or that it has concluded on its own that Chrysler is a lost cause.

If the big money guys in New York weren’t going to put money into Chrysler — when they own the company — it would be an enormously difficult political sale to convince the American taxpayers that Chrysler was a good investment. Obama, it seems, decided that was a fight he didn’t want to take on at all.

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