A few months ago, the U.S. government assumed control of Puerto Rico. As the AP story by Danica Coto reported:
“A federal control board on Friday took over Puerto Rico’s finances and several government agencies for the first time in the U.S. territory’s history in a bid to haul the island out of an acute economic crisis.
It ordered Gov. Alejandro Garcia Padilla to produce a fiscal plan in two weeks and submit weekly and monthly revenue reports that detail how the government is adhering to its budget.
Members also voted on which Puerto Rico government agencies would come under the board’s oversight. They include the island’s central government, its largest public university, its heavily indebted utility companies, a Government Development Bank that is running out of cash and a public pension system underfunded by more than $40 billion.
The board was approved by Congress in June and is charged in part with helping restructure a portion of a nearly $70 billion public debt that Garcia has said is unpayable. Carrion is one of four Republicans on the board, along with three Democrats. Also on the board is a representative of Puerto Rico’s governor who is barred from voting.”
Notice the similarity between the U.S. takeover of the Puerto Rican government, and the European takeover of the Greek government. To be sure, in both cases it was the profligacy of the smaller entity that got it into trouble, but in the end the allure of “cheap money” from the bigger governments was a seductive pill that they should have rejected.
On an individual level, we would urge business owners not to fall into the same trap vis-à-vis your local commercial bank. These people are your best friend when the economy is humming along, but when a crash occurs they will seize your assets and shut you down. Achieve financial independence by “becoming your own banker” as Nelson Nash teaches.
Julie Ann Hepburn, National Private Client Group – Lara-Murphy Report
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