Peter Schiff: Puerto Rico Bailout Immoral; Bankruptcy a Better Solution (Video)
In a recent interview on CCTV America, Peter Schiff discussed the debt crisis in Puerto Rico and whether the US should bail out the struggling territory.
The Puerto Rico Infrastructure Financing Authority went into default earlier this month, fueling speculation that the US should help with a bailout. But Peter argues that is the wrong approach. He told the CCTV interviewer that the US is at least partially responsible for the crisis and should help by allowing Puerto Rico to go into bankruptcy, just like it would any US city saddled with debt. But he emphatically argued against a bailout:
The bailout wouldn’t help Puerto Rico. It would enrich all of the hedge fund speculators who bought up that Puerto Rican debt for pennies on the dollar. What’s the point of using taxpayer money and funneling it to hedge funds through Puerto Rico? All Puerto Rico needs to do is restructure… Why impose the losses on American taxpayers? Impose them on the people who were dumb enough to buy those bonds. Don’t allow them to use their political connections to rip off the American taxpayer.”
Highlights from the interview:
“The United States government in aiding Puerto Rico in borrowing all this money because we made all the debt that the Puerto Rican government issued triple tax free in all the US states, so we created tremendous demand for yield-seeking investors who really didn’t care about risk, or didn’t even know enough about it to ask the questions.”
“The Puerto Rican politicians – this was great for them because they could promise something for nothing to Puerto Rican voters…So they promised a lot more than their tax base could deliver. Creditors finally woke up, and the country is broke.”
“The irony is the US is actually more broke than Puerto Rico. It’s just that we have a printing press and they don’t.”
“There’s never a moral case for a bailout like that. It’s immoral. It’s basically theft. But I think what the US needs to recognize is that it’s partly responsible for the plight of Puerto Rico and actually do something to help, like allow Puerto Rico to go through a bankruptcy just like any city that is indebted in the United States over its head, so it can restructure its debts honestly through the legal system.”
“The United States could make it easier for Puerto Rico to dig itself out of this hole by sparing it from the minimum wage law that we imposed on Puerto Rico that’s much too high for the island. We can repeal the Jones Act that makes it extremely expensive to ship goods in and out of Puerto Rico. There are all sorts of ways we are undermining the Puerto Rican economy.”
“I don’t think we should force Puerto Rico to repay these debts. The debts are unpayable. Puerto Rican politicians should have never borrowed that money. But that’s the problem with democracy. Unfortunately, we made it so easy for the Puerto Rican government to borrow all that money, and that needs to end. We need to end all these moral hazards. One of them, of course, is bailouts.”
“I’d rather have a restructuring sooner than later so Puerto Rico’s economy can start growing.”
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