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Pension Meltdown
Puerto Rico Takes a Page from Argentina's Playbook

We may have spoken too soon about Puerto Rico moving on the road to recovery. At the same time it was reforming its pension plans for teachers, the island territory was also borrowing money from its own public employee insurance fund to plug a hole in its budget. As a result, Reuters argues, Puerto Rico be following in Argentina’s footsteps, citing a news item from a 2009 which draws a parallel between Argentina’s behavior and Puerto Rico today:

Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.

It is a foretaste of what may happen across the world as governments discover that tax revenue [falls short], and discover that the bond markets are unwilling to plug the gap. The G7 states are already acquiring an unhealthy taste for the arbitrary seizure of private proper.

For those who haven’t been following the Kirchner saga, comparisons with Argentina are not a good thing, particularly when it comes to pensions and retirement funds. Puerto Rico’s borrowing may not be as bad as this, but given the rest of the news coming from the island lately, it doesn’t inspire confidence.

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  • bigfire

    Who can Puerto Rico declare war against? British Virgin Islands (if you’re taking the Argentina method) or Dominican Republic?

    • xbox361

      In the end, expect them to declare war and win an uncontested battle against American taxpayers.

  • mesquito

    I vaguely remember a press conference from about twenty years ago wherein Jesse Jackson pressed the government to seize 401Ks in the interest of Justice and Urban Investment.

  • TommyTwo

    “the island territory was also borrowing money from its own public employee insurance fund to plug a hole in its budget.”

    So why aren’t we hearing the union leaders screaming bloody murder over this wonderful “investment” or over the widespread underfunding of public employee pensions? It’s simple: why should they? By collaborating with this, they are helping governments keep spending high, thus avoiding potential layoffs or salary reductions. And what about their pensions? Why, they’re “guaranteed” regardless! If this cynical ploy backfires and pensions do indeed get affected, is it any wonder that the general population will be deplorably lacking in sympathy?

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