PUERTO RICO (INTELLIHUB) — The Commonwealth of Puerto Rico, an American Territory, is set to default on a portion of their $70B debt Monday, when bondholders plan to lay claim to $22M in Credit Default Swaps and another $1.2B in July.
Now some are pointing out that the default will lead to the collapse of several big banks in the United States as the Commonwealth is not protected by U.S. bankruptcy laws and will receive no help from the IMF.
Moreover the Internal Revenue Service is based out of Puerto Rico and could also be affected as all of this ramps up and comes full circle.
Bear in mind that last October, US Financial laws changed so that there is now a provision in law which calls for banks to be “bailed-in.” That means folks who have stock in failed banks, or who have bonds from those failed banks, LOSE THEIR MONEY to resolve the failed bank! This is euphemistically called a “haircut” but for some investors, it’s a baldy! Some investors get NOTHING.
Watch financial markets very closely this week. If things go bad, they will go bad at lightning speed. Too late for many people to get out and save themselves.
Additionally it’s important to note that the current economic state in Puerto Rico is bad. Hundreds of business have already closed and things are tightening up at a rapid rate and there is a reported 80% decline in local business.
Meanwhile, back in the U.S. we are now seeing some similarities that mimic the market in the 2008 era when the financial crisis hit.
Shepard Ambellas is a journalist, filmmaker, film producer, radio talk show host and the founder and editor-in-chief of Intellihub News & Politics. Established in 2013, Intellihub.com is ranked in the upper 1% traffic tier on the World Wide Web. Read more from Shep’s World.