Bernie has his undies in a wad the because bondholders of Puerto Rican debt want to get paid (emphasis added):
Mr. Sanders said that what he termed “vulture funds” had been buying up Puerto Rico’s debt for as little as 30 cents on the dollar.
“Why should they get 100 percent of their investment when they are paying 30 to 70 percent for their bonds?” he said.
Mr. Weiss said that some debt securities were yielding 11 percent.
“Whoa!” Mr. Sanders exclaimed. “They are receiving 11 percent and children in Puerto Rico are going hungry. That, for me, is not an equation that works.”
Let’s put aside the fact that a lot of Puerto Rican kids are fat (the medical definition for obesity is, “a condition that is characterized by excessive accumulation and storage of fat in the body and that in an adult is typically indicated by a body mass index of 30 or greater”),
recent studies that show rates of childhood obesity on the island running anywhere from 24% to 30%. That compares to an average of 17% across the US, according to the Centers for Disease Control and Prevention.
Perhaps Bernie’s a believer in Fidel Castro’s 1985 call for all Latin American countries to repudiate debt, but Steven Hayward sees it as a sign of THE BOTTOMLESS ECONOMIC IGNORANCE OF BERNIE SANDERS,
Where to begin? “Why should they get 100 percent of their investment when they are paying 30 to 70 percent on their bonds?” Well, a fellow named Alexander Hamilton explained that once, after “speculators” had bought up much of the debt issued by the Continental Congress and U.S. government under the Articles of Confederation, often for pennies on the dollar. Hamilton pointed out that if the U.S. didn’t honor the debt, no one would ever lend money to the U.S. again. “Full faith and credit” isn’t worth much if lenders think you won’t honor your debts.
Sanders objects that some investors are “receiving 11 percent” while children are going hungry. Actually investors won’t receive anything if Puerto Rico defaults. More likely they’ll receive market rates of return if the debt is restructured, which makes Puerto Rico bonds a normal investment. But what about the widows and orphans and union pension funds that bought Puerto Rico bonds at full face value (and a lower coupon rate)? Does Mr. Sanders care about them? Or should they be screwed just to satisfy Bernie Sanders’s lust to punish Wall Street?
Of course, Fidel Castro’s 1985 call for all Latin American countries to repudiate debt and bottomless economic ignorance are not mutually exclusive, especially for those looking for good soundbites.
