Puerto Rico Death Spiral

"I've come to release this info. I'll be brief and let me just keep shit simple." Squaredance Eminem

In these days of the endless droning of wide-spread use of propaganda, it's rare to get the "truth" these days.  But last week, outgoing Puerto Rico governor Alejandro Garcia Padilla beseeched the Puerto Rico federal oversight board that:

“You will soon realize that any reduction in spending implies intolerable effects in aggregate demand, and will further throw Puerto Rico into a death spiral that will directly affect creditors’ recoveries across the board”

Puerto Rico End Game

For me, this prediction is simple, it is inevitable. As our economy continues to degrade, less is always less.  By removing spending from the Puerto Rico economy (whether from budget cuts, payroll reduction (public and private), and immigration) it will mean that any economic development that does happen will falter.

Just as in the parable of the sower of seeds,

“A farmer went out to sow his seed. As he was scattering the seed, some fell along the path, and the birds came and ate it up. Some fell on rocky places, where it did not have much soil. It sprang up quickly, because the soil was shallow. But when the sun came up, the plants were scorched, and they withered because they had no root. Other seed fell among thorns, which grew up and choked the plants. Still other seed fell on good soil, where it produced a crop—a hundred, sixty or thirty times what was sown. Whoever has ears, let them hear.”

... instead, for Puerto Rico, PROMESA is the farmer, his seeds are economic development, the aggressive anti-competitive actions of market leaders are the birds, the massive government payroll is the rocky places,  the low labor participation rates are the shallow soil, and the insanely anti-small business environment is the thorns.

I wish I knew what the good soil of the parable is for Puerto Rico.  What I do know is that we are already in the grip of an economic death spiral.  We have been since 2006.  The real question is when will the spiral reach the bottom?

What does the bottom of this economic collapse look like?  What other unexpected infrastructure failures are we going to see? Where will the economic growth come from? Will we be able to resurrect our lost manufacturing base?