Dean Baker
Truthout, November 6, 2017

Jacob Wilson
L'Antiplomatico, 3 novembre, 2017

Mark WeisbrotGlobedia, 30 de octubre, 2017

November 3, 2017

November 3, 2017

November 3, 2017 (Jobs Byte)

Dean Baker
HuffPost, November 2, 2017

It is common for economists to assert that the trade deficit is equal to the gap between national savings and national investment. If the United States invests more than it saves (combining private savings and government savings) then it is running a trade deficit. This is true by definition.

Intro Econ fans may remember that we have the basic accounting identity saying that output is equal to income:

C+I+G+(X-M)=Y

...where C is consumption,

...I is investment,

...G is government spending,

...X-M is net exports (exports minus imports),

and Y is income.

We also can say that Y=S+C+T,

...where S is savings,

...C is consumption,

...and T is taxes.

The basic story is that the government taxes away some of our income and the rest is either saved or consumed (saved means it is not consumed).

Last month, a joint investigation by In These Times and the Puerto Rico-based Centro de Periodismo Investigativo revealed the top 10 holders of Puerto Rico’s $74.8 billion debt. The authors write:

The popular narrative of Puerto Rico’s debt holders is that they are “small” individual bondholders—rookie investors who trusted their savings to financial firms. But our investigation reveals that some of the most aggressive players demanding debt repayment in Puerto Rico’s bankruptcy court are so-called “vulture firms.” These hedge funds specialize in high-risk “troubled assets” near default or bankruptcy and cater to millionaire and billionaire investors.

While these bondholders are tied up in court with Puerto Rico and the congressionally mandated Oversight Board, the situation on the ground remains grim after the devastation caused by Hurricanes Irma and Maria. Storm-related damages are estimated to be as high as $95 billion.

If Puerto Rico was unable to pay its debt before the storms, it’s virtually impossible now. But that hasn’t stopped at least one vulture, GoldenTree Asset Management, from doubling down on its Puerto Rico bet.

Number five on the In These Times/Centro de Periodismo Investigativo list, GoldenTree reportedly held $587,253,141 worth of Puerto Rican COFINA bonds (bonds backed by income from Puerto Rico’s sales tax). That figure was based on a court filing from mid-August. On October 26, however, bondholders were required to again disclose their financial interests. That filing showed GoldenTree holding assets valued at $852,578,549, meaning that in the last two months, GoldenTree has acquired an additional $250 million in Puerto Rican bonds.

This is classic vulture behavior ? and exactly why many are now arguing for urgent and significant debt relief for the struggling island.

It’s impossible to know exactly when or at what cost GoldenTree acquired those additional bonds ? a spokesperson for GoldenTree declined to answer questions on the timing or cost of the purchases. But even before the hurricanes, COFINA bonds were trading at significantly less than face value. After Hurricane Maria, with Puerto Rico’s inability to pay becoming more obvious, prices have plummeted even further. Given that, and based on where some COFINA bonds are currently trading, it appears unlikely GoldenTree would have paid more than 20 cents on the dollar. At that price, if GoldenTree were repaid in full just on these recent acquisitions it would stand to make a tidy 400 percent profit.

November 2017, David Rosnick and Dean Baker