I've watched both events unfold and can't help but feel that these two things were timed to take our attention away from something but then I thought that it was just my tendency to look for a hidden agenda. Perhaps I was just being too jaded and needed to drink some more tea. Then I read a FB post of a former colleague who is decidedly not a conspiracy theorist or national security enthusiast. Even though she was truly happy for passage of gay marriage and banning of the Confederate battle flag, she felt like something bad is just about to happen. A vegetarian, music playing, gay-rights activist liberal yet she feels after all of this progress the shit is about to hit the fan? More than anything else, that got my really thinking.
China and Russia are never far from my mind these days but I just haven't seen anything new the would have warranted a media "double-tap" of banning a racist symbol and legislating gay-marriage within a week of one another. Then it started to come out just have far the Greek economy has plunged. Greeks starting make runs on ATMs forcing the banks to shut them down until Thursday.
Okay but Greece has seemingly been on the verge of collapsing before. Even if Greece fails, to most Americans this is would hardly seem to be of much concern. Greece's problems are the European Union's problems and the US can just help bail them out. Myopic and convoluted thinking though it maybe given the world's global economy. Most Americans won't register that a major European country is about to go bankrupt which in turn could send the whole European continent into a recession or even total collapse. Of course, that could never happen here…right?
Then this morning I came across an article in the New York Times, Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’. The commonwealth of Puerto Rico cannot pay its $72 billion in debts. Even though Puerto Rico is not a state, it uses the municipal bond market to fund its public works projects. We already know of Detroit's (and now Stockton, California) bankruptcy woes. Puerto Rico's bonds have a face value of 8 times Detroit's! Unlike the case of say Greece, Puerto Rico's debt is held largely by private investors on the mainland US. Your own portfolio may contain Puerto Rico municipal bonds without you even realizing it.
Now the story gets more dire. "Puerto Rico, as a commonwealth, does not have the option of bankruptcy. A default on its debts would most likely leave the island, its creditors and its residents in a legal and financial limbo that, like the debt crisis in Greece, could take years to sort out."--NYT
Of course the looming economic collapse in Puerto Rico did not happen over night. "Residents began leaving for the mainland in droves, and Puerto Rico’s credit was downgraded to junk, making borrowing extremely expensive." The debt is unsustainable and the only recourse seems to be a bond exchange for a lower rate. Obama and his administration have used a 'hands-off" approach to Puerto Rico but this seems to ignore the consequences to the US municipal bond market as individual investors look elsewhere for options. Much like Greece, we may be seeing our own economic collapse coming but Washington wants us to stand divided so the media focuses us on racism, gay rights, and gun control.
The threat of Russia and China, with assists from Iran and Syria, may not be enough to bring us to the brink of war. However, economic collapse with investors fleeing US markets, foreign investors dumping US bonds, and Americans running on US banks could be just the perfect storm needed to begin the next war.