Here are some more bracing statistics, via Randall Forsyth at Barron’s, about just how crazy Puerto Rico’s borrowing has been. The island’s tax-free and relatively high yields have resulted in its debt comprising a wildly disproportionate share of the long-term municipal market: Puerto Rico bonds account for 15% of all outstanding U.S. tax-exempt bonds with maturities of 30 years or more, and they account for 30% of all maturities of 40 years or more. Yet Puerto Rico only accounts for about 1.1% of the U.S. population. The U.S. as a whole has about 318 million people; Puerto Rico has fewer than 3.5 million.
It’s worth mentioning that the responsibility for this debt binge doesn’t lie exclusively with the profligate borrowers on the island and the foolish lenders on the mainland. Universally low yields and general mis-pricing of risk are the deliberate consequence of the Federal Reserve’s easy money policy.