When President Trump suggested that Puerto Rico's debts be cancelled, the value of Puerto Rico's benchmark bonds plummeted from 44 cents to 30.25 cents. Despite the price fluctuation, the feasibility of simply erasing out Puerto Rico's debts is questionable.
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Trump Speaks and a $3.8 Trillion Market Hears an Existential Threat
Trump’s budget director Mick Mulvaney on Wednesday appeared to walk back the president’s comments, and many market analysts dismissed Trump’s suggestion as unworkable. But even the suggestion that Puerto Rico might somehow leave creditors high and dry nonetheless injected new uncertainty into the long, fraught process of trying to put the island’s finances back in order. It also raised the specter of other distressed states, localities and territories (think Illinois, Hartford, Connecticut, and the U.S. Virgin Islands) following the path to paying zero.
