Puerto Rico has been termed "America's Greece." The island defaulted on its debt for the first time ever. It paid only $628,000 of a $58 million debt payment that was due by Monday, CNN reports.
The overall outstanding debt of $70 billion is mostly owned by the ordinary population of 3.5 million through credit unions. Governor Alejandro Garcia Padilla said the government cannot pay all of its debt.
He stated the Puerto Rican economy is in a "death spiral." The governor appointed a team to set out a plan to resolve Puerto Rico’s crisis by the end of the summer.
Obama’s administration does not aim to bail out Puerto Rico. However, the island itself cannot declare bankruptcy, only its municipalities in contrast to the full-fledged 50 states of the US. The best hope for Puerto Rico is to change the law to give the island bankruptcy rights, but the bill is unlikely to pass in US Congress.
Importantly, the US public debt exceeds $18.3 trillion with GDP below $18 trillion. The debt is swelling a few thousand US dollars a second.
