BLUE ZONE MELTDOWN: Puerto Rico’s Rolling Catastrophe:

Puerto Rico was already in default, and no one seems to have expected that it would make this payment in its entirety. But the official announcement underscores the fact that there is no end in sight for the island’s crisis. The appetite in Congress for a bailout or bankruptcy protection appears to be minimal, and it seems likely to stay that way for the near future unless and until Puerto Rico’s woes start to hit the mainland in a major way—a prospect that is not inconceivable, but which advocates of a no-strings-attached bailout have every incentive to exaggerate. So in the short term, the island will probably be forced to continue grinding it out on the backs of its own taxpayers.

In the medium term, as we have said before, there is a role for Washington in bringing Puerto Rico’s crisis under control. The guiding principle of U.S. government involvement should be “relief for reform“—that is, Puerto Rico should be eligible for meaningful assistance in servicing its debts if and only if it can make profound structural changes to the decrepit blue model governance system that landed it in this mess.

Well, once the ruling class can’t squeeze out any more graft, it becomes more receptive to change.