If you don’t live there, or vacation there, it’s easy to look at places like Iceland, Detroit and Stockton, Calif., and laugh a little.

Of course, places like that must have had foxes, or dumb chickens, guarding the henhouse.

The same with Puerto Rico. It’s easy to find people from Puerto Rico with highly critical things to say about how that commonwealth has run its economy, and its government programs. Honesty, efficiency and savvy are not words that come up often in conversations about public finance in Puerto Rico.

But another to look at this is that the most poorly run communities were planning on a certain level of investment earnings to bail them out. They thought, more or less, that the level of water in the investment salvation pool would be about 9 feet high. Instead, it’s turned out to be, say, 5 or 6 feet high. 

A few wackos look bad when the water falls below 9 feet high and stays there.

A lot of nice, regular folks, including insurance companies you do business with, look bad when it falls below 6 feet and stays there.

The world’s central bankers have gone out of their way to keep the water level below 6 feet since 2008 and kept it there.

See also: Bullard says it’s time for Fed to begin raising interest rates

Of course, you probably know that, but what I think is really interesting about Puerto Rico is that one of its big problems is defined benefit obligations, as in Detroit and Stockton.

And, because Puerto Rico is the equivalent of a state, not just a city, its problems also involve problems with Medicaid obligations.

In other words: If Puerto Rico defaults, insurers that are using bonds from Puerto Rico to back long-term care insurance (LTCI) policies or other long-term care (LTC) finance vehicles may have more trouble paying LTC-related benefits because Puerto Rico is having trouble with LTC costs.

Maybe that’s a sign of things to come. Maybe regional and national governments around the world will default on bonds partly because of problems with meeting LTC obligations.

The defaults could weaken insurers’ ability to make good on their claims.

Insurers’ difficulties could increase unemployment levels and leave some customers with unexpected gaps in their LTC financing arrangements. That could further increase governmental burdens and governmental defaults.

All because the legislators of the world delegated the job of propping up the economy to central bankers, rather than swallowing hard and setting up big new spending programs, or, conversely, saying, “Keynes, fooey,” and making tough decisions to raise taxes and cut benefits promises.

By deciding not to decide, the legislators pushed the central bankers to hollow out the world’s nest eggs. Now we will learn whether sucking the yolk out of the nest eggs will lead to little problems, or whether the resulting vicious feedback loops will lead to big problems.