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http://pensionpulse.blogspot.com/2010/03/greek-style-financial-crisis-hitting-us.html
Thank you,
Leo Kolivakis
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I taught at a private school for 1 year after college(15 years ago). The tuition was about 6k...local schools got about 10k per pupil. The 500 student school had only about 5 employees taht didn't teach at least one class...the Headmaster taught a Greek and a Latin class on top of all his admnistrative duties...only people not teaching were one accountant and two janitors. Yes there was a board of directors, but they were all unpaid volunteers. I was a MIT grad teaching computer classes and some math team and baseball assistant coach...I wasn't "qualified" to teach at public school. The PHD math teacher wasn't "qualified" to teach in public school either.
I think I see an end-game.
step 1: Convince as many foreigners to buy US debt
step 2: Use the debt purchase to "prop up asset values"
step 3: Ensure that "those in the know" bail out of the $ and $ denominated assets (e.g. Gold)
step 4: Crash the $ and issue new currency with a 10,000/1 ratio, and peg the New % to Gold/Silver, Oil, and Agriculture, possibly Carbon?
step 5: say boo-hoo to all those poor slobs who bought your debt
step 6: say boo-hoo to all the $ denominated pension plans
step7: restart the ponzi-nomics "growth machine"
by analogy the city of San Diego, (America's finest city - says so on the billboard) has a serious city pension fund problem. it all started during the housing bubble, while CPI was tame, the cost of housing in SD county nearly doubled overnight. (You don't want cops living in cardboard boxes, do you?) so pension contributions were raised to keep pace, even if revenues weren't there. (San Diego is pretty much a tax free zone)
the city couldn't make the payments. members of the board were hauled into court, but they had followed the law as it was written. still the city found money for its downtown redevelopement agency, including a bond for new baseball stadium, (the football people have been pushing hard ever since, and may be close) the city is broke and the city fathers (and mothers) hand out corporate welfare.
meanwhile the county pension fund isn't in much better shape. the tax system in California is basically sales taxes piggybacking more sales taxes. The state funded their bond rollover several years ago with a special sales tax (but read the fine print, if the money ain't there they get into the general fund). if local government wants its own redevelopment, they add a sales tax on top of that, in my city sales tax is 10%, which funds a bond, which built a new restaurant row, and new car dealerships. (now when local governments start making business decisions, you can bet their timing is all wrong, that they look at the last best idea, and they all court the most fashionable ideas, right off CNBC)
our mayor was fired as city manager because his finance manager lost 7 million dollars of the cities money in one day, playing the stock market with operating funds from the city. he also failed to require a bond for a business which failed in the construction phase. no matter the people elected him mayor the next year. once in office he pushed through huge new city hall, with extra office space they can rent out to help pay the construction costs. oooops.
maybe all this sounds familar, because its being repeated ad nauseum, at all levels of government. and of course its going to end badly, what makes a crisis (finally) is really a matter of politics, will Washington save California? (sure once Arnie is out, unless of course Jerry gets in and makes a lot noise). would the EU save Greece if Ari Onassis was still around? probably. does Iceland have the resolve to say no to the UK?
does AIPAC have the stuff to keep those US taxpayer dollars coming into their military budget? just threaten Iran, baby, the squeaky wheel gets the grease. or is that Greece?
San Diego, I remember when they got whacked by Amaranth. I would get rid of all these rinky dinky city and municipal pension funds, roll the money up to a few large public plans and set governance standards that are best in the world, making sure pensions focus on DOWNSIDE risk, not just shooting the lights out.
Had almost forgotten that scandal, (too many to remember). While city government promoted corporate welfare, the county supervisors promoted urban sprawl, with unfunded mandates to improve infrastructure, schools, fire and police. The general fund was subsidizing rural developement, including a Starbucks on every street corner in the new ex-urbia. (some of these places were over an hours drive from downtown SD, where the builders could make a fortune selling a worthless bit of sand) However lately the voters have gotten wise to this, and they rejected the Merriam Hills project. The perception exists, that these projects, whether they are ball stadiums, or housing projects, bring in more money (tax revenues) than they cost. Corporate America has been getting a free ride for years, (with local government raising taxes to pad their profits, - or in the case of San Diego, not raising taxes, and going broke - but some cracks are starting so show. The financial problems in California, and probably Greece, is not really a failure of government to do the work of government, that is a myth perpetrated by the media, and their corporate sponsors. The problem is government subsidizing corporate America, which in turn gave American workers the shaft.
Work all your life, contribute to pensions, let the financial oligarchs profit off your pension money, and when it comes time to collect, presto...the government passes laws to screw you over. Wonderful, just wonderful. They shouldn't call it the pension promise, more like pension plunder. We promise to screw you over real good while you fall under the illusion that your pension money will be there when it comes time to collect. If you're expecting a cushy government pension, good luck.
The street already perceives that the states will be bailed out. Otherwise nobody would be investing in at least a third of our States. Our Nation no longer allows a large entity to fail. Where have you been for the last 2 years Leo? The only failures have been the small fish.
As far as pensions go.....Our government will gain control over these instruments within our lifetime after the industry goes through another turbulent period where they loose billions more. Then our ggovernment will sell the idea that the private sector is not capable of fulfilling the pension promises they have made and they will confiscate all the lute!
They want ALL the lutes...
At some point the can that's been kicked down the road has to stop rolling, usually because a bus flattens it.
Certainly the Fed has to *attempt* to reflate.
There cannot ever be an up-or-down vote on bailing out any state because no one cares what happens to another state's employees or retirees. The reaction would be pure schadenfreude. Hell, we only care marginally more what happens to our *own* state's government. It's not like public employees can take to the streets in mass protest. Decades of the political silos we've built have made government employees the most reviled of nearly all workers. Probably all they'd get out of it is a beating.
Further, if one state receives a bailout, all states will. Otherwise, you'd create a favored class of municipal debt. There would be capital flight. If individual state taxes were raised prohibitively, it would encourage diaspora.
What would probably happen is there would be a federal guarantee on municipal debt... cheapest thing they can do.
Check out Ohio, the "additional liability" itself appears to be over double what the state reported... Represent!
The public sector is a very different employer. Look at New York City, the public school system has 5,000 central administrative staff, the catholic school system (with 1/3 as many students) has 23 people in its central administration. I point this out because we can't possibly expect the public sector to solve any problem.
Pension, bank and insurance company solvency are the reason why the markets can't be allowed to decline - the government will do whatever it has to to support equities. Imagine all these poorly administered plans if equities declined 30%.
I fully agree with this analysis, but where will this end? The pension system always was a Ponzi scheme, and is not economically viable on a long term basis.
But, if we take a step back, all this effort to maintain the illusion of solvency comes though more sovereign debt, a weakening of the Dollar and manipulation of inflation data, so the net result will be no different, apart from the integrity of the nations finances will be far more at risk.
it's like having sex without a condom. It's fun when you're ad it, but FUCKED if you have to pull back and hold it.
Same with debt, when you spend it, you have the best of times. But it sucks to downpay it for the next decades or so.
> "it's like having sex without a condom. It's fun when you're ad it, but FUCKED if you have to pull back and hold it."
Wait... what? I think the analogy you were looking for has something to do with AIDS. Yours makes no sense.
states will all be bailed out. there may be a never-ending supply of dollars, but not a never-ending supply of goods to buy with them.
blue states get bailed out first...red states twist in the wind until they show allegiance to the proper authority.
+1
"allegiance" requiring certain concessions, like removal of right to work laws.
This story, combined with the Pew Research on pensions from a few weeks ago, paints such a beautiful picture.
come on Leo you're not reading the news from the propaganda network, tax revenues in CA took a bump, we're out of the woods, we're out of the dark, step into the light.
Debt is a drug
March 29, 2010 5:00am in Capitalism, Crisis, Economics, Eurozone, Monetary policy | Comment
http://blogs.ft.com/economistsforum/...vernment-debt/
Petros Christodoulou, head of the Greek public debt management agency, said: "We've completed all our funding requirements for April with this transaction. http://www.ft.com/cms/s/0/37c31050-3...44feabdc0.html
The sector fell as Standard & Poor's cut Iceland's credit rating and after Greece failed to sell half of the government bonds it offered.http://www.marketwatch.com/story/us-...uzz-2010-03-30
Debt is not a drug; rather, it is true wealth. The measure of a societies true productive capacity to expand itself exponentially until it collapses on itself in a self immolation of too much of a good thing.
(sarcasm off)
LOL
Looking at the graph, "Additional liability based on market value" has me worried.
Well, not really.
GOLD BITCHES!!!