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Submitted by Leo Kolivakis, publisher of Pension Pulse.
***To all Zero Hedge readers, please go straight to my blog to read this comment:
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Thank you, I am done screwing around with Wordpress!!
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Not to be technical, but black holes don't explode, they pull everything down across their event horizon crushed to a point of zero volume and infinite density. Just the astrophysicist in me.
People, people… it’s Oscar night, stop THINKING about this stuff when the more important issue what movies stars are wearing is upon us. This little pension thingy will go away, don’t worry about it.
Funny but I read somewhere , way back when, where I thought, not sure about this... that under some crappy accounting law that a lot of publicly traded firms somehow took the pension money and put it on their books as a credit and not a liability , which showed up as growth somehow , it was before the "crisis" that pretend and extend was already going on . The article if I remember right , was worried about all of the boomers retiring and taking that pension money away from the bottom line causing a slow market crash.
Geez, can anyone spell obvious. Take the pension fund situation in the USA, the state pension funds are heavily managed and controlled by the private equity firms (to the tune, as of 2007 or thereabouts, to $111 billion [according to the PE firms' own stats]).
Pension funds invest in leveraged buyouts and hedge funds, which in turn are heavily leveraged and structured upon CDOs, CLOs, CFOs, with an infinite amount of CDSs thrown in.
Big Bang, anyone?
Maybe some shock and awe.
"Luckily for civil servants, any shortfall in the amount needed to provide them with a guaranteed amount in their pension pots has to be made up with public money."
Dream on. "Guaranteed?" How? It's an individually enforceable right? or it's something written in some legislation? Well, legislation can be changed.
The same is true for American pensioners. Among other things, did Americans pay any tax on their accrued pension rights as those rights accrued? No. That's why they don't have any control over the funds--they paid no taxes on them.
"Pensions" have simply been another lie when things are good. They're welfare--NO ONE has an individually enforceable right to a pension, for the simple reason that no one has any individually enforceable right to maintenance.
We've been trying to get it--on the basis that maintenance, like housing, is an important fact, that is, an unchanging fact of huma experience.
But as long as maintenance is regarded as within the power of the political system, there is NO security in ANY form of income.
As I say, just look at what Emanuel did to the GM bondholders. They will do the same thing to all bondholders, and all beneficiaries of any form of entitlement.
The problem is not that the economy did not generate growth. The problem is that the economy did not generate RIGHTS.
Generating rights is the fact-finding process of determining which facts are unchanging facts of human experience, facts which are robust and resilient in the face of attempts on them.
We've learned about a few: protected speech, exercises of religion, racial and gender legal equality. We've found these to be FACTS, not ideals, not goals (and for an example of how this process of fact finding goes, just read West Virginia v. Barnette).
And we've learned about a few which we didn't think were important facts. For example, for decades New Jersey read its Constitutional right to education as something--whether fact or goal--which was within the ambit of the political system.
The Abbott cases changed that: they found that education was indeed an important fact. Now there is MUCH more individually enforceable control over education.
I invite you to look at that process at the Abbott cases website: www.edlawcenter.org.
Now substitute "maintenance" for education in those cases, and there you have the future of "pensions."
In short, look at a "pension" as part of the overall fact of "maintenance." Because, baby, that's how Uncle Sam's looking at it right now, and he's saying, "The sheeple are behind the curve--let's loot them."
how come they (bush and obama administrations) protected tbtf bondholders at the expense of taxpayers when theoretical capitalism and moral hazard control (and your post) would have indicated the opposite?
OK.
Where's the real Leo and what have you done with him?
I see no problem. We can just do what the western corporatocracy always does when faced with margin pressures - outsource the pensioners to Chindia.
As long as they live in the rural areas, a few dollars a day should let them live like royalty.
but leo .. as per yesterday . april is new jobs month .. the beginning. these jobs will produce input for pensions ,
leo motto,, hair today gone tomorrow
burma shave
The real crisis will come when the private sector is loaded up with taxes to pay for the gold-plated government pensions of their neighbors.
It is going to be difficult to stomach government-pensioned employees living footloose and fancy free while the rest of society has to pay for their party.
This several decade old mess starts with the something-for-nothing crowd. Does anyone remember when they came to realize there is no Santa Claus? That everyone around you had been lying to you ?
THERE IS NO SANTA CLAUS !
Without real growth in GNP, all we have seen is ASSET INFLATION financed by DEBT INFLATION. The ILLUSION of wealth.
There is a pension crisis alright, but the real crisis is about to come when the people that are expected to pay for these monstrous shortfalls, are compelled by governments to pay for their government employees pension scam(s).
The foundation of all nations are crumbling to a greater or lesser extent and our politicians and financial maestros are fiddling the same tired old tune.
Leo, just think what the numbers would look like if the US systems were still required to use the government 30 year as the benchmark rather than the fairly recent switch to corporates? Makes me wonder if these will be rotated once more once the long bond goes beyond corporates in an effort to assist with smoothing.... Thanks for the interesting read. You have been a tremendous help in assisting me with keeping up with a shared housing associate who is a full member of the AAA.
i'll drink to that!
Seriously having lived in a small town of 1,000 folks with no growth since 1990 all our HS grads had to find jobs elsewhere.
No growth is death to communities also unless we change the way we live.
Certainly lower expectations and a different vision of life is needed. Until now many of us have been THING accumulators.
We still toss things in the garbage that other folks can and would use.
And we still treat the planet like garbage and each other as well.
Oh i see a value change coming, and its huge.
BTW I recall a client where the wife had me remodel the kitchen and the husband repeatedly muttered "I liked it the way it was"
Funny cause his name was "newhouse" but he hated anything to change. As much as we scream about wanting change, many are made uncomfortable by it.
Dude, slow down, I'm getting whiplash. One day it is green shoots and recovery with you, the next it is reality bites. I am assuming that you have finally realized that obligations will hamper any real organic recovery, and extend and pretend will spread from bank balance sheets to Government obligations. I feel covert and overt QE will continue and pain will be deferred until the ultimate reckoning. The people will get what they ask for, good and hard.
Never mind socialismm vs capitalism, what we are heading towards is global kleptocracy with a dose of feudalism. And yeah, you and I are the serfs/peasants.
There is no way that government money or healthcare will be around in 15 years time. Less jam now, if you want any jam later. Its time to start spending smart and saving (gold/silver/commodities)
For those in cities, consider whether you need two cars or even one cars, check out car sharing services like ZipCar which can save about $2,000 a year.
If you need medical care, consider India, China or Mexico where its much cheaper (since you can't go to Cuba).
Stop the fuckers extorting money from you that you don't need to pay. Take your money away from the TBTF (use Canadian banks if you can).
At least someone in Citigroup agrees with you, they call it plutonomy:
http://www.scribd.com/doc/6674234/Citigroup-Oct-16-2005-Plutonomy-Report...
The baby boomers of Amerika are just about to start retiring on mass, the ones that built most of modern Amerika.
Here in the UK, the start of our baby boomers is still 10 -15 years away. I'm 50, and I don't see our current money system still functioning in that time.
"Nothing to see here... move along."
Leo.. keep exposing these pension issue because they along with heath care are the main drivers of our societal destruction. For the past 15-years we've committed a couple of huge errors. We allowed secure public sector workers to value themselves more highly that those "at risk" in private sector employment. Probably our greatest sin is stupidity of thinking that jobs that simply push paper from one person to another create long term wealth. I type some words - you type some words - the next guy types some words.. That's entertainment as opposed to the farmer that plants and harvests a crop or the person that digs up the iron ore and turns it into a scalpel that saves your life. In a recent Leo post he mentioned an increase in employment in law, finance and accounting - these are simple paper pushing jobs that steal from instead of adding to the wealth of the nation.
Pension, 401k, etc.
IMHO ANYTHING you can cash out on RIGHT NOW just do it and take control of by having 'cash in hand' is the way to go. Far too much counterparty risk with many factors from the US Gov seeking to appropriate your 401k to...
Virtually everyone i know is right now cashing in and taking personal control of their money. Just remember to AVOID money markets folks, the recent law passed means they can lock you out of getting your money.
And NEVER, ever under ANY circumstance have over 100k in a bank (yes i know $250k is FDIC). If it was me, banks only have funds to 'keep the lights on;' for a few months. Beware banks and find alternatives like gold or other physical holdings you can immediately get your hands on and that are very easily exchanged for local currency or goods/services.
For those who actually feel that their pension is safe, obviously you want to wake up and see what is really happening.
Physical gold and silver are the primary way to go as far as security of money and preservation of capital. Anybody who doesn't know this or who is scoffing at this is going to learn the hard way.
I was responding to Market Truth's insanity as far as gold being realistically exchangeable to live on.
As far as what you are talking about swamp, you're going to learn the hard way that, if it gets to the point of Armageddon all of you are fantasizing, gold and silver can and will be confiscated. The supposed "security" is all in your mind. If it makes you sleep better at night in the meantime, well do what works but really, as far as using precious metals as any form of currency substitute...
Forgetaboutit.
". . . find alternatives like gold or other physical holdings you can immediately get your hands on and that are very easily exchanged for local currency or goods/services."
"Very easily exchanged for local currency or good/services."
LOL! Dude, this isn't the 19th century or earlier. You live in a fantasy.
What are you going to do, take a bar of gold to the local Domino's for a pizza or Stop 'N Shop for a quart of milk?
By the way, what's your "local currency"? Toys R Us bucks?
A few comments:
1.) "...take control of by having 'cash in hand' is the way to go."
I would agree with you, at least in the short-term. I think not enough people are considering this as a VALID option, but see point 3 below.
2.) "...everyone i know is right now cashing in and taking personal control of their money."
Then why is the market going up? (if many people are supposedly selling)
3.) "Just remember to AVOID money markets..."
The question becomes: Where to park the cash? (physical cash bills, gold, T-bills, etc.?) And, the one problem is that by being out of the market during a scenario of hyper-inflation then holding cash could be a bad idea (because the stock market could also 'inflate' and if you wouldn't have sold, then you may have been saved by an also-inflating market.)
I dont know how to do a blue link.
But i did find an interesting verbal report on China that should make leo wet his pants.
Its found on utube Davincij15 a silver buff.
Like i thought , the romance with cars and things has begun. And its starting the same chain of events we had in the states during the 50s. It s worth a listen.
Leo, is this really a bad thing? Since when is truth, honesty and accuracy in actuarial work evil?
Living standards have been built on a cream puff foundation for decades. They've depended on growth rates of 5, 8 or 9%+, rates we'll not see again. And those rates have never reflected actual growth in productive capacity and in societal WEALTH. One only need look at REAL, not nominal, wage growth and the price of gold. It's almost as if all growth in the entire western world economy from about 1984-85 onwards was a bubble, a bubble of statistics, borrowed money and ever-rolled-over debt. But no real, owned outright and fully paid for GROWTH.
If these pension behemoths sink, it will only be just. Living standards have to be reduced to a point where real, debt-free gains in wealth begin to occur and where western-made products become internationally competitive again.
These looming insolvencies (or, more likely, desperate tax grabs) are one step on that path.
well technically speaking , then, what are we really talking about here? a change of the seasons if you will? a change of the times? a change of the way of life for many amerikans? yes , all of this and more. could this lead to hunger and homelessness? yes , yes it could. right here in the land of the free and the home of the brave. to be perfectly honest, they don't give one good damn about older people. for all intents and purposes according to their world view, they want to kill off the old people. then the retirement problem is solved. you do of course understand why there is such a major push for "health care' legislation. they want to kill off the old people. first you steal their money, then you kill them with government "health care". the sheep will march down and do whatever it is they are told because most of them trust in the government and trust in the system. you tell them things that are to come and they laugh in your face. but one day soon, there will be more laughing and there will be no time for "I told you so" comments. such is the breakdown in our society that is coming. to he who has ears, hear me. prepare yourselves.
Such a large percentage of everything we're looking at today has been borrowed from the future, through outright debt, fiat expansion, etc. We must start over with honest money, something the existence of a central bank prohibits.
Growth is overrated anyway. Everything that has a growth rate above 0% is not sustainable midterm given the limited resources we have. Growth will take mankind over the cliff under any circumstances, it's just a question of how fast. The more growth the faster.
Growth based solely on resource factors is not sustainable in the long run, but growth based on efficiency and technological innovation most certainly is.
Agreed. Conservation should be on everyone's minds. Touch the earth lightly. If we can shed this ridiculous short term growth strategy, maintain the peace until the atypical demographic bulge passes on, the environmental stresses should abate as the economy and population naturally downsizes, thus improving everyone's lifestyle. The economy may not grow but so what. I'm trying to be positive here.
The Hadza and Jared Diamond would likely agree.
I concur. Misallocations must be eliminated. And I agree that the desperate tax grabs are an expected step, even as the wrongheaded and reactionary measures that they are. All the statistical hoodwinkery and ever-rolled debts and stimulus and bailouts and $POLICY_MEASURES serve to accomplish is to prevent the price discovery so necessary for an actual recovery of both honest living standards and marketable constructive enterprise.
I completely agree, although I would place the bubble's beginning back in 1973 or so.
Maybe even earlier...maybe 1971, as many commentators seem to say. You know, gold window closing & end of Bretton Woods. I just remember that most things were going well, my dad could leave my mom at home with the kids, the coinage was silver & our rent was $120/mo., quite affordable back in 1966-69...
I'd go with earlier. '71 was when we got caught bluffing and the gold window closed as a result. We'd been lying for a few years prior to that about our real financial situation. Vietnam was a previous example of fighting a war and pretending it didn't cost anything -> why they cut Freddy and Fanny loose, had to make the books look better than they were...
Then again, I’ve read quite a few things that show we really paid off the WWII debt through inflation, not actual earnings... Seems the Government doesn’t know how to do anything but fudge when it comes to book keeping.
I was going to agree and say 1971 myself, acknowledging that time as the default-by-another-name that it was. Many a salient trend line gets noisy after 1971.
Trend got worse after 1982 - thats when 401k / IRA system started and middle class started pouring money into equities (artificially) boosting returns for pension funds.
Ya know, I keep coming back to that, too. It seemed like such a good idea, reinvesting capital in the future and so on. But what it did was nationalize everyone's investments, or more correclty, it "Wall Street-ized" them. By sending everyone's investment money to Wall Street, Wall Street was placed firmly in charge. Raise money for local investments? How? Wall Street was placed at the epicenter of all significant investment activity, and the skimmers who get paid anytime anything gets rated, issued, sold or bought got filthy freaking rich from the churn.
Greatest scam of the century.
Thomas Sowell had a good series of mainstream media articles related to some of his academic work several years ago relating to wage stagnation for African-American tradesmen in the Los Angeles (mostly Watts) region going back to the 1960's. (can not find it at the moment... afaik i read it at www.jewishworldreview.com )
The gist of it was African-Americans had not increased their purchasing power index income since 1972-73 for most trades, and no trades had better income purchasing power since the Reagan first term recovery.
1982, the paradigm shift.
http://www.youtube.com/watch?v=HiW2-hygtzU
Leo , i went to that site and could not find one article you have written. Different site?
Here is the direct link to his post.
http://pensionpulse.blogspot.com/2010/03/pension-black-holes-set-to-expl...
jeez ireland is having a potato famine without the potatoes.
Wordpress!...... Wordpress.... Leo don't need no stinkin' Wordpress!!
So buy solars? I kid, great work Leo. Pensions are such a huge issue (every adult who has one mentions their pensions to me when I discuss Econ with them). The system is relying on them. Silly system.