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Will the Real Debt Crisis Please Stand Up?
Please go directly to my latest post and leave your comments here:
http://pensionpulse.blogspot.com/2010/03/will-real-debt-crisis-please-stand-up.html
This table from the NYT article sums it up:
On that sober note, have a great weekend.
Cheers,
Leo Kolivakis
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Is the moment really here folks ? Is the TIME BOMB about to go off ? When mainstream media starts spewing articles like the one on yahoo finance (about Social Security), you know bells are ringing somewhere and something is amiss somwhere.
It depends on the global confidence in the Us dollar and the Treasury market, which for now is relatively strong.
Social Security Armageddon came a little early it seems -
Bruce Krastig talked about this on ZH recently.
http://news.yahoo.com/s/ap/20100314/ap_on_bi_ge/us_social_security_ious
I agree aus-punter. So far the system has worked well. But I wonder how many shysters and crooks from the world of international finance are eyeing off this big pile of J6P money. It must chafe them to see regular workers accumulating some serious money and having all that luverlee lucre managed by trade unions.
P.S. - Go to the Keating interview at 1min50secs and you'll see the fix is in for US and UK pensions. The think tanks and News Ltd/Fox are just laying the groundwork for the "anti-destitution model".
My friends....
One has just entered the surreal world of LOLLY POP POLY ECONOMICS....
What does it take to realize that government structures both in the US and Europe are highly flawed ?
Just look at the above ratios ....
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Here is what is going to happen....
Money printing
Tax Increases
And some defaults
Who....just spin the wheel....see who's next....
.......................................
Who are going to be the winners ?
The ones that have the balls the restructure themselves....
1) Tax structure
2) Political structure
The tax and political structure simply needs to be as follows....
1) Taxes....One simple tax structure....a maximum 15% consumption tax on items that are actually consumed...
The concept ? One pays for what they use....Not that complicated...eh ?
Tax allocation....
Per internet vote per township....that's right....no more lobbyists....If the populus wants to spend 1% of the 15% on healthcare...then that is what it will be...etc...
Voting...by internet....and only after the voter has read about the candidate....and knows if they are actually qualified ....and have their beliefs in mind....
....................................
Why ?
Just do this....
Which economy would be the largest by far in 10 years ?
Economy A....taxes all businesses 50% via the Fed....which is in addition to state taxes of 5 to 17%....which is in addition to VAT which is 15%....
Economy B.....15% consumption tax only....
What is the current govt. actually doing at full speed ? Answer: Economy A
Logic ???? The American people want a worse way of life for themselves and their children ?
Enjoy the sliding board to massive US poverty....
.................................................
Item #2
When the Banks lost the money and insisted that the Fed transfer the toxic debt THEY created......the Fed should not have bailed out anyone....
Why ?
Because the money that was moving away from the questionable sources did not disappear....it was simply moving somewhere else....
The money that did not disappear...would have went to the most trustworthy places....and from there would have made its way back into the economy....without the addition of taxes/massive public debt/massive money supply increases and Fed interference....
So what does the Fed Harvard Queens do ?
Transferred the losses to the public....
Why / Goldman Sachs style govt. FACISM....
Now....I will let the public chew on this one....
............................................
I challenge any economist ....any of them to refute the above....
Not one economist can refute the above.....Not one....
.............................................
Now...chew on this ....
The Obama Administration just increased US taxes by over $3 Trillion and growing....and is reducing freedoms in general....
Free ice cream everywhere.....It's everywhere....
..................................................
*yawn* And bonuses are up this year.
Leo, this is all one decade long charade, let's quit being coy.
Wake me when we start being accountable and count the money instead of bullshit Federal Self-Preserve tricks to keep americans from finding out euro trash stole everything they ever had.
The greatest generation would be so proud. Most graves aren't even cold.
One country that does not face a major pension problem is Australia. The Prime Minister who engineered that, Paul Keating, has some serious insight here.
Before you let a bunch of lickspittle think tanks, like the Cato Institute, bludgeon you into despair and submission listen to someone who actually has some solutions.
http://www.youtube.com/watch?v=eql3PSuxhQY&feature=video_response
Note - Keating can be an arrogant sod, and the Liberal Party are the Australian conservative party.
thats true now....but roll forward a few years and see what happens when the superannuation industry that has been gorging itself on fees and providing substandard returns can't pay out
This table from the NYT article sums it up:
What the heck is happening in Poland?
"What the heck is happening in Poland?"
Vodka?
What the heck is happening in America?
Fluoride....and vodka.
prozac = 65% flouride derivitive
Leo, Are pension funds returns tied to the returns they get on fixed income which is completely shot due to Fed's ZIRP (as well as many global Central banks) ? If they were expecting a certain return on fixed income my guess they are completely screwed unless we have some major inflationary events !!
Ros Altmann recently published an article in the Telegraph on why quantitative easing has been a disaster for pensions. By driving rates lower, QE is forcing pensions and retirees to invest in risk assets (primarily stocks) to obtain a decent yield on their investments. Asset reflation is the goal of QE, and they're hoping this will sustain consumption and lift inflation a little - or a lot.
the pension funds have always been heavily weighted in stocks. When the markets tanked back in 2000/ 01, the greater damage was wrought by the Greenspan put effect, so even though many corporates suddenly woke up to the size of risk in their funds, there was precious little they could do about it. If they had been more heavily invested in bonds, there would not have been this duration mismatch, but the cult of equities had been too strong prior to this. Now, we have stagnant equity markets and very low rates, so there is a desperate attempt to catch up.
As for how inflation comes in, they need returns to strongly outpace inflation (good luck with that one), as payments are index linked.
It cannnot happen. Can't. Unless the fed raises interest rates above real inflation. Need to raise rate 0.5 percent per meeting until 5.5 or 6.0 percent. This would skyrocket public debt. Not going to happen.
If it were, then fixed income could return (ie. CD's, div equities....)
This will not happen. QE will continue. New "programs" will come.
They fill screw us out of out $ any way thay can.
Pensioners are doomed to theft.
Sad, but true, imho.
JG
So it turns out that mass inflation expropriates and ruins the people who don't have access to the printing press?
I am shocked.
on the one hand our developing global oligarchy is producing more and richer billionaires while the social benefits class grows exponentially.
by design or not, the result extinguishes middle class revenue producers. when the lower class explodes due to benefits default, blame and retribution will fall on the power holders.
A few comments:
1) I am not into fear mongering, and it is possible that the Cato Institute is overestimating the real debt crisis, just like others are underestimating it.
2) If we enter a protracted period of deflation, most pensions long stocks, real estate and private equity are screwed. That's why the Fed is desperately trying to engineer "contained" inflation via asset reflation.
3) We can't expect people to fend for themselves. This morning on CNN, I heard that according to the Employment Benefit Research Institute, 46% of Americans surveyed are unaware of how much they need to save for retirement. Most people are clueless about where to invest and how to invest their money (not that professional money and pension fund managers are any better).
4) Any way you slice it, tough choices lie ahead. The pension promise is broken. It makes me sick to my stomach watching people's retirement money being pissed away to as pension managers, private equity and hedge fund managers enrich themselves. I'll let the late George Carlin have the final say, because he nailed it in this skit on the American Dream:
Perfect Leo....and it's not a skit. It's George speaking the truth.
Leo, in your article you also said:
This Carlin piece and your attitude explain a large part of the problem facing us: You and Carlin always want to blame "them", those "rich cocksuckers", the "owners of the country". Yet we all know that no pensioner has ever said "enough, I don't want any more than I contributed".
And it is with this stick that the the socialists have been beating entrepreneurs, businessmen, and investors around the head since the boomers lost Vietnam. This vilifying and taxing and endlessly regulating those people who actually create wealth has forced them to either go offshore or become parasites living off of the beast like everyone else.
If you want to restore economic growth to the country then instead of ranting about "rich cocksuckers" and chasing them offshore, perhaps you should start exposing the socialists and progressives who after 50 years have managed to kill off capitalism and free enterprise in the country and turn all it's citizens into wards of the state.
Are you writing this from a mental institution? What the hell are you talking about?
We have been in a period of massive deregulation in the financial industry since 1992 that allowed the theft that has occurred to the taxpayers. What socialists would have supported this deregulation? Bernie Sanders? Not a chance.
Restoring economic growth to a country with the system we are in will be a tough road and I think impossible. And it's because of the corporate person that says "fuck you" to the people with flammable water after Chesapeake Energy drills into the Marsellus shales and the family is left with a well that has more gas than water in it 1/2 mile away. A house they now cannot sell or insure since you can light the water on fire or poison your children taking baths in methane. That is what is called an externality. It's a product of pure unresponsible capitalism. We need responsible capitalism but it's not coming back because there are lobbyists for every industry to make it easier for them to get business done, damn those living near their project sites, damn the consequences that if they had to pay for they would be less profitable.
The rich cocksucking banksters have stolen our money with the blessing of our elected officials.
The system is broken. We need to start all over because the cracks in the damn are just starting to widen. Our problems have everything to do with the uber rich and nothing to do with socialists, it's due to sociopaths!
My first exposure to investment bankers came in conjunction with financing a grain processing facility in Kansas a few years ago. We hired a bank to place the debt of the facility; one of the bank's bankers had personally "earned" $56 million the previous year. I wondered what amazing feats he had accomplished to earn such massive compensation.
I did not have to wait long for the answer. The bank hired co-placement agents. We spent two days on the project "due diligence". Then the bankers argued for three weeks over the fee split, nearly causing some potential buyers to walk away.
All the banks care about is the fee. The more times they are allowed to slice the pie, the more times they can extract a fee. This behavior is rewarded with mind-boggling compensation; as long as the pie-slicing is rewarded, the slicing will continue.
I have yet to meet an investment banker who is 1)honest and/or 2)adds value in any way.
Dunno about the Marsellus shales, but shit happens.
Reality is looming, and the question is which path leads to our salvation: ever more and bigger government or a restored constitution forging self initiative and severely limited government . Mr. Beale, you have made your choice clear: blame the capitalists.
I think I was pretty clear that I blame the Sociopathic Corporate Structure..that has very little to due with responsible capitalism which I highly endorse.
Beale's scenario is not an example of "shit happening," it is someone being shat upon. In this case a corporation reduced their cost of business by not containing water pollution resulting from their extraction methods. To them this savings is "free money" and went directly to their profit line. But (as many on this site like to point out) nothing is really free. In this case the cost was borne by homeowners whose property value was destroyed. Hardworking honest people now financially ruined, thanks to their involuntary contribution to their corporate neighbor. And when that neighbor has a million times the resources of any individual, there is no recourse through government regulators or the courts.
So don't present a false choice between "big government" and "self initiative." So long as this twisted incestuous relationship exists between corporate and government power, self initiative and hard work are a sucker's bet. Honest capitalism might bring this country back but I don't see that happening anytime soon. I don't like socialism any more than you do but it couldn't be much worse than the travesty we now call free enterprise.
I nearly missed that - you used the term "the pension promise."
In real life, resources and how to get as much of them as possible is paramount. We live in a world of scarcity and the capitalist economic system seems best-suited to dishing out what is available based not on need, but on a rather Darwinian winnowing of the savvy and quick, the ruthless and the perspicacious from the rest. Point is, it is not, nor is it intended to be "fair". The economic system in which we function reflects the basic ~ nasty, brutish and short ~ state of nature. That it does allow most people a somewhat better life is to its credit.
We've seen that governments are increasingly distrusted. Witness Napolitano's book, "Lies the Government Told You". They err because they are human, perhaps. And to naively trust in government, financial 'professionals' or indeed any of the institutions of latter-20th century society is ill-advised.
The population has ALWAYS had primary responsibility to look out for their own retirements. Anything else is sloughing off that responsibility. Anyway, as several commenters point out, it's HEALTHY!
Point by point:
1. It is unlikely Cato is overestimating; in many cases they are underestimating. For instance -- they assume the European healthcare systems will continue with their current cost containment regimes in place. This is unlikely, as when the boomer generation retires they will move from the "paying for" side to the "consuming" side... and their numbers will ensure that many of the cost containing rules are lifted. That is simple self interest... the pig in the python suddenly sees the old rationing methods as unfair, and demands they be changed.
2. I've been saying for years... Washington needs the bubble. All governments of the advanced nations need bubble economies from now on... they've been purposefully engineering them for a good 15 years (at least). Normal, sustainable growth cannot meet the needs of the welfare state any longer. Why do you think they've been hyping "green tech" for a while now? They hope to create a green tech bubble, like the original tech bubble of the 90's... they need the money.
3. We're gonna have to expect people to save on their own. The 20th century idea of the big, government run welfare state is over. It is dying. There is no evidence one can be built that is both sustainable and affordable. No evidence at all. It is high time people stop hunting for that golden goose and begin recreating a realistic society with realistic promises and sustainable economics.
4. George Carlin's rant is OK as far as it goes, but I don't buy the idea that this is all, or even primarily, a problem caused by "the club". Do the elites need a smack down? Hell yeah! Do some laws need changing, some rules updating? Yep. But even after that is done, the vast majority of the problem will still be here.
Now I've got to get back to work, Oh, the joys of self-employment!
F*cking guy was a genius
" We can't expect people to fend for themselves." Since when? 1932?
And its whose fault that they are clueless?
Everyone's; thus because their cluelessness affects all, it is everyone's "fault". Blame the individual first, then let the blame trickle up. If America had been told not to eat fast food, then it would be the fault of the individual. Because it was not only made readily available, but was thrust on the populace, it is the fault of all. Is this too much to ask? At this point, yes. Hindsight is 20/20; but a fool and his time will soon part.
Blame the kid or the parent? The kid is mentally fragile, due to the upbringing. The parent also? A vicious cycle. Really, who cares anymore, it is all over. The time for debate was long ago. America FAILS. The world FAILS. No "redos". Calvinball lasts until supper. We lost Hobbes in the forest. Now Calvin goes to bed while the rents go searching for him. Too bad in this case, the parents hate Calvin; this because Calvin is not their son. The DOELARR was double XROSSED! Y? because they DON"T LIKE YOU!
A year and a half ago I thought, 'After some deserved rioting in March ('09), the people will have to come together at town hall meetings, and oust the local, State, and Federal Congresses.' I was right that people would come together (health "care" debate?), but I forgot how damn stupid people have become. I had faith; faith in humanity and society. Instead, I was left hoping and wishing. Never again will I hope; hope is the most pathetic emotion in the metaphysical universe. Still, something will give. We are in grave danger of understanding the consequences of our situation AFTER we ourselves have caught fire. We are past the point of "the roof is on fire" and the blowback will be catastrophic. Get out now.
Of course, the welfare state is self reinforcing.
"The real destroyer of the liberties of the people is he who spreads among them bounties, donations and benefits. " - Plutarch
Fending for yourself is the only answer.
Maybe we should get our cues from the Amish.
As far as I know, they opted out of the social security
scheme and neither contribute nor draw.
Self-reliance is a rare phenomenon in the Western world.
They also pay cash for all medical care they consume and they don't piss and moan about it.
They form kind of "mutual aid societies" amongst themselves and their small family groups.
They actually consider costs/benefits when it comes to their own care.
Imagine that.
(If it weren't for the goofy hats and clothes and the fact that you have to actually believe that there is a magic-man that lives in the sky and has magic powers, I would probably join up.)
Off topic . . . nice collar on Jihad Jane, Rusty.
you don't have to believe in the magic man or anything else to live like they do.
The whole idea of requiring employers to "contribute" to employee pensions is as unsustainably utopian and naive as is having taxpayers "contribute" to public sector pensions.
Privatize them all...no more forced exactions. Put the responsibility to save for retirement directly on the beneficiary: the employee.
Fortunately, given the mounting insolvency of many schemes, this is in effect what is happening now.
Basically, let's just admit the truth - old people are a waste of space. Not only do they smell funny, but they don't actually do anything much apart from get ill, drive very badly and moan about how "things were so much better in their day."
In order to lower their taxes (leaving them more income to over inflate house prices), they lumbered the younger generation with a terrible state education system, enormously expensive higher education and when we do get into the workforce we are told we have to pay far more to cover these people, who are going to live much longer than they said they would and we can forget about getting any benefits if we haven't dropped dead before we reach the official retirement of 80 by 2025...
so at what age will you leave the planet? Oh, you are not going to age!
I can smell you already LOL
Soylent Green !!!!!
http://www.imdb.com/title/tt0070723/synopsis
"In order to lower their taxes (leaving them more income to over inflate house prices), they lumbered the younger generation with a terrible state education system,"
I agree the K-12 education system is terrible. But it has little to do with tax rates. The real, per pupil spending in America has skyrocketed since the 1950's and 60's. I don't recall the exact number; but it has way more than doubled. The problem is that the education establishment has turned the system into a payola system for themselves rather than an education system system for the students. Is there any reason my local highschool needs 32 assistant principals? That's how many they have. Multiply that kind of problem throughout every level of the system, you get what we have, a system that costs a lot more and produces a lot less. If you don't believe this is primarily a public employee payola problem, ask me what the guaranteed annual return on my teacher's pension is.
Hope you die young because if not, you will be a waste of space too.
No exit.
Better to burn out, than to fade away.
Not to mention that a week in the hospital will probably cost society more than you produced in your lifetime.
Rahm know this. Expect future Medicare to be an envelope with two cyanide capsules and a card with a phone number (so they can pick up your corpse and take it to the soylent green factory).
Disaster Capitalism at its finest.
Our good friends at the Cato Institute are working overtime to convince the gullible that their pensions are DOOMED!!! and an ENTITLEMENT!!! Bad little worker bees. What made you think paying 9% of your income for 40 years entitled you to anything?
C'mon people, get some bloody backbone and stop being bamboozled. Yes the pension system needs some rationalising at the edges, and it needs to be done ASAP. But don't fall for the propaganda. Stop being the foot soldiers for the oligarchs.
When spending > tax revenue, the only possible end result is bankruptcy, which is what we're all facing. Inadequate moeny in pension funds to pay retirees is just one symptom of the greater problem. That fact has nothing to do with capitalism nor the cato institute, it has to do with politicans appeasing short term public interests with deficit spending. Pension systems can't be fixed by "rationalising" anything, they can only be fixed by either cutting outlays or raising taxes, neither of which is sitting well with the people. The people are convinced they are entitled to their pensions, but when the money has already been spent by politicians they voted in and who spent the money, then what are they really entitled to?
So the crisis will be DECADES away? Really? I'll be dead by then. I thought everything was going to collapse last year, now it's 50 years away. Such drama.