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Pension Shocker: Plans Face $2 Trillion Shortfall, Moody's Says
Last month, in "Cities, States Shun Moody's For Blowing The Whistle On Pension Liabilities," we highlighted a rift between Moody’s and some local governments over the return assumptions for public pension plans.
To recap, when it comes to underfunded pension liabilities, one major concern is that in a world characterized by ZIRP and NIRP, it’s not entirely clear that public pension funds are using realistic investment return assumptions. The lower the return assumption, the larger the unfunded liability. After 2008, Moody’s stopped relying on the investment return assumptions of cities and states opting instead to use its own models. Unsurprisingly, this led the ratings agency to adopt a much less favorable view of state and local government finances and as WSJ reported, rather than admit that their return assumptions are indeed unrealistic, local governments have opted to drop Moody’s instead.
The debate underscores a larger problem in America. Almost half of the states in the union are facing budget deficits.
Underfunded pension liabilities are one factor, but the reasons for the pervasive shortfall vary from plunging oil revenues to plain old fiscal mismanagement. The pension issue gained national attention after an Illinois Supreme Court decision threw the future of pension reform into question and effectively set a precedent for other states, sending state and local officials back to the drawing board in terms of figuring out how to plug budget gaps. One option is what we have called the "pension ponzi" which involves the issuance of pension obligation bonds. Here is all you need to know about that option:
'Solving' this problem by issuing bonds is an enticing option but at heart, it amounts to what one might call a "pension liability-bond arbitrage." The idea is to borrow the money to plug the pension gap and invest it at a rate of return that's higher than the coupon on the bonds, thus saving money over the long-haul. Of course, much like transferring a balance on a high interest credit card onto a new card with a teaser rate (or refinancing a high interest credit card via a P2P loan) this gimmick only works if you do not max out the original card again, because if you do, all you've done is doubled your debt burden. As it relates to pension liabilities, this means that what you absolutely cannot do is use the cash infusion as an excuse to get lax when it comes to pension funding because after all, that's what caused the problem in the first place.
And here's a look at how pervasive the problem has become:
Make no mistake, America’s pension problem isn’t likely to be resolved anytime soon and in fact, with risk-free rates likely to remain subdued even as equity returns face the possibility that the beginning of a Fed rate hike cycle could trigger a 1937-style equity meltdown (bad news for return assumptions), and with investors set to demand higher yields on muni issuance thanks to deteriorating fiscal circumstances, the financial screws may be set to tighten further on the country’s struggling state and local governments. Bloomberg has more:
The cost to American cities for their cash-strapped pension funds is starting to look a lot worse, and it’s not because the stock-market rally may be losing steam.
Houston was warned by Moody’s Investors Service this month that it may be downgraded because of mounting retirement bills, the latest municipality put on notice as the company ignores bookkeeping gimmicks that let cities mask the size of their debt for years. The approach foreshadows accounting rules for even top-rated issuers that are poised to cause pension shortfalls to swell as new financial reports are released.
"If you’re AAA or AA rated and you’ve got significant and visible unfunded pension obligations, you’ve only got one direction to go in terms of rating, and that’s potentially down," said Jeff Lipton, head of municipal research in New York at Oppenheimer & Co. "It’s the presentation on the balance sheet that is now going to drive urgency."
Cities that shortchanged pensions for years are under growing pressure to boost their contributions, even after windfalls from a stock market that’s tripled since early 2009. Janney Montgomery Scott has said growing retirement costs are "the largest cloud overhanging" the $3.6 trillion municipal-bond market, where investors are demanding higher yields from borrowers under the greatest strain.
That was on display this week for Chicago, whose credit rating was cut to junk by Moody’s in May because of a $20 billion pension shortfall. The city was forced to pay yields of almost 8 percent on taxable bonds maturing in 2042, about twice what some homeowners can get on a 30-year mortgage.
Estimates of the pension-fund deficits facing states and cities vary, depending on the assumptions used to calculate the cost of bills due over the next several decades. According to Federal Reserve figures, they have $1.4 trillion less than needed to cover promised benefits.
Officials have been able to lower the size of the liability by counting on investment earnings of more than 7 percent a year, even after they expect to run out of cash. New rules from the Governmental Accounting Standards Board require a lower rate to be used after retirement plans go broke. Many reported shortfalls will grow as a result.
Moody’s, which in 2013 began using a lower rate than governments do to calculate future liabilities, has estimated that the 25 largest U.S. public pensions alone have $2 trillion less than they need. Cincinnati and Minneapolis are among cities Moody’s has since downgraded.
The California Public Employees’ Retirement System, the largest U.S. pension, this week said it earned just 2.4 percent last fiscal year, one-third of the annual return it projects. The California State Teachers’ Retirement System, the second-biggest fund,gained 4.5 percent, compared with its 7.5 percent goal.
In short: America is facing a fiscal crisis at the state and local government level and it appears as though at least one ratings agency is no longer willing to suspend disbelief by allowing officials to utilize profoundly unrealistic return assumptions in the calculation of liabilities. This means downgrades and as for what comes next, we'll leave you with a recap of Citi's vicious "feedback loop".
From Citi
How does a downgrade create a feedback loop?
Payment induced liquidity shock
For many issuers’ credit contracts, a drop to a speculative grade rating acts as a payments trigger. For instance, the issuer may have commercial paper programs and line of credit agreements as a part of its short term borrowing program and a rating downgrade could qualify as an event of default for these borrowing arrangements. This enables the banks to declare all outstanding obligations as immediately due and payable.
A rating downgrade could also force accelerated repayment schedules and penalty bank bond rates on swap contracts and variable-rate debt agreements.
Thus, as a result of the rating action, an issuer could face increased liquidity risk at an unfortunate time
when it is working to navigate its way out of a fiscal crisis.
Knock-on rating downgrade risk
In some instances, rating agencies may disagree on an issuer’s creditworthiness which could result in a split level rating for a prolonged period. But a drastic rating action by one main rating agency (either Moody’s or S&P) which knocks the issuer’s debt to below investment grade could force the other rating agencies to follow with a similar downgrade. While the other rating agencies might feel that underlying credit fundamentals of the issuer do not merit a sub-investment grade rating, their rating action could be dictated by negative implications due to the liquidity pressures posed by the first downgrade to junk status. Recently, S&P downgraded a credit as a result of Moody’s rating action that stated that its rating action reflected its view that the issuer’s efforts “are challenged by short-term interference” that prevents a solid and credible approach to resolving their fiscal problems.
Shrinking buyer base
Many investors have mandates to buy investment grade debt only and a fall to speculative grade status could cause existing investors to liquidate the holdings of the fallen credit and shrink the universe of buyers.
Rising issuance costs
In many cases the issuer may have been working diligently to reduce its exposure to bank credit risks in the event of a ratings deterioration (for e.g. shifting its variable-rate GOs and sales tax paper to a fixed rate by tapping its short-term paper program then converting it into long-term debt) but the unfortunate timing of the downgrade will make this task much more challenging as a shrunken buyer base for an entity’s debt, quite naturally, translates into a higher cost of debt.
A higher cost of debt exacerbates liquidity problems and thus the feedback loop could continue to gain traction.
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Speaking of 2 Trillion, what ever happened to that 2 Trillion that was reported missing from the Pentagon a few days before 911?
They discovered it was in building 7 at the WTC on 9/11.
Destroyed of course, so no loose ends there.
BOTH bad.
It was the WTC 6 Building.
NOT destroyed (simply TRANSFERRED, exept for the Gold that was trapped in the subterrainean tunnels on the way out).
WTC7 actually had NO MONEY in it, unless you count the vending machines (or even a deep basement).
Don't let the FACTS get in the way of your bullshit post, though.
Kurt Sonnenfeld:
http://www.voltairenet.org/article160636.html
When the North Tower fell, the US Customs House (Building 6) was crushed and totally incinerated. Much of the underground levels beneath it were also destroyed. But there were voids. And it was into one of those voids, recently uncovered, that I descended with a special Task Force to investigate. It was there we found the security antechamber to the vault, badly damaged. At the far end of the security office was the wide steel door to the vault, a combination code keypad in the cinderblock wall beside it. But the wall was cracked and partially crumbled, and the door was sprung partially open. So we checked inside with our flashlights. Except for several rows of empty shelves, there was nothing in the vault but dust and debris. It had been emptied. Why was it empty? And when could it have been emptied?
Dutch boy: "Speaking of 2 Trillion, what ever happened to that 2 Trillion that was reported missing from the Pentagon a few days before 911?"
Peanuts.
http://rense.com/general70/trill.htm <<<< 3.3 T
and.... from the fed
http://www.cudahynow.com/blogs/communityblogs/212140561.html <<<<<< 9T
Madoff got the short end.
Bernie robbed the wrong people.
Don't worry about SS we OWE ourselves the money I'm sure we're good for it.
'Scott Walker type trolls' that post here, they whine and blame the hired help, while trying to rationalize fraud. They are blind/ no conception that there is two sides to a retirement contract, or a public works project, for example.
I on the other hand, am quite happy to blame the Dalys, and the Rahm Emmanuals, Swartzeneggers, or that joke of a governor from Louisiana, and other mayors and governors that are the ones that asked for the bond/contract in the first place, and quickly lined their own pockets, and happily signed specific contracts into YOUR grandchildren's realm, we call 'the new normal'. Birmingham, AL is recent history...look it up.
And it should be no surprize that Moody's is just now decided that...'hey those AAA bonds have not really been AAA, ~for a long time now, pervasive even~ and we figured out... using extra-conservative estimates/high tech modeling, and there is no way that junk should have ever been rated anything more than junk.'
wwxx
Blame it on who you like, the fact remains we are all just a bunch of dressed up apes ridding around on a rocky ball of shit somewhere out in the middle of space trying to figure out what the hell we are here for.
Don't blame ME! Mel Brooks did it FIRST!
https://www.youtube.com/watch?v=ZAZhtT-dUyo
Imagine how underfunded they will be after the equity market crashes 50%, 75%...and stays down. ZIRP has chased them into the equity market with a much larger allocation than historically common.
The next crash is going to force major pension reforms and massive haircuts on the payouts...
To anyone counting on pensions exclusively to support you, plan accordingly.
Tick tock, tick tock...
Bonds aren't any better. Calculate the loss on a 30-year US T-Bond at a 8% yield compared to today's 3%. Similar losses implied, around 50-60%, which means the pension fund is carrying the asset at 200-300% of its fair value.
Fair point.
I agree, as I also believe the next crash will be a simultaneous bloodbath in equities AND bonds.
This next one will be one for the history books. Which is why they will throw everything including the kitchen sink at fighting this one off. The big kaboom is coming.
Tick tock, tick tock...
Ever look at the CAFR? They already ARE the market. Who they gonna sell to, the Chinee?
When that happens,They will be nationalized, along with every private pension plan, in return for a 'guaranteed'annuity from Uncle Scam.As safe as SS was in their hands.Super, super lockbax.
Not to worry.You can be sure of Uncle Scam
If none of them could get their pensions straight after this stock market rally,there must be a lot of morons running things.
What's the bet the people running the pension funds are also in public unions and thus cannot be fired for doing a lousey job.
If that is the case then I'm just laughing my head off!
See the problems that not guaranteeing inflation at zero, all the time, everywhere, brings?
I got it and blew it on whores, coke and finally junk. I'm in rehab taking HARVONI to try and save my liver. Am I doomed?
Jesus still loves you.
Jesus Rodriguez? or Jesus Ruiz? I ain't no homo.
Teacher pensions will be the first to be discounted 50%.
for me it's just pc politics pulling the confederate flag down every where, i'm waiting to sign a petition or vote to take the american flag down from every building, and out of any room where public-sector union employees work, it represents the indentured servitude of most of Americas gen-xers, and 100% of Americas millinials, the only difference between black slaves brought to america and put into slavery, and todays millinials is they didn't get the boat ride.
public- sector union reps, and politicians,( one in the same). negotiated these benefit contracts, to their mutual financial, personal, and political benefit.
millilials are going to wake up and realize the trillions the govt is redistributing away from those horrible baby boomer savers is their inheritance.
Young fools better stock up on food and water.
Underfunded pension liability looks only at pension investments. It is also possible to fund pensions with current revenues. If the annual pension expense is, say, 5% of your budget, that's pretty manageable even with no invested assets.
That's just robbery. Eventually people stop accepting such. In the private sector, that's extra margin that has to be generated to pay for it, which isn't usually possible in a competitive environment. In government/public finance, that's extra tax revenue that must be raised making one's region less competitive.
Oh so it's better to take the same 5% and send it to a pension fund?
My point was technical -- if you want to understand the problem you need to look at the major pieces. It's a very different matter for a city with an underfunded liability but very robust revenues than for one with an underfunded liability and weak revenues. That's all.
"which isn't usually possible in a competitive environment."
By competitive environment, do you mean an environment where the C suite people 'earn' enough to retire on a few years because they have cut their staff to bare bones minimum and frozen their salaries, and buy the cheapest possible toilet paper for office restrooms?
What I see is execs who poor mouth employees, then pay themselves huge salaries and jet around the country first class to meet other company execs for important meetings at luxury hotels.
The last 3 private companies where I worked followed this model.
I can no longer exist or function in that model.
That's an obvious Ponzi scheme.
It's also the way the US federal government is operating the Social Security system today.
How's that working out?
Well, it is a good thing the fed won't raise rates anytime soon then, huh? If it does pension will be the least of the problems.
Time for the IRS to dip into United States of America Money Market Fund Shares.
Let's have a look on the new floating policy. We best navigate lost money to cover are ass.
Supplemental Letter to IRS and Treasury regarding Money Market ...
Mr Janet Yellen, I need a three trillion loan to bail out Puerto Rico. Can you supply me a NIRP interbanking thru SWIFT. I promise to impoverish the entire country to receive another IMF bailout loan within 5 years.
Add me to Zerohedge contact list. We can share banking details.
/sarc
Well OT.. but I am putting it at the bottom of the thread so don't get mad at me..
OK, so try to understand this, kids.
A few years ago when the PTB decided they need to replace the entire broadcast spectrum with digital, I still had a few caveman CRTs in the spaces that the Missus occupies,
I still have two frequency distribution networks on co-ax throughout the home fortress. Channel 3 belongs to my one and only and Channel 69 was mine.. but since I have not watched TV, Cable, Satellite or any other type of mindless pap for the last several years Channel 69 is totally unused.
The only time I see TV is when I walk through the Missus’s space and see the Drew Carey Gambling Show or CBN or the Oldies channel.. (oh, BTW “The Rifleman” was on last night and I got a bit captivated by Chuck Conners and his trick .44 Winchester)
So….. now the old CRT’s have all been replaced by flat screens and I told my dear lady that I should eliminate the digital converter box… but she would have nothing to do with it.
She wanted the simplicity of low–res channel 3 feeding her high-res screens.
God bless her.
These pensions will all be bailed out by the federal government and the Federal Reserve. Free money, no worries.
Apply IRA and 401k money to public pension funds. Problem fixed.
The Obama administration has been discussing that possibilty for the last couple of years.
Apply public pension funds to Social Security. Oh, and they can work til 65 or 67 like the rest of us.
The Donald will fix it.
I telll you what.. he keeps that truthy trash talk up and he will rile the base up the way that the base needs to be riled up.
The question is .... is it possible to pivot enough to the middle to capture the general electorate in the big vote.
It might be Trump V. Koch in the big picture… cool..
If I look at govt and all the real things that need to be fixed it looks like no govt in EU, Canada, Australia, Israel, or USA works... probably since the people are not represented.
The people's issues just are not addressed at all.
And we can list all the financial issues, conflict of interest, fraud, financial ratings fraud, pensions, 2008 Sub prime or Derivatives or FDIC Insurance being unfunded or Bail-Ins being prepared, or most major cities facing financial downgrades for pension shortfalls, or corporate or university trust short falls... or Greece, Humanitarian Crisis in Greece, Odious Debt, Illegal Debt in Greece,... and the ones that Get Bailouts, Corporate Bailouts and our Bribed Politicians never take responsibility... there is no Ethos.
Just found a Film Write up that shows the way the English handle Rape of Teen Girls by Muslim Immigrants or Pedo Priests:
"9. Death Line (Film)
This deeply underrated British horror features a brief cameo from Lee, but makes the list for being disturbing, hilarious, and deeply weird. Gary Sherman’s 1976 film concerns a cannibal dwelling in the nooks and crannies of London’s Underground, feasting on tourists and commuters. But when he picks off a politician, it triggers a manhunt, led by the one-and-only Donald Pleasance. Lee shows up as a shady “traffic warden” and goes toe-to-toe with Pleasance in a delicious scene that sees him utter the really rather amazing line “Your dainty little footsteps are echoing in places where one is advised to tread lightly.” The film itself, meanwhile, is an underrated classic, and watching it guarantees that you’ll never hear the phrase “Mind the doors” in quite the same way again."
- So yeah if we can get Citizens Fired Up, lets figure out what Motivates them like the Politicos try to do (Since they have no Honesty or True Thoughts coming forward)
Wage Suppression and Out Sourcing our Jobs is a Systemic Plan to Wage War on part of our Population... they have Changed our Economy into a British Trade Model... where they refuse to invest in our Economy or in Compensation for our/THEIR Own People... but they say they are Patriotic and their companies are People... Only they don't go to war or bleed for the most part unless they become Mercs.
The Counter-Intelligence Operations against our Workers and Citizens and Voters and the constant propaganda and control of the National Narrative is Obscene.
All the Laws passed since Clinton have been Counter Intelligence Operations that accomplish anti-Citizen Agenda Items, Anti-Security, Anti-Freedom, Anti-Free Speech, Anti- American Knife Sticking... Like Open Borders, Expanding VISAs for Foreigners after shutting down Tech Jobs, its all about Cutting Costs and having not Responsibility for the Outcome. Then they cover up the crimes and weakness by touting fake statistics.
USA is not the best Health Care, Education, Press, Freedom, Civil Rights, Free Speech... Our Politicians are afraid to open their mouth for fear of losing Campaign and Lobby Dollars.
So yeah if we can get Citizens Fired Up, lets figure out what Motivates them like the Politicos try to do
Hunger, Starvation and Mortal Fear is what it will take for the people to turn really nasty!
He's already stirring the base up, but its Hitlery's base is the problem.
Never enough debt issued to payoff the compound interest. Create Choas to bargain displaced money into another coffer.
The KVB - Never Enough - YouTube
Hum, didn't we see this type of scenario play out in Greece. I wonder if the US has an unfunded problem with social security,,yep,,how about medicare,,yep,, how about pension plans for federal employees,,yep,,and the list goes on an on...
But America has a secret weapon...Goldman Sachs...get them involved in some creative financial accounting tricks...and our problems just melt away...who said it could not be this easy...you just got to believe!
The local and state politicos cannot solve this. They are owned by the unions. They will keep doing what they are paid to do.
The Feds must come in and apply the same actuarial discipline that the private sector chafes under. No exceptions. To meet this very reasonable standard, the feds should begin by lending money as needed to keep the pension funds compliant. Where will the money come from to pay back these loans? From those who benefit—the beneficiaries. Since the feds have unlimited ability to tax income in any way they want, they should establish an excise tax on benefits derived from these bailed out pension systems to fund the bailout. Problem solved, a self-funded bailout.
The local and state politicos cannot solve this. They are owned by the unions. They will keep doing what they are paid to do.
The Feds must come in and apply the same actuarial discipline that the private sector chafes under. No exceptions. To meet this very reasonable standard, the feds should begin by lending money as needed to keep the pension funds compliant. Where will the money come from to pay back these loans? From those who benefit—the beneficiaries. Since the feds have unlimited ability to tax income in any way they want, they should establish an excise tax on benefits derived from these bailed out pension systems to fund the bailout. Problem solved, a self-funded bailout.
They also can't just print money either, so they live in reality unlike the feds that make fiat out of nothing. Same reason we taxpayers cant's just spend spend spend without consequence - we live in reality no the lala land of the printing press masters.
How did you do that .... a two in one double post .... I guess you could have just typed the comment twice .... but, that seems a little tedious ?
"The Feds must come in"
That's where your post went wrong.
The correct answer to these gun totling leaches and their hangers on is "NO MORE" and "FUCK YOU EARN YOUR OWN MONEY AND GET YOUR FILTHY HANDS OUT OF MY WALLET".
Problem with these plans is that they're overweight in equities from a historical perspective. Meaning, in the eventual stock market downturn, their pension shortfalls will increase dramatically. The whole pension plan system was based on normalized rates not ZIRP.
Collective NIRP Financial Policies. Keep throwing bread crumbs off the table to keep the peasants engaged. Make them feel apart of the banking pilfering process.
Seems that they're overweight fixed income, not equities. Historically fixed income hasn't existed as such a significant asset class.
Here in the "New Normal", why is this a problem? All they need to do is give JP Morgan
or Goldman a call. Their experts can quickly come in and bundle,securitize, and lever the junk
at 100x and sell it into the market. Place the profits from the sale into the fund and then create
a shell company.Hire a p/r firm to create a beautiful,glossy prospectus using the profit numbers
of the sale of the bundled,securitized,junk sale, plus, the currently working/contributing employees
to show a steady stream of revenues. Next "leak" a bit of this to the market, then hype the hell out of
the IPO, the muppets, seeking anything that might yield a bit of profit will be sucked in like dust in a whirlwind
Realizing they've been snared in a pump and dump, the experts simply program the algos to incrementally
short back down to the gutter, skimming the cream all the way down. See, problem solved...
(Disclaimer) The activities described above are both FRAUDULENT and ILLEGAL.. I don't do it...I don't recommend
others do it.....(sarc)
I have easy solution: TAX THE RICH
Why do I have the feeling that police officer pensions will be just fine?
Because you'll be paying for it straight out of your pocket.
I wonder how much they have invested in physical silver, ROFL.
BTW, 2 trillion bucks is 133 billion ounces at current prices, or 150 years of world mining supply.
The average citizen is far too wrapped up in trivial matters, to even bother look at the world at large. Joe Public knows more about the Kardashians, Tom Brady and deflategate, Trump Tower and Taylor Swift, compared to their understanding of the Federal reserve, Fractional reserve banking, S & P, Moodys, LIBOR, FOREX, Regulatory capture, Precious metals market rigging et al, and for that Joe Public will reap what their fucking ignorance has sowed. I recently gave a friend the book called Planet Ponzi by Mitch Feierstein, 3 months later and they still haven't read it. The simple truth is, they’re not interested and think I'm exaggerating the state of financial sector, private pensions and public finances IE; You can lead a horse to water, but you can’t make them drink it.
Drive through an upper middle class suburban neighborhood .... and see if you can spot .... the homes of the government workers .... if you can't tell .... you are the private sector dupe !
Sure when you have ZIRP how can pension funds be expected to generate income which was how they planned to fund in the first place. Also when banks are allowed to bundle up toxic debt and sell it as AAA to pension funds and then there's a huge loss, sure there's a shortfall. All brought to you by banks like JPM and GS.
Babay boomers will be screwed big time. Hedge accordingly.
Escondido is thinking of becoming a sanctuary city .... for legal Americans !
there wont be anybody left
We are in a desert boys and girls riding a dying horse. There are but a few options. Make peace with the inevitable.
Does the horse have a name?
https://www.youtube.com/watch?v=zSAJ0l4OBHM
I don't even have to click your link.
They shoot horses don't they,,,, which
is a horse of a different color.... or is that now raycist too?
We're talking about PUBLIC pension plans here. Most people are not directly affected so they don't care.
Public employees, these days, get higher wages than the average person so could more easily save for their retirement. If they aren't, then it's their own fault if they have insufficient funds to live on.
I doubt they'll get much sympathy from most.
They won't be asking for sympathy. They will use the law.
and a gun.
Village, I live in central Florida. The economy is to a very large extent based on the incomes of retirees. Shut down the pensions and millions of elderly will starve. If you don’t think that will impact local businesses, you are not paying attention. As the house burns down there is a bit of schadenfreude that wells up when the rats and roaches start to burn but never forget in the end we all wind up in a smoldering ruin.
Most private business owners clearly understand that a large part of their take is directly or indirectly flowing from government workers, government pensions, or government entitlements. This shit is so entangled that no honest person believes they would all do well in the private sector if all that government shit was haircut'd to the roots. Costco takes ebt cards for christ sakes.
The truth hurts, but the reality is that pension based or social security based "retirement" is something dreamt up by socialists, like AARP. If you've personally saved up money to retire, then great. But if not, Ponzi schemes only lead to an out of control debt spiral. It all comes down to personal responsibility and families. The idea being that when you get old, your children should return the favor and take care of you.
For those without the support of family, that's when charitable organizations like churches should come into play. Governments, whether they be local, state, or federal, should not be in the business of securing your retirement. I wasn't aware that taking care of old people was in our Constitution.
You sir are correct and win first prize!
Now have gubbermint return the $2 - 300,000 confiscated from my (our) wages PLUS a reasonable 4% compounded over the past 50 (60) years and I (most) will gladly exit the system.
I have noted over the years that many for some reason prefer to let grandma starve (Well, not their grandam!) but,,, just shrug their shoulders at the theft of her contributions to fund the empire wars and deaths of mostly young american soldiers and countless other social give aways. Let me share the scam many are doing which is exacerbating the social security funding problem.
Little Jenny , who is on disability, gets knocked up while out and about. Has a couple of kiddies but no resources to care for them. Lives with Mom and Pop who partake in her disability payment. Then Pop gets ill and soon it'll be curtains for him.... What to do? Well, First adopt little Jenny's offspring. Then when Pop exits,,, Social Security will pay Mom $1700 per month if she is caring for children, plus $1700 per child. Poor Mums bringing in $5100 per month until kiddies are 18yo. But I digress....
With the millions of boomers paying into SS over the past 60 years with even the most mundane handling of the funds,,, SS should be overflowing with dollars.
In our current societal and financial environment, if you can't put your hand on it anytime, CHANCES are it AIN"T there...You can take that to the bank [being what banks are nowadays, even that trite statement has lost ALL meaning]...
digitaly speaking
is cybermoney real?
make sure what you have in your hand is useful when the cloud disapears
click
delete
in CA the state has to make up the difference, the flowchart isnt a closed loop, when the state workers pension fund turns insolvent, then the state could spiral into bankruptcy. you cant run a state for the primary purpose of funding the state worker retirement fund. so voter revolt would be forthcoming. i am pretty sure the fund is based on 8% a year, using all sorts of fancy derivatives, i believe its Goldman who runs their fund, i know that Goldman was accused of front running their trades, haha... this is one of the big reasons why the fed reflated the stock market, and said piss on main street. the firewalls here dont exist, and with obamacare the states have taken on a bigger responsibility to underwrite state medicaid patients (obamacare is basically corporate welfare for health insurance companies, they take the premium then dump the patient onto state programs when they get sick, to make this bitter pill more palatable, obama promised more federal money for state medicaid programs, so the flowchart widens out to reach all the way to washington, and so washington calls janet yellen and says juice the market, my dear, and goldman gets filthy rich, and thats where we are..)
Lord knows the reasons for such a priority on zombies pensions padded by tax theft but,,, those pension plans that are short a few bucks
can join the rest of us poor bastards they're robbing!
Anyone that's shocked has had their head in the sand. An intentional disregard of reality.
Imagine what happens when retired cops, fireman, and miltary get cut off. You know it's coming. In Zimbabwe, Mugabe put the printing presses in overdrive to patronize these sectors. Kept them loyal for awhile. Until prices quickly caught up; so he fired them up again. Where does that lead? Yep, hyperinflation, and it's inevitable. Locate the nearest lifeboat.
In Roman times, it was decided, after deep consideration, that the slaves would not forced to wear the same identical attire so that they would not notice their great numbers (strength in numbers).
I'm sorry,,,, I live in a Constitution Free zone and therefore cannot give my opinion on those poor, poor under class army of government employees whom etch out a living even at their meager salary and have nothing extra for retirement. /s
ponders why underfunded state pension funds aren't systemically important institutions and need to be subjected to stress tests, say using 12 year returns from the Nikkei from 1991 (39,000) to 2013 (8,000) as one scenario. Japan experimented with the first zero interest rate as a means to fund its fiscal deficits and solve its unfunded pension liabilities.
ponders also why dc schemes where the individual is at risk, use the odd trillion dollar of target date funds as a default option (with 90% equity allocations for 25 year olds, dropping to a mere 40% for 60 year olds) and are not subject to stress tests or are not treated as systemically important when they clearly are going to affect the odd 40 million workers and increasing (and by more and more as contributions, hopefully, accumulate into capital).
ponders also what the growth rate would be in the US today if the insolvent banks and government agencies of ten years ago had not made promises they knew either they or the people they advised, could not possibly keep. my bet is 7.5% growth from a lower base of economic activity in 2011, but on a much sounder footing without the perpetual "how do we keep kicking that can" logic.
if i borrow 10 bucks from you for a week, come back a week later and say "umm haven't got it, but lend me another ten and I will pay 20 bucks net week" then do that for another 100 weeks, you are either a fool or you have broken my knee caps and arms. the downside of protection rackets at government or individual level is that physically damaging the borrower, reduces the ability to repay...whether that is greece, ukraine, puerto rico or state pension funds.
people who only elect leaders to manage the affairs of borrowers who have no understanding that debt accumualtion = poverty damage others as well as themselves.. what to do? maybe change democracy so you only get a share of the democratic vote according to the degree of taxes you pay. the more you pay in taxes/have paid in taxes, the more say you have if you don't pay taxes you dont get to vote: people in retirement can be exempt, provided they have paid taxes over their working lives.
Here you see one reason why I decided to exit insurance and financial services as a whole quite some time ago. Yesterday, I was acknowledging myself as a former bankster. Bankster is a derogatory term I only applied to myself and nobody else. And I only did so because I became reasonably aware at the time of what was going on and going to happen at an increasing rate over time to the hard earned currency of others as a result. But I have learned exponentially more since that time. Almost nobody will like or benefit from what is coming down the financial pathway. I wouldn't want to see Europe be the first target with all these bailouts. And so I've done my part. Not only to withdraw my consent for what will transpire but in my own small way attempt to atone for any past transgressions.
Banking and insurance are exceptionally valuable industries. And there are many hard working honest people, as there are in ALL sectors, that have to remain in their positions in spite of the current state of affairs for a whole variety of reasons. Often just in order to survive. Many do not realize what is in store for them on the current course.
And with all the cover-ups, terminations and even corporations getting cut off for trying to do the right thing and atone for the wrong they've done it is not to realize why nobody will step forward. The one's that do risk everything. Now that takes courage. I am actually proud to see corporations stand up to this. Not many do. And when a ratings industry refuses to publish accurate information in the West then the East retaliates and downgrades that company. As I've said many times before this is a global issue requiring a positive global solution for everyone.
It is not often you see corporations take big risks that could negatively affect their books and shareholders. They are the ones that should be rewarded with new business and customers for doing the right thing. Just as whistle blowers should be protected and rewarded for taking the right path. That will happen. Maybe not yesterday or today but soon. And faster with your assistance.
Since, based on my knowledge and experience, I can unequivocally say that these two industries are sewing the seeds for their own self-destruction. A significant or complete loss of your customers trust. This will engulf many allegedly too big to fail corporations or subsidiaries. In addition, these industries are contributing to a much larger and more disastrous course globally. Paul Craig Robert touches on a portion of this well and includes his political experience too. Additionally, I may even have a greater awareness of what is specifically going to happen than many of those inside the industries. And especially far more than many of your customers who rely on your expertise to protect them, their families, their assets and their future.
It is my moral obligation and duty to caution all of you, both businesses and customers, against continuing down the current path. You too, like your colleagues in Government, need to take the steps necessary to seek out your visionaries, protect and reward the whistle blowers and join forces to change the end result. Are you, like I asked some of your colleagues in Government, willing to unite and take the necessary steps to help correct what is broken so that we may all find ourselves on the right path? I can only provide that answer for myself and my family. Now it is up to each of you to decide what you will do. Choose wisely. I know I have done so and would support and welcome those of you that choose a similar path.
My warm regards go out to my friends, family and former colleagues still in these industries.
Consider me shocked......NOT