Are Collapsing Pensions "About To Bring Hell To America"?

Tyler Durden's picture

Authored by Mac Slavo via,

The toxic dollar is bringing hell in a handbasket.

Along with the student loan debt bubble and other major financial factors, the looming pensions crisis is bound to be the death of us all.

Because it’s based on a future promise to pay, it has long been a benefit dangled to solve strikes and union disputes – because, in the end, it is just more debt, whether private or public.

With tens of trillions in unfunded liabilities, the weight of an avalanche remains dangling over our heads. An aging population is cashing in on needed retirement benefits while the younger generations must support multiples that are unsustainable financially.

Somewhere between the retiree that needs clothing, food and lodging, and the bankruptcy of cities and state governments is the makings of the next economic crisis.


This is one of those things that few will pay attention to until it’s a 5 alarm fire. Then the policymakers will run around with their hands in the air saying they didn’t see it coming.


Of course they did. But addressing the problem is hard and will make people unhappy in the short term.

This blog pointed out the sad, and quiet fact that entities like the government of South Carolina are deep in debt over pensions. Everywhere there are failing social systems.

And somewhere, the rubber is going to met the road, and people are going to get hurt.

As SHTF previously reported:

In 2014 a new Federal law made it possible for pension funds to cut benefits for their recipients.


[I]n October of [2015] the canary in the coal mine fell over and died when Illinois announced that the State was posting pension payments because it ran out of money.


Fast forward a few more months and things have been taken to the next level. The Central State pension fund in Kansas became the first such fund to take advantage of the 2014 law as 400,000 Americans who depend on their monthly pension income to pay for such things as their mortgage, groceries and medical expenses saw an average of $1,400 per month sliced of their monthly benefits.

Unfortunately, there may be no avoiding some very painful lapses in checks in the difficult years ahead.

As Market Watch reports:

But take a look South Carolina’s government pension plan, which covers roughly 550,000 people — one out of nine state residents — but is a staggering $24.1 billion in the red.


This is not a distant concern, but a system already in crisis.


Younger workers are being asked to do much more to support the pensions of retirees. An analysis by the The Post and Courier of Charleston noted recently that “Government workers and their employers have seen five hikes in their pension plan contributions since 2012, and there’s no end in sight.” (Most now contribute 8.66% of their pay, vs. 6.5% before the changes.) At the same time, the pension fund has been chasing more stocks and alternative investments instead of relying on stable investments like bonds that may be much less volatile but generate only meager returns.


And if that’s not troubling enough, South Carolina’s pension fund is far from alone.


California’s Calpers public retriree system is notoriously underfunded and doomed to implode. Chicago, Detroit and other urban wastelands are sagging under abysmal debt. Dallas, Texas pensions went insolvent. Puerto Rico is nothing but a propped up holding corp(se).

Something massive has been swept up just under the carpet.

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swmnguy's picture

That whole song is full of lessons, beginning with the fact that it's 40 years old and maybe tells more truth today than it did then.

JRobby's picture

That's about how long they have been holding this fiction of a monetary system up. What a coincidence!!!!

swmnguy's picture

Interesting observation, indeed.  I believe it hit England before it hit us.

JRobby's picture

You Sir, see why the elite worry so much about "real" artists that deliver the message and can influence hundreds of thousands.

mary mary's picture

My taxes are going to the FED and the corporations surrounding it.

shocktherapy's picture


“retirement programs for former federal workers—civilian and military—are growing so fast they now face a multitrillion-dollar shortfall nearly as big as Social Security’s.

waterwitch's picture

for a glimpse of what that might look like, check out American Blackout

mary mary's picture

That's one reason Democrats are always against the Second Amendment.  You don't have to be young and spry to shoot well.

Mustafa Kemal's picture

Yup, hes "fighting fascsism and the US Gov. is fascism"



Tejano's picture

He's confused. A lifetime of smoking pot will do that.

mary mary's picture

He's not confused, and a lifetime of smoking pot will not necessarily confuse anyone.  Plus, I seriously doubt you have had a lifetime of smoking pot, so you are just blowing your wad in public, aren't you?

JRobby's picture

Tejano is just hoping his dick gets hard for a change. Not happening for him.......

mary mary's picture

Can't remember his name, but an American former Army Captain served Simon Bolivar pretty much throughout the entireity of his campaign against the fascist Spanish.  "Texas" reminds me of that Captain.  Trying to do the right thing.

And of course there was the Lafayette, serving George Washington during the USA Revolutionary War.

Plenty more examples in history.  Lots and lots of examples.  And of course the DeepState of their time and place always called them traitors and idiots.

GunnerySgtHartman's picture

HA!  Speaking of that, there was an 80-year-old guy in the local news who shot some home invaders.  When they forced their way in, he pulled out his pistol; they started to take off and he killed one with a shot to the back of the neck from 30 feet away (crack shot at age 80!) and wounded a second in the shoulder.  The third got away but was picked up quickly.  The old guy was hailed as a hero, as he should have been!

nuubee's picture

"The Mobility Scooter'd dead"

swmnguy's picture

They're buying a StairLift to Heaven.

mily's picture

I just can't wait for baby boomers to find out that pension system is FUBAR, imagine what that will do to consumption based 'merican 'conomy

bpj's picture

Hell, I am pissed because no one talked about government jobs in school. Being a baliff in Orange County Ca. has got to be the most primo job on earth. Start when you're twenty, work an easy, easy job where you can read tomes and no one will fuck with you. Then at fifty you retire and draw 90% of your base 50 for christ sakes.

Blankenstein's picture

Being a public school teacher in the Chicago suburbs might even be better.  Because in additon to retiring at 55 at 80% of final average salary you only had to work 9 months a year during your tenure. And you can increase your salary by getting a master's from a 4th tier diploma mill.  

2ndamendment's picture

Yeah, its almost as if you cannot promise people 80 to 100% of their salary and health benefits into retirement after a short 20 years on the job. I am talking to you, California and Illinois. 

IridiumRebel's picture

What schmucks. San Bernardino sheriffs making 120k after retiring from the force at age 52.

swmnguy's picture

That's what Civil Forfeiture is for.  That's why they include it in budgeting forecasts.  It's almost to the point of being a 3rd Amendment issue.

krispkritter's picture

Or the NY cop making $96k and retired at 42.  

swmnguy's picture

$96k in NYC?  That's not far above the poverty line.  Hard to spend less than $40k on rent alone.

Still, it's not a bad backup while you work another gig.

Blankenstein's picture

That's much better than the average bear.  The median per capital income in Manhattan is $67,000, so he's well above the median.  

swmnguy's picture

Wow, I didn't realize that.  I see nationwide median per capita income is about $30,200, so I guess NYC would be a little more than double that.

It's not easy to live anywhere in America on the median per capita income, if you don't have someone to share the costs with.

Blankenstein's picture

The median household income in Manhattan is $75,575 so he is still doing better even if you account for more than one earner.  Even with that, how people who aren't in the 1% can afford to live in New York is beyond me.

Blankenstein's picture

It's even better if you get to collect the pension and go back and work for the same department and collect another salary.  This is in Naperville ILLINOIS

"The dismissal of the state's appeal allows Marshall to collect his salary and police pension, which stood at $154,775 and $104,109 respectively last year."

"He earned a (28)-year pension serving the city of Naperville honorably, and he's entitled to have that pension," Radja said. "Just because he's a young man, a hard worker, doesn't mean he can't earn a salary at the same time.


"Marshall spent 28 years with the Naperville Police Department before retiring in 2005, when he became Naperville's assistant city manager. In May 2012 he returned to the Police Department as chief and chose to keep collecting his police pension while contributing to another pension system, the Illinois Municipal Retirement Fund, as he had done while assistant city manager."







Offthebeach's picture

In Massachusetts you're a loser if you don't have at least two govey pensions AND disability.

Aussiekiwi's picture

Interest rates close to zero, the FED deliberately threw everybody's pensions under the bus to save its banks, enjoy.

tmosley's picture

Raising interest rates actually help pensions though.

They just need to raise the rates to something that would actually resemble market rates, like Volcker did. 20-30%.

swmnguy's picture

Correct.  If interest rates were anywhere near what the market would dictate, there would be only minor issues with pensions.  But the allure of being able to impose a massive retroactive pay cut on workers was too great.  Artificially low interest rates have driven the stock bubbles while also facilitating the further looting of the American worker.

joe90's picture

In the long term. What's being paid out today is what was invested 10 + years ago, so it's the interest rates averaged over the term of the investment. Years of near zero interest will take years to negate.

Actuary's picture

Incorrect. Higher rates only change the present value of the obligation - not the obligation itself, the benefit payments.

The problem is the richness of the benefits. Why should a school district pay 75k for 30 years to a person who no longer teaches children? Just give her a damn 50% match on the first 4% to her savings plan like everyone else.

swmnguy's picture

I know a lot of teachers and I don't know anybody getting anything close to that in their pension plan.  Half that, sure.  Most teachers aren't getting $75k in salary, either.  Median is about $50k.  Very few jobs require more education and licensure in return for lower pay.  Maybe in coastal urban areas they're making $75k, but the cost of living is at least that much more than the median, also.

Ignorance is bliss's picture

Do rising rates actually help pensions? What about all the bonds already on their books? Those bonds took a shot to the nuts yesterday. Now the pension funds need to hold them for duration or take a loss.

tmosley's picture

Pensions usually do hold to redemption, rather than selling principle on secondary markets (to my knowledge). Unless they are liquidating it shouldn't have a super-pronounced effect (if they are liquidating they are screwed anyways). Certainly not much worse than the status quo. Market rates would allow new inflows to fund existing obligations until they get out from underwater. Need really high rates for that. Anything else and they all sink eventually.

Sort of like asking "does a rising tide help drowning people?" It certainly lifts all the ships that are still above the waterline.

pitz's picture

Actually pensions haven't been holding to redemption.  Nor have the banks or insurance companies.  They've been holding their durations high, to pick up extra yield over the years, as 'long-term investors'.  Achieving returns far in excess of the quoted coupon rates on account of the long-term falling interest rate environment.

Of course, mathematically this strategy completely breaks down as the interest rate cycle reverses.  Even if they switch strategies and hold to maturity, the best they'll ever do is the coupon rate, which comes nowhere near their return objectives for fixed income.

In short, FIRE is screwed in rising long-term interest rate environment, and that includes the pension funds.  Those who try to convince you otherwise are trying to sell you a bill of goods.

pitz's picture

Rising rates do not help pensions as the assets lose a lot more value than the present value of their obligations falls. 

Fund managers and bankers have been blaming "low rates", but in reality, the problem is excessive pension fund manager compensation, and excessive pension promises relative to contributions made and assets available. 

With higher rates inevitable, they're going to run out of excuses.  Falling rates have plumped up pension fund returns far in excess of increases in liabilities, and this excess, at least for the short term, has made them look a lot more solvent than they are.  Similar deal with insurance companies and financial institutions -- both of which are extravagant compensators and spenders relative to the value they create.

Dr. Engali's picture

Meh, just hit Ctrl-P, that fixes everything.

earleflorida's picture

Ctrl-D = Debt

US Taxpayers taxes will 'GO' up to satisfy the debt.

Yes they will be raised!

Realize that % payment on ~ 7 Trillion (foreign debt) without even raising the debt ceiling will add ~ $175 Billion to our debt without flinching an eye!

That's just 1/3 of our overall debt that we know of!

Ctrl-P will be a "'Fail-Safe' Nuclear Option", if and when WWIII starts?!?

ejmoosa's picture

I've said this for a while now.  Behind closed doors the politicians know this.


And that is why they have been so damned determined to open the gates of immigration into the US.  These Ponzi schemes need some fresh blood to keep the system afloat for another generation or two.

And by then, the current politicians will be long gone.


bpj's picture

I agree, they need youthful workers toiling and paying taxes because this pryamid is upside down big time. It is the only thing that explains why they threw open the doors to South America. However, the welfare may just cancel out the future return.

Defiated's picture

I've noticed the first thing immigrants do is apply for welfare and work for

cash under the table.....6 or 7 families combine income and buy a house...we, of

course, are astonished and appalled as we each need 1000 sq ft of 'space' per person

to live with dignity..(we think)

TheLastTrump's picture

25% of US school children are "immigrants".


Take this money & give it BACK to AMERICANS you fucks.