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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mary mary's picture

But did the banks in Cyprus take everyone's stock in Exxon, Deutschebank, Microsoft, etc.?   They didn't, did they?  You don't have to keep more money in a checking account than you need to pay your monthly bills, and if you don't trust your banker, why would you?

mary mary's picture

Even though Roth IRAs are composed of after-tax savings.  That is, money the saver already paid tax on, and was therefore, supposedly, "actually his".

all-priced-in's picture

The earnings inside a Roth are never taxed - when you withdraw the funds they are tax free. As long as you meet the requirements - 5 years invested - over 59.5 -- maybe a few more - but most people are nott paying tyaxes on their Roth withdrawls.


I have heard several members of congress say that it isn't fair when someone had hundreds of thousands of dollars in a Roth and a big chunk of it was never taxed - they want to make the income earned above a limit taxable.


Expect all of these changes to be made in the name of fairness - that is just another way to fuck over the people that saved and give it to the people that didn't.



Blankenstein's picture

THe earnings aren't taxed, but the money you put in the Roth was after tax.  

mary mary's picture

Yes, yes. 

Well, nobody made Congress create the Roths.  Congress created the Roths all by itself, and then offered them to Americans who had saved up money.  The Americans who signed the Roth contracts Congress asked them to sign are hardly being "unfair" to Congress.

I guess, though, that every year Congress includes more thieves who think they can get away more with saying that any (non-Banker/non-Church) American who has his own money is being "unfair", is a witch who needs to be burned at the stake and all her property conveniently appropriated.

I post here in an effort to keep the pressure back on such thieves.

Pitchman's picture

Many both within and beyond America's borders labor under the delusion that US policy is determined by the nation's elected representatives amid a careful balancing act between the judicial, legislative, and executive branches of government. In reality, the inner workings of US policy resemble nothing of the sort.


Exposing the Real Deep State


Grandad Grumps's picture

Yes, but the collapse in pensions and bank forced bail-ins will cause a bigger change in the people than they think. People will not become helpless. They will band into smaller groups for survival and create many centers independent from the global systems... and there will be a return to spirituality, which will make humans powerful and virtually impossible to control.

I do not think that this is exactly what the controllers have been planning.

swmnguy's picture

That's what happened in the 1930s.  It scared the controllers badly enough they let FDR bail them out despite their distaste for leaving even crumbs on the table.

Pvt Joker's picture

Chicago update :  with the city's bonds in Junk status what does our mayor do?  Stop borrowing?  Hell no.  last year he got the city a $13.5 million loan from Bank of America.  The collaterl?  the heating and cooling systems of about 60 public buildings.   So now , in case we don't pay, BOA has the right to foreclose and remove the heating and a/c pipes.

swmnguy's picture

Soon enough everything of value will be under the control of the lenders.  Witness the Alberta Tar Sands and the Bakken fracking operations.  All of it is completely fueled by debt, which is returning less and less and will not be repaid.  The problem then becomes the lenders'.  Sure, they'll own it all, but it won't be returning anything.  Bankers don't actually do anything physical.  They can't pump the oil.  And there's not much point paying somebody else to pump it, when it already wasn't returning enough to pay down the debt.  The system has to completely collapse before that makes any sense.

If BOA were to foreclose and pull out the heating and cooling, what then?  There goes their own revenue stream.  Ultimately, there's no winning this game.  The problem for you and me is, we lose first, before the lenders do.  How long that condition persists is open to question, as is our survivability through that window.

lasvegaspersona's picture

BoA to become a huge metal scrapper?

Wonder what they'll get per pound for copper.

silverer's picture

RonaldWilsonReagan, one our favorite ZH posters, would tell you it's a right wing plot, or they're just making it up, even though the Democrats have run the show in the cities for decades. It's never the Democrats fault. Republicans should just change themselves to Democrats, since a lot of them vote that way, but it would take away their favorite tool, the Blame Game, and politicians might be expected to be accountable. Not in a decade of Sundays.

Omen IV's picture

you dont getit - the lender forecloses and then shuts it down until a lease is signed as "operating agreement" not debt which has to be paid before debt to operate


unless they stop public schools all together the lender will be paid at probably default rate of 14%!!!!!!

Bubbette's picture

There are problems with government and private union pension plans.  Artilces like these need to keep them separate.  In California cities and public entities are filing in bankruptcy Court, but the bankruptcy Courts are not allowing the ridiculous government union pensions to be stripped.  Government union workiers can retire at age 52 to full pay plus the "biff" if they accumulate several years of overtime.  A firefighter reitred in Orida at age 52 to $256,000.00 a year plus a generous fully paid health plan.  These ridiculous plans are what is driving the pensions into bankruptcy, that and corruption.  Many times the government official negotiating with the union is a member of the union.  If you have a strong stomach:


There is an estimated $3-4 Trillion shortfall around the Nation in government pensions.

swmnguy's picture

The real underlying trouble is the artificially low interest rates, and the artificially high forecast projections allowed to justify inadequate contributions.  The payouts are a problem, but not on the same scale as the contribution shortfalls compounded by the low interest rates.  

The whole scheme was mapped out in the '80s, to help business shed unwanted fiduciary obligations, and to herd everyone into the stock market.  The US economy began its decline in the '70s, and the objective ever since has been to "extend and pretend" to keep the way clear for looting until the collapse became so obvious nobody could keep whistling past the graveyard anymore.  At that point, it all falls apart.  We aren't there yet, but the signs are coming faster and faster.

lasvegaspersona's picture

...but those with Social Security wil be OK......right....?

lakecity55's picture

Sure! Ya just won't get any!


SgtShaftoe's picture

They're hoping the other issues will come up first and mask the fallout. Looks like it could all hit at once. That will be just lovely...

Bill of Rights's picture

Oh knows another bailout coming for the insurance companies...

Nunyadambizness's picture

"Nothing to see here folks, keep moving."

How long have we heard this or something similar whenever someone brings up the problems with SS, Medicare, Pensions, etc., etc., ???  Now time is coming where all those Socialist promises are going to implode, and it's giong to hurt a LOT of people, though unfortunately nobody will likely learn and will fall for the next snake-oil-salesman promising them a full and complete retirement at the age of 45 after working only 25 years with the "Union" {or State. County, etc.).  

If it sounds too good to be true, it probably is.  Words to live by.

roddy6667's picture

Simple solution to the unfunded pension (and Social Security) problem. Start at the top. Reduce anything more than 75% over the median monthly payment TO 75% over the median monthly payment. This cap will work because there is no sympathy for these people and there are not enough of them to cause a problem. Can you see them demonstrating? They would be stoned to death.

lolygager's picture

Math hurts.


The concept of retirement and pensions/social security for all is purely modern. It is only in the last 100 years we think we can live the end of our time in a relatively comfortable financial position. We fail to account for the growth in populations, extension of life expectancy, stalling of wage growth and rapid increases and intensity of health care costs. This becomes really fun when some of these are setup for lifetime benefits. 

For example, I am in my mid 40's. by the time I retire, the average retirement age will be around 72. When I die, the average death age will be in the upper 80's. My retirement should last about 16 years.

It was not long ago that people retire at 62-63. Die about 74. They get about 9 years. As you come forward from the early 20th century (when these programs were concieved), you will see this widening of the retirement age and death age as you come to present day. God forbid there is a quantum leap in medical technology that will make that gap even wider. Largely these pension funds do not take this into account. If you have lifetime monthly payments and you are overshooting your stay by almost 2x, yes, funds will run out of money. Many of these governement based pensions pay out as function of the highest wage years towards the end of thier careers. Many of the "public servants" crank on the OT to drive thier W2 higher and thus rake it in at pension time...These people are just playing the game. Sadly it is our tax dollars they are gaming.

Any government based pension funds should dissolve and distribute present value to those that are getting paid and those that are paying (future payees). They should be allowed to transfer to the invenstment of their choice tax free to move the money over. Government and politics mixing with pensions are like taking hallucinigens while shooting guns. Both never end well




Don Sunset's picture

There is no way the local, state or FED GOVTs could afford to pay out a fair lump sum retirement to all the pensioners.

VWAndy's picture

 Define fair. Where I come from life aint fair.

Fr33m3n's picture

Fair is always subjective to individuals. Hell, based on the global insanity, where I come from, the birds sing a pretty song.

lolygager's picture

Not saying pay lump sum retirement. I am saying give up on the pension fund and liquidate to the pensioners and payers.  They would get pennies on their percieved dollar paid as pension.

mary mary's picture

That's mighty thoughty of you, Lolygager.  Would you also like us to go through our houses and box everything up and give it to you?  And how about if we sign contracts for our kids to work for you for free for the rest of their lives?  And deed the whole Planet to you?  Because... you know... you're special.

lolygager's picture

No, just stop throwing good money after bad in the form of taxes. It is a black hole, where does it end?  I am saying cut bait and call it a day. Split up whatever is left in the pension fund to those that have skin in that game. Get the government out of funding pension funds with tax dollars. 

The first step to getting out of a bad investment is recognizing it is a bad investment and stop putting in more money. 

mary mary's picture

No.  We have an alcoholic in the house, and that is the problem.  You are ignoring the problem, and instead attempting to distract our attention away from the problem, toward symptons.  If you "cut bait" by cheating one person today, the alcoholic will still be there tomorrow.  Who will you cheat tomorrow?  Who the next day?  When are you going to address the actual problem, the alcoholic?  The alcoholic is the FED.

Get thee behind me, Satan.

mary mary's picture

All I want is for the government to give me what I put in, one silver dollar for every dollar I put in. 

Okay with you?

"Present value" is actually a calculation.  I don't need a calculation.  Nor do I trust government to calculate honestly.

tbone10's picture

Maybe you fux and your grandparents will end up on the fucken streets

shortonoil's picture


Go long 12 gauge pump shotguns, and double 0 buck. Even an octogenarian is not likely to miss! If they start running in packs someones got a problem; its hard to stop someone that's almost dead anyway.

foodstampbarry's picture

I ain't payin shit. I don't have a pension and neither should they.

Vardaman's picture

Some people "bought the wrong paper."  Their creditors, their children and themselves will suffer immensely.  Short of gummint bailouts, no one else will.

CowboyzFan's picture

Except everyone else they do business with.  It's all connected.

Vardaman's picture

Uh.  Their creditors.  I said that...

CowboyzFan's picture

Yes, creditors...PLUS everyone they buy or rent goods and services from and everyone they provide goods and services to.

Unless you're a guy living off the land in the middle of nowhere, it'll be almost impossible not to be affected.

gregga777's picture

When the SHTF and everything goes to hell in the United States one of the dream jobs will be escorting the scammers who profited from bankrupting the pension plans to the gallows.  

VWAndy's picture

 Yall got ZIRPed and all the experts knew going in.

rf80412's picture

In theory, a pension bust will mean that the Boomers will be dependent on their children and grandchildren having good jobs.  Might lead to some progress.

crossroaddemon's picture

Fuck pensions... I'm halfway retired now at 43. The secret is low expenses, not shitloads of money.

Fed-up with being Sick and Tired's picture

Yet, guess what? THEY WILL TAX SOMEONE to pay it, and that might be you! I am 20 years older than you and I DO NOT FEEL SAFE with this load of shit coming down the track. If I were in my 40's, I would figure out a way to squirrel assets away OUTSIDE OF THE BANKING System, something that I simply trying to figure out.

CRM114's picture

I've figured out a way, but I'm not telling anyone because if it becomes popular then the Government will notice and do something about it.

Hint: You need something which is currently not regulated and/or low taxed, and/or hard for the Government to check up on.

TeethVillage88s's picture

Consider the word Jewelry as Tall Tom might say.

Jewels are kind of an age old means of wealth storage. Could be some people wear their wealth and carry lots of money.

But I'm not into Art or Jewelry. What have Jews done historically? Buy up debt or lead money to key city people in the black market (off official books).? Sow bullion into clothes?

TeethVillage88s's picture

SO ZH... is this true about all banks (90%) doing business in Cayman? Structure, Simplicity, External Auditing preserves integrity, honesty, accountability?

Cayman Islands Banking Supervision

- Government policy is to protect the Cayman Islands' status as a reputable international financial centre through strict examination procedures for new licenses and close supervision of the business of existing licensees.

The main government controls are...

- The appointment of a professional Inspector of Financial Services who leads a banking supervision team which examines all applications for licenses, makes recommendations to the Governor in Council -- the Islands' "Cabinet", which must approve all bank licenses -- and closely monitors the activities of licensed banks.
- Strict insistence on the submission of regular returns and compliance with all Government requirements, including an external audit by approved local auditors.
- The power to revoke a license if it is found that the licensee is carrying on business in a manner detrimental to the public's interest or to the interests of depositors and other creditors.

A number of features have enabled the Islands to attract and retain both wealthy individuals and major corporations and institutions. Some are obvious and frequently cited: political and economic stability; a business-oriented government; a tried and tested legal regime and an effective regulatory framework which meets international standards but is not burdensome or cost-prohibitive.

rosiescenario's picture

"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)."


.....and the Fed is attempting to bring down the market? That will really help the situation.