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PIIGS In America: Is Illinois Preparing To Request A Federal Bailout?
Moments ago we saw the following amusing headline crossing the BBG:
- ILLINOIS TEACHERS' PENSION FUND CUTS RATE OF RETURN TO 8% FROM 8.5%
It's amusing because these are the same teachers who were demanding, and received, higher pay - 17% higher over four years in fact - following a several day strike. It is even more amusing considering that in a fiscal year in which we saw QE2, Operation Twist 1 and 2, and LTRO 1 and 2, the nation's largest pension fund, Calpers, managed to eek out a measly 1% gain (and this is including the end of June surge following the then announced European bailout which turned out to be yet another dud). It is, however sadly, most amusing, because it may be a harbinger of something truly sad: the advent of the "PIIG bailout" to America, when a US state demands a Federal bailout. We have seen how eager Europe has been to bailout its insolvent nations. We are next about to see just how "united" the US is when its own solidarity is tested as state after state repeat the European bailout experience. But hey: at least we have the dollar so all should be well.
From the WSJ:
Now that Chicago's children have returned to not learning in school, we can all move on to the next crisis in Illinois public finance: unfunded public pensions. Readers who live in the other 49 states will be pleased to learn that Governor Pat Quinn's 2012 budget proposal already floated the idea of a federal guarantee of its pension debt. Think Germany and eurobonds for Greece, Italy and Spain.
Thank you for sharing, Governor.
...
Illinois now has some $8 billion in current debts outstanding and taxpayers are on the hook for more than $200 billion in unfunded retirement costs for government workers. By some estimates, the system could be the first in the nation to go broke, as early as 2018.
For years, states have engaged in elaborate accounting tricks to improve appearances, including using an unrealistically high 8% "discount" rate to account for future liabilities. To make that fairy tale come true, state pension funds would have to average returns of 8% a year, which even the toothless Government Accounting Standards Board and Moody's have said are unrealistic.
The city is already facing upwards of a $1 billion deficit next year with hundreds of millions of dollars in annual pension costs for retired teachers coming due. But despite the fiscal imperatives, the negotiation didn't even discuss pensions. The final deal gave unions a more than 17% raise over four years, while they keep benefits and pensions that workers in the wealth-creating private economy can only imagine.
As a political matter, public unions are pursuing a version of the GM strategy: Never make a concession at the state level, figuring that if things get really bad the federal government will have no political choice but to bail out the pensions if not the entire state. Mr. Quinn made that official by pointing out in his budget proposal that "significant long-term improvements" in the state pension debt will come from "seeking a federal guarantee of the debt."
So when the time comes to bail out Chicago we can just tell America's insolvent state(s), who will soon pursue the MAD strategy of Europe's PIIGS, to demand a bailout with the ECB. We are confident the ECB will be more than happy to comply: after all quite soon Mario Draghi will realize that his goal should be to push the EUR down not up, and taking on more and more bailouts and money printing is precisely what he should be doing to once again retake the lead in the global FX race to debase.
After all, as it was already made clear earlier, Obama's promise in exchange for European votes, is to bail out Europe. It is only fair that Europe reciprocate after the election.
Quid pro quo.
And now: the End of the Beniverse
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There is no way that the expected returns from a pension plan can be over 6% from here because the only return available on bonds is the yield to maturity and investors can not therefore expect to earn over 4% given current interest rates in the bond market. Historical returns from much higher interest rate levels are not now relevant. Given a deleveraging global economy a long term investment the return in the stock market should not be above 7% which is the long term growth in revenues. Using most asset allocations the return assumptions should therefore be 5-6%. Using these assumptions, which of course are before the investment managers take out their managment fees, the government pension plans are broke and the pension consultants should be sued for allowing higher assumptions.
When exactly did all these administrator salaries go ballastic? Or did it just creep steadily upward over the decades while nobody was looking? Hospital Administrator making $1,000,000? School District administrators by the thousands making $300,000 or 400,000? Town and Small City administrators making hundreds of thousands? These are simple minded jobs that any schmuck who has an iron-butt for sitting in meetings and knows how to glad-hand can do. Climb to the top of the pyramid of paper-pushers and hit the jackpot. Administrators do nothing that is truly productive.
At some point the big bubble of make-believe will burst and everything will reset back to what can actually be afforded. At that point public worker salaries will drop like a rock and pensions will be capped at something like $2000 a month. These buffoons worked an average administrative job; let them live an average retirement.
Well, historically, it was during the Wilson "administration". Especially when he was additionally comatose, then his "administrators" did stuff that pushed things to the breaking point in the late 19-teenz.
Why are the numbers so large. Check out "Kemper-Tregoe" on the wiki for a view as to how the manipulation occurs. You know, it is "rational" to have these increases.
- Ned
Actually, that's "Kepner-Tregoe," for anyone looking it up.
When? It was when being a Lib was no longer a capital crime.
The state thinks they can sell bonds at 1% but thinks it can earn 8% from investments. Doesn't add up to me.
New math: 1 + 0 + hopium = anything you want.
Not like you'll be around when TSHTF.
It's called 'Liberalism'.
You have no responsibility for anything, cuz Bush did it.
Rhymes with 'you didn't build that'.
your great UNFUNDED STATES OF ALLIANCE is about to crack.. hah... your united will be missing a lone star...sorry
Usa will be broken before EU...when the soldiers all over the world come back at home beaten and see what have been done to their country, they will revolt.. starting from texas.. sorry Ben.. your wealth effect have not reach your foot soldiers..
so government promices dont mean anything
We have a Bingo! Tell us Johnny, what did our contestant win?
Johnny: Debt servitude for life! Congratulations!
One does have to ask - how long will, say, Texas and North Dakota allow themselves to be taxed in to penury in order that Illinois teachers can have a lavish retirement or so that California can continue to provide in-State tuition for illegal immigrants?
Eventually, this all does fall apart - eventually, people will fight rather than allow this to go on forever. Hopefully, of course, we can over the next ten years install in government people at least remotely connected to reality. But if we don't then there will be a very difficult time for us.
Next ten years? I think you are being wildly optimistic in your assessment.
Lots of failed assumptions in modern Amerika:
1) shoving propaganda down the throats of innocent children is an "honorable" profession
2) there is such a thing as pensions, and they will gain a return and increase in value in perpetuity until the return of Christ and then it won't matter
3) there is a solution to these problems
4) we aren't bankrupt
5) there is infinite oil in the Middle East to bail us out, and when that runs out Martians will bail us out
Pigs in Outer Space: I thought it was Hitler video with Realtors selling empty Condos.....!!!
This is the biggest Ponzi scheme in the world. Those pension plans are based on assumptions that are not realistic and therefore they are unsustainable.
The problem - no politician is a enough of a leader to face those issues. Millions of future retirees will find that the pension they rely on is not there when they retire
It reminds me some corporate decisions that looking back seem completetly unreasonable, as REALLY? - http://rsilberman.com/?p=525 - reminds us of the New Coke, the Edsel, and the recent Adidas shoes. Someone should go into the management teams of those plans and ask them - "REALLY?"
Illinois won't be bailed out if Obama loses. There is no need. Unlike Europe, US States don't guarantee bank accounts, and most social programs are Federal anyway. Illinois will just have to break its unions, and life goes on.
Illinois break its unions? Dream On brother.
Tell me ...
who is the next GURU...
After all this central bank shit..intervention after intervention..eternity..
Peole need GURU'S, they need someone to look up.. its gonna be like this but who...you..
OK.. I tell you..todays gurus are HFT gurus..we all know that.. but who will be the next one?
UHFT ultra ..the game of speeding end up in Marion Jones in 100..what then ...LTFH or what..
no.. I think the guru will be
Tyler or something
Most likely another Hitler.
When primary wave 3 down hits full force, these pensions will be paying out pennies on the dollar.
http://bullandbearmash.com/chart/standard-poors-500-weekly-september-21-...
The Dow reads the same.
The impact will be devastating.
Like every other institution the labor class (teachers) are targeted as the bad guys.
In reality it is the ADMINISTRATORS that have ruined school system along with the Private Sector that is licking its chops over $600B in revenues if education is privatized. It is ADMINISTRATORS that are OVERPAID.
Teachers are a not an overpaid group. They are attempting to educate our future citizens.
How is it that people produce nothing but who extract and who do nothing positive for society make tons of money and poor teachers are targeted as being overpaid.
Good grief.
lol....get serious
No No No No No No..... Dumbass.... It is the fat cat UNION administors AND the non-union fat cat rich Administrators that are traitors AND the enemies of the people. The teachers are just a bunch of usefull tools. ALL of you bitches who work off of MY dime, will come some time in the near future where your vote only counts as only 3/5ths of a vote. That's right THREE FUCKING FIFTHS. Fucking unions!!!!
And the Brown Shirts bear no individual responsibility for the acts they perpetrated under the administration of Hermann Göring...
An 8% return is a drug induced fanasty, I would be happy with a relatively riskless 4% RFLAMO!
Could be that they just finished negotiations with Los Zetas for the distributions rights in Chicagoland
It's not Los Zetas in Chicago.
The wimdy city is the exclusive turf of Sinaloa Cartel and DOJ.
Chicago is the exclusive turf of Sinaloa Cartel and DOJ.
What else would you expect from the state that gave us two of the worst presidents in history - dishonest Abe and Barry Obamo......yes my home state that great state...........
Must not forget the Chicago politic hacks are running the show in Washington. If Chicago needs a bailout, the check will be written out the next day. The rest of the country pays the bill.
Just another shoe ready to drop, in a closet FULL of shoes on high shelves.
Bitch about this specific bailout claimant all you want, doesn't matter so much which group it is this time. As long as we are Japanified by psychopaths in the global elites, this type of pension fund stuff is just collateral damage...literally.
The shoes dropping like this, drip drip drip, is the very essence of Japanification. The minute you think you get a leg up, BAM! Another 'crisis' needing 'resolution'.
Just wait for the life and health insurance shoe. Man, that's a fucking big shoe.
since we're talking about schools-there has been an explosion of heroin use in IL suburban schools. I saw j ventura point out the other night how alot of the heroin production declined when al quaeda shut down the poppy fields in Afghan but now that the USA is running things over there our schools are flooded w/ the shit again-coincidence?
Oh, check this one.
http://www.reuters.com/article/2012/09/21/liquidnet-layoffs-rbc-capital-idUSL1E8KLFZU20120921
Soon, the Fed/Gov will bailout NYSE and Nasdaq. Wait, juuuuuuuuuuuust wait.
Calpers are already under Fed umbrella, nobody really cares about them any longer.
since I live in Illinois I have mixed feelings about a Federal Bailout of Illinois. Yes I know a Federal bailout would be stealing money from the other 49 states . However , if we don't steal the money from the rest of the country. I will have to pay more in taxes. So I guess reluctantly I have to support Gov. Quinn, aka Elmer Fudd, in his effort to shake down the rest of you. So Game On. We may be out numbered 49 to 1, but we have a guy in the WH and as we say in Chicago , the fix is in.
PIIGS in District of Columbia
A small bit of history to help you see thru questionable times.
Benazir Bhutto Says Osama Bin Laden Dead In 2007!
Next..
Benazir Bhutto's Assassins SHOOTING
Lastly..
President Obama on Death of Osama bin Laden
Some slick cats in DC think they have all their lies covered. Something woke me out of a dead sleep to log into Zero Hedge at 3:50 AM and post this. Cannot explain.
you saw bin laden's ghost holding hand of that of Benazir's?
Two ghosts who want to be heard in the book of true history; not of political witchdoctory?
Imagine if they could come back and give testimony!
What would JFK's have to say about that of LBJ's and CIA company shills now all zombies?
Its the stuff that spook stories and his-stories are made off; "here's looking at you kiddo!"
or, "this is the beginning of a beautiful friendship!"
No state bailouts no rise in oil prices no inflation no drops in stock prices no tax increases no rise in insurance premiums until after the reelection of Obama. Then the feeding frenzy begins. It can only go one way,its in the cards.
Looks like your five-year MSM losing all credibility prediction is coming true Tyler.
--
Distrust of media hits record high
Published: 21 September, 2012, 22:04
AFP Photo/Greg Wood
There’s something you should hear, but we’re willing to bet you might not believe it. The results of a new Gallup poll reveal that Americans’ distrust with the media is more severe than ever.
Gallup released findings from one of their newest studies on Friday, and through their research the polling group has determined that more than half of Americans have little to no trust in the mainstream media. According to the group’s findings, 60 percent of Americans polled say they have “little or no trust in the mass media to report the news fully, accurately and fairly.”
//...//
The results of the Gallup study come close to mirroring statistic from a similar poll conducted recently by Public Policy Polling for Daily Kos and the SEIU. When they asked around one month ago if Americans had a "favorable or unfavorable" view of the political media, 78 percent of those polled said they were more than weary of political journalists.
http://rt.com/usa/news/media-gallup-percent-trust-682/
--
This appears to be about a little more more than mere dieing newspaper empires.
The MSM is bought and paid for by the add counsel.
We're the PIIGS in Ameeeeeerica wo-o-o
We're the PIIGS in Ameeeeeerica wo-o-o
And all the bailouts go ro-ound and roooooouuuuuund
Yaaaahhhhhh!!!! Daahh-Dada-dada! Yaaaaahhhhhh! Daaahhh- Dada! DAh!!!!
I have had this song in my head since this has been the headline...........
The states built that federal government (and when some states saw the error of their ways over 600,000 lives were lost as a sacrifice to the central power gods) -- too big to fail too powerful and corrupt to shrink
Some time during obama's 2nd term the federal reserve will own many states. You will be making your vacation plans to see the golden gate bridge via the travel division of the federal reserve.
Is that way Draghi/EU prefers Obama to stay presie for the second term?
Any mention of an Illinois bailout this close to the election is a set up to embarass Obama.State bailouts are a possibility but the purpose of the timing is transparent.
Just as transparent as the health care law 4 years ago from now, and it became "We had to pass it so you could find out what's in it" What was in it was money for cali to continue building bridges in cali on the US taxpayers dime, what's so different now??
Save the publik sektor pension funds .... confiscate the gold of publik workers and retirees .... it was acquired crimminally ! Redistribute their gold with their fellow employees .... better yet, give it back to the tax payers who couldn't afford to buy gold ! You can still buy a lot of gold with a $900k yearly pension .... especially if you cash it out with those people who cash out lottery winners ? Lottery winners = Retired bureaucrats ! Gov. pensions = Windfall profits !
Form neighborhood "Acorn" style groups and go visit your retired bureaucratic neighbors .... throw their own shit back at them .... mark their houses with pigs blood .... it's easy to find the bureaucrats .... they're the ones with the new cars ! We are the French peasants .... they are the Government Privileged .... give them the Socialist redistribution they planned for the rest of us !
It's not about jobs. If it was, we'd be building highways and dams in every state. The Fed/Bernanke are doing their damnedest to reflate the country (and reimburse the bankers) back to where we were in '06-'07. Fuhgeddaboutit. Demographics alone show that all those big spending boomers in their peak earning years are now purchasing their cemetary lots. It's over and it ain't coming back. The natural deleveraging/deflation re those ridiculous years that's going on now cannot be stopped. You can't force inflation on people either. You can stick a $1,000 price tag on a banana but if all anybody's got is a buck, that's what it will sell for. In the end when all anybody has left to their name is 100 bucks, 100 bucks will be a lot of money.
LOL
anyone with half-a-brain knows that they are not going to receive this money. once the cutting is done, they'll be left with a
5K a month retirement salary.
jb
Illinois is Obama territory, so it should be a problem? Will it be? No.
The opposition, Mitt (what kind of name is that?) is too stoopid. Do all republicans have silly names like Newt and Mitt? They should be named Joshua or some other bible name, because they are so Evangelical=Jewish.
But the liberals are ones who are really fokked up the behind and they still vote for O'bummer. Why? No alternative
OVERDUE CORRECTION LOOMS:
Due to recent central bank intervention and short covering spikes, all these daily charts are extremely overextended & a significant correction is expected very soon ~ SPX, DOW, NZDUSD, GBPUSD, AUDUSD, COPPER, CRUDE, GOLD, SILVER.
http://www.zerohedge.com/news/2012-12-24/market-analysis
http://trader618.com
Illinois is the supreme PIIG of the world. Speaking of education in Illinois. By the time I got into school I already was ready for 5th grade and just tuned out after 1st grade, until college. In retrospect it was probably a bad idea since the only thing that governs your life in this world is that stupid piece of paper or your GPA. These overpaid slackers need a 80 percent reduction in pay and pension. I never learned anything in school other than what came from a book.\
God help us.
Police and fire protection nationwide soon to be a 44 magnum and a fire extinguisher. Oh wait, I live in Chicago, same as it has always been. When public workers no longer get paid, be ready. If the Bamster loses in November it will be burn baby burn in the hood, not looking forward to that. 1968 all over but on steroids.
It should be noted that Chicago Public Schools has it's own pension fund, seperate from the state's Illinois Teachers Pension Fund for any school districts outside of Chicago.
Mike Madigan's plan is to shift pension obligations back to the individual school districts, which would result in massive peroperty tax increases around the state. Pat Quinn, looking towards reelection, is not keen on that idea, so he is seeking a federaal bailout. "Blame Blagojevich" will be an emerging theme in 2013.