Zero Hedge: 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. more …
Opinion: December 20, 2016 Fox Business: “The unthinkable just happened: For the first time in its 85-year history, the California Public Employees Retirement System, CalPERS, is drastically cutting benefits for public retirees.”
Dallas News January 19, 2017: “Dallas pension director blasts city’s plan to end pension as ‘worst display’ of ethics she’s ever seen.”
Dallas Pension News February 5, 2017 : “Dallas’ pension misery has company in Houston. Like Dallas, Houston is staring down billions of dollars in future pension payments that it can’t afford — and it needs the state Legislature’s help to fix it.”
A pension plan is a promise to pay a benefit to employees upon retirement. Back when interest rates were high, that was fairly easy to do. A significant percentage of the pension plan money was/is invested in high grade government bonds to keep the plan safe.
Then the unthinkable mentioned above began. Short term interest rates began to fall due to the government induced housing crisis, and the Federal Reserve kept them down for 10 years with money printing schemes, in a futile effort to stimulate the economy.
Bond yields plummeted and so did pension plan returns. Stock market returns were not sufficient to make up the bond shortfall.
The problem, Virginia, is that Keynesian academics from the progressive left pegged pension benefits to an 8% return that has not happened since Adam, and there is simply not enough money to pay promised benefits.
- CalPERS has a 10 year return 5.1%
- Dallas police and fire pension has a 10-year annualized return of 2 percent
Revelation 6:5-6 calls for a global economic disaster that has an eerie resemblance to hyperinflation i.e. a days labor for a days food, and only the uber-rich, symbolized by the oil and wine are unscathed for a time.
Government debt is exploding all over the world making a bail-out of pension plans near impossible. With drastic cuts or elimination of pension benefits combined with run-away inflation, it is not hard to connect the dots.