America’s Pension Bubble

ShadyDave

https://www.bloomberg.com/graphics/2017-state-pension-funding-ratios/?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social

This seems like it will be the next bubble to pop to me. I also think the student loan debt is a huge issue, but since it is almost impossible to get forgiven or discharged (unless you die), that will just handcuff the millenials and will cause stagnation for the US economy since many of my fellow millenials can't buy houses/get married/buy a car and spend $$& otherwise.

I live in Connecticut and the legislature has been under democrat control since 1959 (about 85% of the time). We have a ticking timebomb for teacher and state employee pensions, since they have been unfunded and under funded for decades. The burden is now falling on taxpayers shoulders to pay these bills that have been neglected for the last 50+ years.

We have some of the highest taxes in the country and business and the wealthy are fleeing, causing a vicious circle of ever-increasing taxes. Our legislature hasn't come up with a budget for 2018, so we're in a budget crisis and our Governer (voted most hated in the US) has emergency authority until one is passed. I know many other municipalities and states are going through the same issues. It will be interesting to see which big city/state will be the next to declare bankruptcy. The main culprit is pension and benefit obligations for retirees that were not thought out when being negotiated years ago. Plus life expectancy and healthcare costs are contributing to the issue as well.

If a Illinois/ New Jersey/ Connecticut/ Kansas declare bankruptcy, what do you think the US congress and rest of the G'ovt would do? From what I understand they would have to approve the state declaring bankruptcy. Thoughts?

ChrisRx

Pensions? What's that?

I am extremely lucky to be working for a company that has a pension, however, and I am greatfull indeed because Pensions are getting rarer.

I would be more "worried" about the lack of 401k savings in America...

hchcoin

Look at South Dakota on the table in your article 104.1% over-funded.

derryb

Just one more case of debt that will not be paid (take a look at the subprime auto loan and student loan problems). Economy is being strangled by easy loans (low rates and irresponsible lending) and unfunded promises (fix this with short term limits on all elected positions). As long as banks can pawn their loans off to someone else (as in the lead up to the last crisis), they will loan to anyone that can breathe. They should be required to hold and service a loan the full life of the loan. When the chickens come home to roost the eggs will be served on dollar toast.

The real question is "when will the taxpayers finally take a stand?" and of course the answer is never. Do not forget the business of banks is to loan, and the business of the Federal Reserve is to protect the banks. Fractional lending by banks should be reeled in and banks should not be allowed to deal in derivatives. If you wanna know how it got this bad just read up on repeal of the Glass Stegall Act.

Debt has been and continues to be the elephant in the room. The only thing that will ever clear the books is a reset. Keep stackin.

ranshdow

They'll confiscate our 401(k)'s of course.

derryb

@ranshdow said:
They'll confiscate our 401(k)'s of course.

And it won't even look like they stole them.

cohodk

They....they.

Damn they.

roadrunner

@ranshdow said:
They'll confiscate our 401(k)'s of course.

They will also be used to help pay off the $150 TRILL in US Bank otc interest rate derivatives when they eventually blow up. Not if....only when. The Govt QE spending spree since 2009 has staved off the inevitable a few years. And I don't blame them. Why not buy Stocks for central banks when you can buy them other people's key stroked debt-money? The BOJ owns over 60% of the Japanese ETF's.

https://www.bloomberg.com/news/articles/2016-08-14/the-tokyo-whale-s-unstoppable-rise-to-shareholder-no-1-in-japan

johnny9434

i hope the russians dont hack the system and steal the 401 k money. just saying

MorganMan94

@johnny9434 said:
i hope the russians dont hack the system and steal the 401 k money. just saying

Only if that "hacking" you are talking about is a poor excuse used to cover up your poor decisions and investments.

BAJJERFAN

IMO pensions like this are effen ridiculous.

rochester.nydatabases.com/database/teacher-pensions-new-york

cohodk

@BAJJERFAN said:
IMO pensions like this are effen ridiculous.

rochester.nydatabases.com/database/teacher-pensions-new-york

Obscene.

Baley

They suck

291fifth

Rather than worry about pensions we should be first be addressing the issue of gross overcompensation for top corporate executives. Watch out for those golden parachutes!

derryb

New "bail-in" rules put bank depositors on the hook for a bank bailout. I personally would not have a 401K with any bank.

ShadyDave

@BAJJERFAN said:
IMO pensions like this are effen ridiculous.

rochester.nydatabases.com/database/teacher-pensions-new-york

But think of the children!!! (sarcasm)

cohodk

@roadrunner said:

@ranshdow said:
They'll confiscate our 401(k)'s of course.

They will also be used to help pay off the $150 TRILL in US Bank otc interest rate derivatives when they eventually blow up. Not if....only when. The Govt QE spending spree since 2009 has staved off the inevitable a few years. And I don't blame them. Why not buy Stocks for central banks when you can buy them other people's key stroked debt-money? The BOJ owns over 60% of the Japanese ETF's.

https://www.bloomberg.com/news/articles/2016-08-14/the-tokyo-whale-s-unstoppable-rise-to-shareholder-no-1-in-japan

Very interesting. Imagine what would happen if/when demand increased. So little shares available to buy. Hmmmmm.

cohodk

@derryb said:
New "bail-in" rules put bank depositors on the hook for a bank bailout. I personally would not have a 401K with any bank.

Ira, 401k, and other retirement plans operate under the Dept of Labor.

derryb

@cohodk said:

@derryb said:
New "bail-in" rules put bank depositors on the hook for a bank bailout. I personally would not have a 401K with any bank.

Ira, 401k, and other retirement plans operate under the Dept of Labor.

@cohodk said:

@derryb said:
New "bail-in" rules put bank depositors on the hook for a bank bailout. I personally would not have a 401K with any bank.

Ira, 401k, and other retirement plans operate under the Dept of Labor.

Does not negate the fact that banks/financial institutions acting as custodians hold the IRA funds which also happen to be covered under the same FDIC protections as savings. When one of these large financial institutions goes under and depositors, without choice, have their savings converted into worthless stock of the failing bank while their cash gets applied to the bank's debt (the bail-in), only a fool would believe that IRA cash, held by the same bank, would be treated differently.

As a footnote be aware that in a financial institution failure the big derivative bets that banks make among themselves (gazillions of dollars) go to the front of the line in being made whole.

cohodk

What you wrote derryb is fraught with misinformation and speculation.

Let's just hope that someday demand for gold will increase beyond the rate that it is being mined and the price will rise.

johnny9434

@MorganMan94 said:

@johnny9434 said:
i hope the russians dont hack the system and steal the 401 k money. just saying

Only if that "hacking" you are talking about is a poor excuse used to cover up your poor decisions and investments.

understood(and thankfully not mine)

metalmeister

Our friend (Retired) has so much Pension money from the government coming in she can't spend it all. She is constantly traveling around the World on cruses and visiting 5 star spas. Our city manager retired in 2000 with a $400,000 annual Pension. Do the math.

jmski52

Why not buy Stocks for central banks when you can buy them other people's key stroked debt-money? The BOJ owns over 60% of the Japanese ETF's.

But, but, that implies that the central banks will eventually own.................everything..................bought with nothing but thin air.

in a financial institution failure the big derivative bets that banks make among themselves (gazillions of dollars) go to the front of the line in being made whole.

And unfortunately, not one person in 50 would know this, nor would they understand what it means to them.

Downtown1974

ALL federal and local government pensions should be calculated by the participants BASE pay. Overtime, bonuses, stipends, etc. should not be factored into retirement. If a librarians base pay is $70k a year, then that should be the amount the calculations are derived from. It seems like this ideology would have worked wonders in metalmeisters community. I don't know what a city manager earns, but I'm willing to bet it is no where near $400k a year. Especially 17 years ago.