Wednesday, October 14, 2009

Multiply by 50 states and the Feds....

Every pension plan is going bankrupt thanks to promises for the future based on results of the past. Basing retirement payouts on "bubble" returns has caught these programs with their pants down. Promising, in writing, benefits that can't be funded is all it takes to bring down the system.

We just have to watch over the next 7-10 years as all these millions of people  hit retirement age. That's government employees who vote. Give big bribes to the politicians. Hell, many are married or related to the politicians. Where do you think they will find the money to pay for all this , Hmm?

Not from me. I won't have shit left to tax. Social Security checks will barely pay the "green electric " bill. Foreigners? Think they'll have any money left?

Right now the rich are buying gold to "perserve" their wealth. Since their paper assets  pretty much melted away. Throw in the housing losses and most are technically bankrupt. So these people will be chasing any "safe" investment. Even if that "investment" is the government inflating their losses into the future.

Wait! We've been doing that. Probably why the 25 ct beer is no longer with us. Or a McDonald's combo for less than a dollar. 10 cent Pepsi? Or my favorite the 25 cent pack of cigarettes.

Of course, it will all work out with Oba mama in charge over the next decade.  Right?

Read the whole piece below and see what you think.

Mish's Global Economic Trend Analysis: Five Major Pension Problems - One Simple Solution
Unsolvable Problems

* Expecting 8% returns in a 4% world. When 30 year treasury bonds are yielding 4%, the dividend yield of the S&P 500 is 2%, and the S&P 500 PE is 140 (26 if you use operating earnings), 8% returns are from Fantasyland.

* Pension benefits start too early. People are living longer.

* Private employees do not receive these kind of benefits. Public employees should not either, especially at taxpayer expense.

* Indeed, continuing to chase high-yield in a low-yield world is a guarantee those plans will blow up again down the road.

* Pension plans are so underfunded that it is virtually impossible to catch up, no matter what risks the plan managers undertake. When asked how long it would now take for its investments to put the fund back on track, Ohio officials simply said: "Infinity."

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