Monday, August 16, 2010

Eventually, Its Gonna Hurt

UPDATE: Founder Of Reaganomics Says That "Without A Revolution, Americans Are History"

Now you're talking.

I'm not talking about the markets. I'm talking about the unsustainable pension and social security promises and projections that are so ridiculous they will never be met. Yes, I'm talking about those plans where we've supposedly had our retirements secured and where the fruits of our labor apparently bloom on the vine. Well, you folks that think you have your meal ticket punched and that retirement will be all you ever dreamed of better get a clue. The next market crash will be the final blow to the pension industry (well, it is already blown, but they won't tell you that).

As a primer you we need to revisit this post from Mish back in April (near the top of the last correction!) Interactive Map of Public Pension Plans; How Badly Underfunded are the Plans in Your State?  Two or Three trillion, who's counting? Those are not such enormous numbers when you consider Cali is close to $500B on it's own. These simple stats should terrify you alone:

Public Pension Plans Less Than 30% Funded

Illinois SERS - 23%
Indiana Teachers - 26%
Connecticut SERS - 27%
Oklahoma Teachers - 27%
Rhode Island ERS - 29%
West Virginia Teachers - 29%
Illinois Universities - 30%
Kentucky ERS - 30%

This post 22 Statistics About America’s Coming Pension Crisis That Will Make You Lose Sleep At Night should keep you up at night. Number "17 - According to the Congressional Budget Office, the Social Security system will pay out more in benefits than it receives in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  The Social Security deficits are projected to get increasingly worse in the years ahead." There are 21 others that you need to read.

Denninger chimes in with Revoke Krugman's PhD (Social Security) "Those who believe that there is an actual "Social Security Trust Fund" are either lying or have an IQ smaller than their shoe size. Either way, listening to them and believing this tripe, if you're expecting to actually receive Social Security and structure your life around that belief, is a great way to wind up destitute, homeless, hungry and cold." I can not agree more. Karl does a nice job of pointing out that "As we have repeatedly seen these sorts of fraudulent accounting schemes are both extremely common in government and work really well right up until they collapse - and when they collapse they tend to do so without any warning at all." Yup, like the South Park vid on the right, annnnd ITS GONE!

So how does all this threat to retirement savings effect the economy? Well that is covered in the WSJ's Another Threat to Economy: Boomers Cutting Back. the best quote from this post is, "The impact isn't limited to people on the verge of retiring. Younger people, too, will have to reduce consumption now to save enough money to get by in retirement. That's one reason Richard Berner, chief U.S. economist at Morgan Stanley in New York, estimates that even after the economy recovers, consumer spending will grow at an annual, inflation-adjusted rate of about 2% to 2.5% in the long term, compared to an average of 3.6% in the ten years leading up to the last recession." I'll give the author a little slack (must be a newbie or something) for totally ignoring the 1,000 other issues other than interest rate risk. He must have had a "letter" quota he had to be under.

What will really destroy the dream? Zero Hedge (I hope I don't have a Bloggger etiquette issue like others here LOL) Matterhorn Asset Management There Will Be No Double Dip... It Will Be A Lot Worse the markets are going to get CRUSHED eventually wiping everything out and then (when we can finally talk about a real recovery) years later once the debt bubble has been eliminated it will all be gone. A nice post on Yelnick has a comparison from the 1937 crash in Market Still Following 1937 Pattern for those that subscribe to the this did that so it will so this theory. And thus you have the Fed and government's raging battle to keep the markets afloat at all cost of face total anarchy (where have you heard that before?).

POOF! Like in a David Blaine magic trick it will all be gone. Wiped out. Destitute and out of work Americans and millions without pensions will all rely on the new Socialist government. The American dream will be gone. The promise of a beter life will be dead, and we'll have to begin to look elsewhere. The bankseters, corporate giants and the government will have robbed everyone of their promised retirement savings. Folks, no one can imagine how bad this is going to get. I'll predict that by the end of 2012 most will have felt severe hunger pains, and all of us at one time or another will have been in the streets multiple times protesting against the government's policies very loudly. You have been hoodwinked and Argentina V. 2.0 will be America (OK, Greece may be 2.0 but we will be a subsequent version sooner or later).

Enjoy it will you still got it folks!

Thanks for the views and take care.