Thursday, February 14, 2013

Unfunded Pensions and More

      Recently, a California resident and retiree sent us a note about seriously unfunded and over-subscribed pension funds in California and Illinois.  Normally, we would not include a response on this website, but the seriously bad financial state of America demands that we make as many people as possible aware of the severity of the problem.  As a starter, to get up to speed, just google pension funds in Illinois or California.  In my comments to him I just poured more gasoline on this already out-of-control fire.

      Yes, under-funded pension funds was part of the examination that was getting a lot of publicity, but zero attention about a year ago.  Fortunately, Tennessee was 47th out of 50 states that were essentially bankrupt, which is usually defined as not having sufficient assets to cover its liabilities.   But, all Californians are going to have to “pay the piper” and that crisis is not too far down the road.  Think you have tax issues now; just wait until these contract obligations hit the books!  As industries and the rich flee your state, you will not be able to cover those liabilities without huge hikes in taxes.  I just hope that Tennessee isn’t going to be expected to bail out California, because it is too big to fail.  The 1860 Civil War will seem like a mild skirmish in that case.  Most of the southern states are highly conservative and do not have the same public-sector labor corruption.
      But that is just the beginning.  The government backed student loan program was noted as approaching $ 1 Trillion in liabilities, greater than the credit card debt.  With the current feeble job market, much of that is not going to get repaid. 
      About 2016 we are heading into a confluence of financial disasters.  The Medicare/Medicaid cost explosion at the Federal level, baby-boomers expecting pensions at the State level and Social Security at the Federal level, and the students defaulting on school debt.  Then we have the potential collapse of the Eurozone, which WILL have serious collateral damage to our economy and ability to cover these financial obligations.
      Half of Americans THINK they are already paying for too much and the government has an infinitely large and bottomless piggy bank.  They are like Eleanor Cliff who said on Sunday’s McLaughlin Group, “What me worry.  We’ll figure something out when the time comes.  We always have.”  She reflects the mentality of the political left.  I’ve tried to deal with these people.  I think they live in OZ, where the wizard takes care of everyone.
      I am still hoping we can sell California (and Eleanor) to the Chinese before we are forced to surrender it to them to cover unpaid loans. It would be worth less in a surrender.
      Australia or New Zealand are looking better every year.

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