Pension System Failure Is Guaranteed

Scary title, huh?  Surely, one must exhibit suspicion if not outright derision at the title of this post.  But, to prove it, one only need pay attention, because the facts are right out there in the open for all to see.
 
Who is Bill Gross?  The CIA official take on him–from Wikipedia–is here.  http://en.wikipedia.org/wiki/Bill_Gross
 
He is lauded as the “nation's most prominent bond investor.”
 
What did Mr. Gross say today?  He said this, here:
 
 
and which was picked up by businessinsider.com, here
 
 
“The U.S. (and global economy) may have to get used to financially repressive – and therefore low policy rates – for decades to come. . . . the last time the U.S. economy was this highly levered (early 1940s) it took over 25 years of 10-year Treasury rates averaging 3% less than nominal GDP to accomplish a “beautiful deleveraging.” That would place the 10-year Treasury at close to 1% and the policy rate at 25 basis points until sometime around 2035! “[L]ow yields can become high yields almost overnight. But they should stay abnormally low. A highly levered U.S. and global economy cannot deleverage “beautifully” without repressive future policy rates . . . .” 
 
So, is Mr. Gross an outsider, a loon, or like us, all bedazzled with our silver tin foil hats reflecting the dim glow of the computer?  If you say Mr. Gross is an insider, an elite, I agree.  He may curry disfavor from time to time, and his style may be grating to some, but he walks the walk and talks the talk.  He admits candidly the truth: the Fed cannot increase rates towards the historical mean, for decades!
 
Now, let us all take a look at demographics and the ongoing retirement phenomenon.  Just do a Google search like “retirement demographics.”  Besides the glaring reality that the boomers as a group just did not save like their parents, and are thus heading off to retirement totally dependent upon govt aid, or those lucky ones, who get pensions, there is another factor to consider in all this.
 
The private pension system is structurally unsound.  What do I mean?  Look here, from Calpers:
 
 
“Assumed Investment Return Rate to Stay at 7.75 Percent,” from a press release on the Calpers page on March 15, 2011.  
 
Here is what Calpers invests in and their allocations: “The highly diversified CalPERS investment portfolio has an allocation target of 49 percent publicly traded stock, 16 percent bonds, 14 percent private equity, 13 percent real assets – real estate, infrastructure, and forestland – and the remaining 8 percent in smaller allocations in asset classes designed to minimize volatility and liquidity risk.”
 
Based on this allocation, Calpers says they will return an average annual rate of return of 7.95 percent: “As a part of its analysis, CalPERS staff, using the revised asset allocation, generated 10,000 investment performance scenarios covering the next 60 years. The analysis concluded that expected returns will average 7.38 percent in the first 10 years and 8.50 percent in years 11 and beyond, which resulted in a 7.95 percent average annual return over 20 years or more.”
 
So there you have it.  Who is correct, the bean counters at Calpers or Bill Gross?  Let’s look at the incentives, for some guidance.  Calpers bean counters have a vested interest to keep the discount rate high, so as to keep employees contributing to their fund.  If the discount rate was lower, then Calpers would have to ask that members pay more going forward, or would have to adjust benefits and projections.  Those in charge would have uncomfortable meetings trying to justify their investment decisions.  If Calpers raised its contribution rate, this could have the effect of reducing the number of contributing workers, because there could be backlash from new employees opting out into something different.  Finally, what happens if Calpers gets its comeuppance by a lowly bankruptcy judge from Riverside, California, who give Calpers a shave or worse?
 
How about Bill Gross and his incentives.  He has NO incentive to argue for fantasy rates of return.  He wants to make money for his funds, and his money is where his mouth is. He does not believe for one instant that the Fed can raise rates.  Rickards is in this same camp, too.  I mentioned what I believe about Rickards already.  He is a consummate insider.  He is not only talking his book, he is doing it convincingly.  So, IF Rickards and Gross are correct, and they most certainly will be absent some calamity or collapse [sorry Mr. Fix, I do not believe collapse is so imminently pending that I have hunkered down in my underground bunker just yet], then rates will stay LOW LOW LOW for quite some time, thereby calling into question the investment assumptions of pension funds all over the place.
 
I have not even touched the govt mess that is social security.  The sad facts are that the only solutions to the massive public debt: (1) payment thereof, (2) sudden default, or (3) stealth default by inflation, ALL result in retirees having dramatic losses in purchasing power when they most need it.  Even the lucky boomers with private pensions cannot count on those being solvent at the end. 
 
There is a solution, though.  This is a precious metals site, so perhaps the solution is also right there to see, if one could only see it . . .
 
Prepare accordingly.
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122 Comments

ArtL's picture

1st

1st Amendment of the US constitution

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances

The biggest problem facing the world's environment  "Global Warming" 

for a complete refutation of the Skeptic position see

kingboo's picture

"Oh counselor"

"Do I look destitute to you?"..... sorry.. I had to. :)

Bongo Jim's picture

Heh heh heh

He said "bedazzled."

Mr. Fix's picture

Always enjoy a bit of timetable debate, it's inevitable (4th)

Great post. Even if you don't agree with my “bunker mentality”, and that a collapse is a lot sooner then most people think, you do present it as an absolute inevitability, which I completely agree with.

So it's only a matter of timing, right?

This is one of those scenarios where you are much better off preparing years in advance, then allowing yourself to wait until it's even a day too late.

Once the populace realizes just how screwed we are, it will already be too late.

Besides, in the meantime I go to work every day just like you, and only delve into this economic Armageddon stuff as a late-night hobby, instead of watching the boob tube, which would be at least as entertaining.

As the first post mentioned in the video posted, that “global warming is the greatest threat to humanity”,

I profoundly disagree, right now, the United States government is far and away the biggest threat to humanity.

When their debt bubble finally bursts, far more people will die as a result than raising the planet's temperature a few degrees.

Of course, the pension funds are all bankrupt, but so are the operating funds of every government at every level within the United States.

When people stop honoring the dollar, and lose “full faith and confidence in the US government”,

the true value of our currency will revert to zero, it's true intrinsic value.

The Ponzi scheme that is the US dollar is unraveling at a blistering pace right now, all that is holding it up is the art of illusion.

Once that illusion dissipates, the consequences will be catastrophic.

Have a good night,

sweet dreams.

NW VIEW's picture

May we have other options??

Item # 1 - Payment (will not happen).

Item #2 - default (not  without a fast bail-in of all public assets)

Item # 3 - inflation (good choice but the dream of America will be over)

Additional :

Item # 4 - This land had bail-ins before wherein  the population lost almost everything that they owned free and clear.  Napoleon received about $15 million for the 828,000 sq. miles that he sold to Jefferson.   France received the money, America took title to the land, and the Indians met Custer and headed north to save what they had left.  That was their bug-out bag and shelter.  This is not new and lessons can be learned from history.   Lewis and Clark had to inform the tribes that the great white father now owned their land.   The rest is history.  When one is forced to grab their bug out bag and head for the hills, debt and assets (the balance sheet at home and for the nation), have little value.

These problems  and debts will not end well.  History is screaming at us.  The EE,  that has burned down the households of the nations with their greed, will have to stand in judgment.  "The Lord laughs at (the wicked) for He sees that their own day (of defeat) is coming".   Psalms 37:13

1 Founders Fan's picture

Fiscal Magic

Given that the largest portions of public debt are unfunded liabilities like Social Security and Medicare , another politically expedient method to extinguish the debt would be to lower the average lifespan.  Politicians love to avoid accountability and would welcome any method that reduces or delays the effects of their cumulative ill-advised promises of entitlements.  An independent body making life and death decisions within a socialized medical system could prove very convenient for the political class - not so much for the Baby Boomers.  Would that be called sudden default or stealth default via death sentence?  Either way, the number of concerned counter-parties would be reduced.  Financial repression (low interest, high inflation) alone will be detrimental to the health of many seniors, but really helpful in magically reducing public liabilities.

"Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent." - USSC Justice Louis D. Brandeis

“Indeed, in a free government almost all other rights would become worthless if the government possessed power over the private fortune of every citizen.” - USSC Chief Justice John Marshall

Strongsidejedi's picture

LIttle Lies by Fleetwood Mac

On behalf of the Turdite community, I would like to nominate Fleetwood Mac's "Little Lies" as an official theme song for the partial shutdown of the US federal government and the pension system of the US government, state and municipal governments, and large corporations.

(NOTE:  ALL PHOTOS IN THIS ESSAY ARE FROM THE LAST 12 HRS)

Songwriters: MCVIE, CHRISTINE / MENDONCA, EDDY QUINTELA
If I could turn the page
In time then I'd rearrange just a day or two
Close my, close my, close my eyes

 
But I couldn't find a way
So I'll settle for one day to believe in you
Tell me, tell me, tell me lies
 

 
Tell me lies
Tell me sweet little lies
(Tell me lies, tell me, tell me lies)
Oh, no, no you can't disguise
(You can't disguise, no you can't disguise)
Tell me lies
Tell me sweet little lies
 

 
Although I'm not making plans
I hope that you understand there's a reason why
Close your, close your, close your eyes

 
No more broken hearts
We're better off apart let's give it a try
Tell me, tell me, tell me lies

Tell me lies
Tell me sweet little lies
(Tell me lies, tell me, tell me lies)
Oh, no, no you can't disguise
(You can't disguise, no you can't disguise)
Tell me lies
Tell me sweet little lies

 

If I could turn the page
In time then I'd rearrange just a day or two
Close my, close my, close my eyes

But I couldn't find a way
So I'll settle for one day to believe in you
Tell me, tell me, tell me lies
 

 
Tell me lies
Tell me sweet little lies
(Tell me lies, tell me, tell me lies)
Oh, no, no you can't disguise
(You can't disguise, no you can't disguise)

Tell me lies
Tell me sweet little lies
(Tell me lies, tell me, tell me lies)
Oh, no, no you can't disguise
(You can't disguise, no you can't disguise)
Tell me lies
Tell me sweet little lies
(Tell me, tell me lies)

California Lawyer's picture

Timetable Debate

Mr. Fix: I too enjoy debating the great question of "when." I had to challenge my beliefs because way back in 2008, I was so firmly convinced that the collapse was imminent that I grossly misallocated my time and resources. Now, five years later, wiser for the lessons learned, the first thing I do before springloading immediately to the "collapse is imminent" mindset, take a deep breath and go look at the preps that I have already undertaken. If there were an imminent collapse, then I would just execute the plan. There would be no histrionics, no dithering, just somber carefully thought out steps done in a methodical sequence.

So, collapse, if it happens, even though it seems inevitable and scary all at the same time, is just one more thing to have prepared for. To me, life before children was extraordinarily different. Now, I cannot imagine not having my wonderful family. I prepared for having a family, and now I am just living life. Life will go on, even during and after a collapse. Life will just be different is all.

I would prefer that a collapse not occur, but it seems absurd to believe it won't. So, the only question is really proper preparation, mentally, physically and spiritually.

In that regard, the "when" question slides down the list of things to dwell on, as I already undertook tremendous preps in a state of anxiety.

The best thing to come from believing in imminent collapse was that I decided to stop drinking, because I did not want to have to endure forced sobriety under extreme circumstances. Now, I don't miss it at all. Strange story, huh?

But I will keep thinking on the timetable issue as always. Thanks for your post. I appreciate it.

Occasnltrvlr's picture

I Think Catherine Austin-Fitts...

...is right.  The collapse has happened, is happening, and will continue to happen.  It's happening one person at a time, so as to "not be televised."

However, there is also the position espoused by Lindsey Williams, that there is a planned, future, world-wide, derivatives-induced simultaneous collapse of all currencies.  That's scheduled for after full implementation of Obamacare, parts of which have been put off until Jan. 01, 2015.

Frankly, I think the wheels are starting to come off, and the timetable for the orderly collapse envisioned by Chaplain Williams's friend is going to be sped up, and will happen in a little less-orderly fashion than they'd like (thanks in large part to the likes of Putin and alternative media).  But, not tomorrow.

AlienEyes's picture

Unfunded my ass!

Hundreds of billion in FICA payments were "unfunded" when the rat bastards in congress "borrowed" the money.

If they paid it all back with interest SS wouldn't be so unfunded. Using socialized welfare to decrease liabilities by croaking old people has a flip side with remedies called votes and lynching. I can think of a long list of members of congress that would look really good dangling at the end of a rope. The same "cure" would do wonders for banksters and some doctors whose only motivation is greed.

ata's picture

global warming - -

That's a good one  -  wake me up when It starts and I'll stop lighting fires                                                                                                                                        PolarBearsCooking.gif

SS121's picture

Decades? Years?

The great ship Wall St. has had her hull ripped by an iceberg, she's on fire and in 30 foot seas without a rudder. 

Kamikaze pilots are unloading on her until they crash into her in exploding balls of fire. 

Yet, amidst all the commotion of the burning, floundering, sinking ship... two men stand on the forward deck looking out at the ocean ahead and discuss the ship's future from their "expert" points of view.

Mr. Gross, president of Fantasy Cruise lines postulates that the Wall St. is destined for decades of dutiful yet uneventful service based on Fantasy cruise lines historical uses, projections.. blah blah whatever...

Mr. Calpers, one of the owners of the Wall St. sees a more eventful, exciting future for the Wall St. in it's many many years ahead, based on his ships maintenance  reports and other information that he thinks is relevant.

Which one of these gentlemen is correct?  Answer: imo, neither.

The people who walked away from that discussion long ago and are now seated comfortably in the plentiful and unsinkable Silver and Gold lifeboats would be the ones to ask.   They won't say decades, and probably not many will use the term "years(s)".  One might say say she'll likely be completely gone in a matter of months.

But for now... what a catastrophic sight she is.  It's no wonder that so many people witnessing this thing from the boats, are convinced that the days ahead will be worse rather than better. 

But after the lifeboats have gotten everyone back to the solid dry land of Main St., they'll realize that all the hand-wringing and worry was for naught.

The sun will still shine, the veggies will still grow.  Gasoline, no longer priced up by the fake market, will be dirt cheap again.  Everything "system" "Wall St." (stocks, fractional reserve banking, derivatives, central markets) pretty much gone.  Everything "natural" "Main St." will be happy days.

The scary screams from those going down with the Wall St. will have faded from memory, ahhhh... life is good.  It's good to be on the lifeboats with you folks.

achmachat's picture

worth viewing

some perspective:

ata's picture

wealth and happiness -

I'm with Chris Duane.  Going against group think has worked for me.  Changing now would be just wrong.  We are all pre destined to function in different ways.  The biggest mistake we can make in life is to deny our destiny.  Even if things go wrong, following our pre destined  plan is one of the great keys to unlock the secret of happiness.  Collectivism for an individual is a disease of the mind. 

DASK's picture

Mr. Fix and Cal Lawyer, I

Mr. Fix and Cal Lawyer, I think you have touched on the essence of the issue here: inevitable but not necessarily imminent.   My story is almost exactly similar to CalLawyer's in that I 'awakened' and panicked hard in 2007-2008, and have subsequently chilled out and started a young family.  I wouldn't call it a misallocation though; even though I went overboard on the gold/silver and prep then, I still put in the majority of my stacking at lower prices than exist today.   And I don't think my current peace of mind would have been possible without that initial panic.   I still have the coins, still have no debt and no financial investments, still have the military water filters and 'go bag', have educated myself a ton, brought my partner on board and have plans.   

Some here might have misgivings about some prep steps (I also bought more gold at 1800, silver at 35, etc.), but the simple result of the inevitability is that at some point the insurance won't be available at any price.   In the future even those investments that may not have been optimal will still look good.  Even though the timing may be well into the future, the only game-theory correct play is to prepare as much as required to achieve peace of mind immediately.  Then optimization.  One simply MUST be ahead of the curve on issues like this; the day that the average person realizes the need for catastrophe insurance, it is too late... if everyone knows that one needs gold, who will be selling it? ..  and I foresee a lot of angst here from those who thought they'd wait for some 'more opportune time' in the future.  At that point, those who have been prepared need to already be into the 'next move' which will be an (already existing) plan to secure and maintain what they have managed to carve out against the hungry and angry collective.   

Howard Roark's picture

Some pension funds are

About to move to real, hard assets. Rather than paper with letters.
The Dutch Pension fun gain the right to invest in physical gold!!!
See here: http://ausbullion.blogspot.com.au/2013/10/dutch-pension-fund-wins-right-to-invest.html

Here in Lusitania under the siege of the Troika, EU bureaucrats and National socialists I can only hope…

Keep strong.
HR

Spartacus Rex's picture

Insiders & Private (?) Pension Fund/s

1) Gross is definitely an "insider".

2)Does Calpers really qualify as a "private pension"?

I hardly think so, since being wholly made up of California State Public Employees. Unfortunately however, mediocrity carries a lot of weight in the public employee sector, no where more especially than in California, which is no surprise since it is the biggest Marxist/Socialist State in the Union

For crying out loud, given the sheer size of Calpers Pension Fund, they could easily afford the best and brightest investment advisors on the Planet. Private Venture Capital has been cleaning up and pulling down literally 10's of Billion$ in Silicon Valley for Decades. What, the folks at Calpers are too stupid to get a piece of that pie?

NO, the simple truth is that Every Public Sector, and every Public Employee's Paycheck and Pension, from the POTUS all the way down to the lowly Dogcatcher, is wholly dependent on the fiat Ponzi Coupon Pay System, ergo take their walking orders and investment "advice" from the Banksters who only act in the Banksters' self interest.

Perhaps most don't recall or otherwise had heard about how decades ago Orange County, California got reamed by Wall St. selling that County DERIATIVES, even though under the Law, the County was actually barred from investing in derivatives, but only the predominantly retarded citizenry of California wouldn't even imagine that a licensed security advisor, and bound by oath County public officials are actually expected to be cognizant of the Law.

>

Spartacus Rex's picture

Lifted From Our Fave Dave In Denver

Untitled.png

Spartacus Rex's picture

Also This...

WEDNESDAY, OCTOBER 2, 2013

September Auto Sales And ADP Payroll Report Confirm The Economy Is Tanking

 

I have to say, Barack Obama is probably the biggest political sell-out in the history of the United States.  Anyone who voted for him and still supports what he is doing is either tragically brain damaged or pathetically naive.  That's not to say the Republicans are a better alternative but Obama sold out his supporters like  plantation slaves in the 1800's.

Yesterday's auto sales report for September - led by GM's 11% plunge in sales and incredible bloating up of dealer inventory levels - confirms my view that the economy is tanking.  Today's ADP (Automatic Data Processing, Inc) Payroll report for September further confirms, as today's payroll report was nothing short of disaster, with a big miss of the consensus estimate AND the two previous month's reports revised downward sharply.  The dollar has lost the 80 level.  The world isn't buying into the story being reported in the media by Wall Street and the President that the economy is improving.

I review this data plus three other observations in this article:  September Auto Sales/Tanking Economy

I further expect that housing sales will follow auto sales lower.  September home sales data will start coming in three weeks.

 
Spartacus Rex's picture

Collapse Is In Hindsight – It Is A Matter Of Time (Part III)

Gary Christenson | October 2, 2013

We live in a world of exploding debt, unsustainable deficit spending, Quantitative Easing, corrupt politicians, and “forever” wars that benefit the political and financial elite.  We will need help to survive the collapse of failing economic and political systems.

This article is the continuation of part I (read here) and part II (read here). As introduced in the previous parts, our research of 20 different cycle theories has indicated that as of 2013 serious turmoil will reign in all markets and that the precious metals drop of this year was just the first shot across the board (courtesy: Gary Christenson). Every cycle theory we researched pointed to a coming collapse in different financial assets, varying in degree and exact timeframe. The dolldrums are becoming louder.

In our most recent update on the debt bear market, we showed in several must-read charts how every additional unit of debt based money is creating decreasingly less economic output. In the 50′s, every dollar of debt created more than 4 dollar of economic output. In this decade, the economic output is 0.08 dollar. On the highest level, it is the most important indication that the debt bubble is ripe to pop (although popping will not be a one-time event, it will probably be a process with no specific start and end date). 

Collapse – From Our Debt Addiction

Bill Bonner: (link)

“The feds decided to fight fire with fire.  To solve the debt problem, they added debt!  The genius of this plan was, we admit, not immediately obvious.”

“The feds have always had one overriding goal:  to transfer money and power to themselves.  They create no wealth.  The can only get it by taking from others.  The crisis – which was nothing more than a natural market correction in an unnaturally extreme debt cycle, caused largely by the feds – gave them cover for larceny on an ever grander scale.”

Egon Von Greyerz: (link)

“We have had a century of false prosperity based on printed money and credit… These four extremely shaky legs, Central bank printing, Bank leverage, Government borrowing and Derivatives manufacturing have created a world of delusional wealth and illusory prosperity.  Also, there is a total absence of moral and ethical values.  We are in the final stages of an era of extreme decadence, an era that sadly cannot and will not have a happy ending.”

Dan Norcini:  (link)

“In a debt based system, more and more, larger and larger, amounts of debt have to be taken on for the economy to grow.  It is difficult to do that if consumers are afraid to spend with the same reckless abandon as they did during the boom years.”

Karl Denninger:  (link)

“What Bernanke did yesterday [the no-taper caper] was guarantee a crash.”

Collapse – Before or After the Next Big War?

Ernest Hemmingway:

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.”

Bill Holter:  (link)

A war is necessary.  It is necessary so that fingers can be pointed to it as the reason for all things bad… Not many pay attention anyway but a war, more than anything else will distract attention to the real deal.  The real deal being that the global Ponzi scheme is collapsing.”

Strauss & Howe – “The Fourth Turning:” (link)

“History offers even more sobering warnings:  Armed confrontation usually occurs around the climax of Crisis.  If there is confrontation, it is likely to lead to war.  This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war.  If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken and leaders captured.”

Collapse – Seek Protection & Safety With Gold

Dr. Paul Craig Roberts:  (link)

“So what the Fed is doing is simply keeping the system going as long as it can.  I don’t see how they can avoid a crash.  It they stop QE it’s going to crash.  If they don’t stop it, it’s going to crash later.  So the Fed is manipulating everything to keep the system intact.  And to repeat myself, they can do that until there is a run on the dollar, and when there is a run on the dollar they lose control.  At that point (the price of) gold and silver will explode.”

Robin Griffiths – Historic Fed Decision’s Impact on Gold and Major Markets (link)

“The (gold) charts indicate that a capitulation sell-off has taken place, completing the bear part of a cycle still in secular uptrend.  Central banks have been trying to disrupt the bull move but they have simply ended up with nothing in their vaults.  They have lent or sold so much of the precious metal that it would take seven years of production to rebuild their reserves to the levels they were at two years ago.”

Western Central Banks have supported collapsing western currencies and economies by selling off the one real asset – gold – that has no counter-party risk.  This seems less like a sensible decision and more like an act of desperation.   The result has been a massive transfer of gold from western commercial and central bank vaults to the east, where China, Russia and others have imported huge quantities of gold from London, Switzerland, and New York.

DISCUSSION:

  1. The U.S. economy is run largely for the benefit of the political and financial elite.  (An excellent explanation is given here.)  Ever-increasing debt is necessary for the transfer of wealth to the political and financial elite.
  2. It seems that BORROWING MORE money to extend current wars and to fight additional wars in the Middle East is a major component of the U.S. economy.  What price will we pay in terms of lives, jobs, commodity price inflation, and the standard of living for the middle and lower classes?  It is clear that expensive and pointless wars will accelerate the timing for a financial collapse.
  3. The United States, Europe, and Japan have chosen to print money and create more debt to “solve” their excessive debt problems.  Few expect this will end well and history suggests some form of collapse is highly likely.
  4. The United States, Europe, and Japan have created a crushing mountain of debt that is ever-increasing and can only be rolled over (extend and pretend), but not repaid.  Which currency and economy will collapse first?  How long will the United States dollar maintain its “reserve currency status” and how dire will the consequences be when that “exorbitant privilege” (French Minister of Finance) is lost?
  5. When the dollar weakens or collapses against other better managed currencies, how drastically will gold and silver appreciate?  There is no bubble in gold yet, but remember that “there is no fever like gold fever,” so another bubble in gold seems inevitable.  Gold fever will visit those countries that have abused their monetary systems, mismanaged their currencies, and who confuse actual wealth with unbacked paper money, which is merely a depreciating currency based on debt IOUs.
  6. What about the $1,000,000,000,000,000 (a $ Quadrillion or so) in global derivatives?  Could a spike in interest rates cause those “weapons of mass financial destruction” (Warren Buffett) to collapse the international banking system and a few Western economies?   For perspective, remember the economic crash of 2008, the 2006-07 housing crash, the tech stocks crash of 2000, and many other financial crashes that enriched a few at the expense of the many.  It can happen again!
  7. 7.  Are you prepared?  I’ll say it again – protect yourself with gold and silver stored outside the banking system!

Stay safe!  It is wise to admit that strange and previously unthinkable events are now more likely to occur in the U.S. and Europe – such as stolen MFGlobal customer accounts, Cyprus “bail-in,” and partially nationalized Polish retirement funds.

Additional concerns that may contribute to a financial collapse include QE to infinity, unsustainable deficit spending, middle-east wars, a government shut-down, Obamacare, an unknown risk from about $1,000 Trillion in derivatives, and loss of faith and trust in governments and central banks.

A financial collapse may not occur in the next few months, but the risks and instabilities seem to increase every quarter.  Gold and silver, stored outside the banking system, seem more necessary after each new political crisis, government scandal, QE creation, and financial bail-out.  http://goldsilverworlds.com/economy/collapse-in-hindsight-matter-of-time-part3/

Spartacus Rex's picture

From Jim Sinclair's...

clip_image007_thumb.jpg

143-year-old law stirs fears during shutdown

Administration officials now live in fear of a 19th-century law that could get them fired, penalized or even imprisoned if they make the wrong choices while the government is shut down.

The law is the Antideficiency Act, passed by Congress in 1870 (and amended several times), which prohibits the government from incurring any monetary obligation for which the Congress has not appropriated funds.

In shutting down the government, most memos cite the law as the reason. The Government Accountability Office says employees who violate the Antideficiency Act may be subject to disciplinary action, suspension and even "fines, imprisonment, or both." (cont. @ http://finance.yahoo.com/news/143-old-law-stirs-fears-193436176.html )

Winter's picture

Why isn't the Comex defaulting yet?

The Comex is left with about 23 tons of gold in their registered inventory (as per Harvey Organ’s web site). From this you have to subtract what will be delivered in the month of October. When October is over, they should be left with about 10 tons of gold. This quantity of gold is so ridiculously small that it screams at something evident: The big players in the gold market (I really mean all of them) have all agreed to keep the price of gold as low as they can for as long as they can. If such was not the case then any big player, being a central bank or a hedge fund, could force the Comex into a default this very month of October. All they need to do is buy 10 tons of gold and the Comex is forced to settle in cash. By comparison, around 10 tons of physical gold is sold and delivered every day out of the Shanghai Gold Exchange. So the question is why doesn’t this happen?

Here is my theory:

1. The Chinese (and others like the BRICS, etc) want to accumulate as much gold as they can at the lowest possible price. Therefore, they also have an interest in manipulating the price of gold to the downside. On this topic there is an interesting interview on KWN.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/9/30_Poker_End_Game_-_JP_Morgan%2C_Fed%2C_US_Treasury%2C_China_%26_Gold.html

2. This coupled with the recent news that Sprott Asset Management has made a deal with the biggest Chinese mining company to explore and identify junior mining companies for acquisitions tells me that the Chinese have a vested interest in maintaining both the price of gold and the mining shares heavily depressed for as long as it can be done.

The Chinese know that time is running short and the current monetary system will not last for much longer. In addition to that, the West has pretty much leased and sold in the physical market all the gold they could lease and sell. I doubt that there is much physical gold left to be offered at the LBMA. Foreign central banks will buy everything they can at current price level without pushing the price up.

Therefore what is the best alternative for them to continue to accumulate physical gold at the lowest possible price? They buy mining companies with proven underground reserves at heavily discounted prices. The HUI index is ridiculously low and even Eric Sprott was bragging not long ago that he bought at penny to the dollar the gold reserves of a junior mining company. By far, the cheapest gold you can find today is the proven reserves of some of the mining companies. Especially if these companies are in financial trouble… Which I bet that at current prices several of them are.

Once the Chinese (or whoever else) own a mining company, it won’t matter for them if the price of gold goes up. The price they will pay for their physical gold is their total extraction and refining cost for as long as they can mine the place...

So my theory is that the price of gold will be maintained as low as it is for as long as:

A). Foreign central banks (like the BRICS) can scoop physical out of the LBMA
B) There opportunities left for acquiring good mining companies with proven underground reserves.

Once this is done, then I believe that the price of gold will be allowed to move to the upside.

DeaconBenjamin's picture

IRS at 100: How income taxation built the middle class

In 1910 and 1912, new progressive state legislative majorities across the nation endorsed the income tax amendment. Early in 1913, final ratification gave Congress a green light to add an income tax to the tax code. Months of congressional debate culminated eight months later with a new revenue act that featured a modest income tax.

How modest? The top tax rate would sit no higher than 7 percent on income higher than $4,000 — the equivalent of slightly more than $94,000 today.

That top rate would soar higher in the decades to come — much higher. In the 1940s, during World War Two, income above $200,000 faced a 94 percent tax rate. America’s top marginal federal income tax rate would hover around 90 percent into the early 1960s.

These high-tax years — for the rich — should have been a time of economic calamity. At least according to the critics of progressive income taxation. But real life proved these critics wrong. Commerce did not cease when the tax code levied steeply graduated rates on U.S. incomes. The wealthy did not flee. The entrepreneurial spirit did not evaporate.

Quite the contrary. The United States thrived throughout the mid-20th century heyday of high taxes on the rich. We became the first mass middle-class nation in the history of the world, the first industrial nation ever where the majority did not live in poverty.

The progressive income tax was a key pillar of this middle class “golden age.” Fiscally, the nation’s steeply graduated tax rates raised the revenue that bankrolled new programs and services that opened doors into middle-class life. Culturally, these same steeply graduated rates sent the message that American society frowned on incomes that towered too high over the nation’s economic and political landscape.

Looking back on those years now, the historical record is clear: America works best when we tax progressively — and significantly so.

http://blogs.reuters.com/great-debate/2013/10/02/irs-at-100-how-income-taxation-built-the-middle-class/?ftcamp=crm/email/2013103/nbe/AlphavilleLondon/product

Sorry to break this to you guys, but correlation is not causation.  Maybe the lesson of the 50s is that the only time a country can afford 94 percent tax rates is when the industrial base of every other country in the world has been destroyed.  Want to pursue that thesis?

Mr. Fix's picture

"It’s safe to say that we’re onto something?"

COMEX DELIVERY MONTH SMASH: THE PATTERN RE-EMERGES

Bernanke-Dimon-Fed-TunnelFebruary, April and June were Comex delivery months that saw the price of gold get hammered. August was a delivery month that saw the price of gold rally. October is a delivery month and gold is getting hammered again.What’s the difference?
I think at this point it’s safe to say that we’re onto something. [Read more...]

Bollocks's picture

priceless...

Matt Taibbi gives his play by play commentary of CNBC's demented interview with Alex Pareene and why anybody could do Jamie Dimon's job...

wouldyoubelieve...'s picture

absolutely correct Deacon

when you're the only country producing at lower cost through mass production, selling to a world decimated by by almost a decade of war and aftermath, and the only country capable of buying large quantities of raw materials for cash and supplying loans to other nations, you're bound to improve your economy no matter how hard you try and F it up.

silver66's picture

popping the bubble---Bollocks

You beat me to it. I was just about to post the same video. It got sent to me by a friend this morning. It is great.

silver66

wouldyoubelieve...'s picture

Maria BarfdePOMO

unbelievable, doing her best Hitlary impersonation "what difference does it make?", she needs to read a history book and understand, those who willing went along with propagandizing for the PTB get the same  sentence as the leaders, i.e. Axis Annie and Tokyo Rose, guess she's Market Maria?

Turd Ferguson's picture

Thunderlips appears on Bloomberg

MODERATOR

Strokes his mullet by advocating strong federal regulators. What a joke.

http://bloom.bg/1a1ZNiO

 

ag1969's picture

Bollocks

That is one of the best videos I have ever seen!!  LMFAO!!  "What, a massive international crime syndicate?"  That set the tone for an absolute barrell of laughs.  Awesome!!  Everyone send that video to everyone you know.

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