Retirees Face Huge Problem
Wed, Aug 21, 2013 - 11:50pm
Now that the drama of the Fed is all but digested, let's focus in on the effects of all this financial chicanery. Absent sound money, the fiat system is mis-pricing risks everywhere, asset allocations are all off and predicting the future revenue streams based on a zero interest market is pure speculation, fraught with extreme danger for those counting upon stability in the long term. Like retirees, for instance.
Call me chicken little, fine. But, the proverbial writing on the wall is now shining brightly, flashing its warning to all who will listen.
That problem, is of course, pensions, and their impossibly optimistic assumptions that retirees hope will lead them to receive monthly paychecks in the future. This story is on Zerohedge, obviously, here, and has also reached the mainstream media, see here for example. Another Zerohedge post has a striking chart, here. There are those who may not prefer their news from the internet, or from sites like Zerohedge, but I go there because the writing is timely, detailed, prolific and as to this problem I see coming full-steam ahead, Zerohedge is way out in front in their reporting of it. Whatever you do, get knowledge from any source and think for yourself.
Read the comments after the Zrohedge articles, too. There is one comment that talks of “State Constitutions” that guarantee those pensions. While the State Constitutions MAY INDEED purport to guarantee those pension payments, those guarantees are now being tested in the federal bankruptcy courts.
We have reached the end of the can-kicking stage when the bankruptcy courts are called upon to address state sovereign debt issues relative to the federal bankruptcy code, and which dispute over interpretation may trigger a Constitutional decision based on the 10th Amendment. This is as serious as it gets, and anyone who is focused short term is missing the point.
For those formerly residing in the good ol’ USA, and who think that they are retired, living abroad, cheaply, say in Costa Rica, or some other tropical Central American country, and doing so legally in that country on a pensioneer visa, well, those folks best be paying attention.
What happens when–not if–but when, the dollar either hyperinflates, or the pension payments shrink or cease altogether? Can’t happen, you say?
Ask those hard working retirees from Detroit, or San Bernardino, or any of the soon to be other major cities’ pensioneers who have worked hard, saved, retired, and now live off their govt-funded pensions whether they can make ends meet with reduced or eliminated monthly checks. How is it fair to them? They did nothing wrong. Their work was done, they fulfilled their promises, and now those elected officials who kept making promises to stay in office, well those elected officials are long gone too. Now, the tide is out, and we all see who is naked.
So, what if the checks are cut, or stopped? What if a Costa Rican retiree finds one day that the monthly check is reduced or gone? What happens then? Can a retiree even live abroad without a pensioneer visa? What will the host government do if the monthly pension check stops? Then what? Think what this will do to the host country, too? How many US pensioneers are abroad, spending their US retirement funds abroad, propping up that local economy? What happens when that money flow is disrupted or stopped?
TEOTGKE is coming, and these thorny, difficult, future scenarios must be addressed now. Please do not be a victim and be unprepared. Look what happens when city services decline as the result of lack of funds.
Let me also point out that the mainstream media is playing its role in avoiding telling the truth. Understand that there is an agenda being foisted on everyone, and nothing resembling the truth will be told unless it fits their current meme. For example, notice there is NO mention of the general description of the four suspects in the story above? Why not? Is the reporter trying to tell the public some news? Which if so, would not one interested in crime in their area want to know the suspects’ general description so as to be able to be on guard against possible future crimes? Is that not obvious, and sensible? Or, is it perhaps, that the reporter is sensitive to the TRUTH, and keeping with the meme of a culturally divisive country, heavily involved in class warfare, the reporter does not want to be characterized as being racist for pointing out the suspects general description and perhaps RACE? Or was it the editor who chose not to tell that part of the story?
Finally, why does the reporter not delve into the back story, that is, what were four thirty-something-year-olds doing far from their own neighborhoods in Los Angeles, instead hanging around committing crimes in San Bernardino, in the middle of the day? Is this not a relevant question to ask and perhaps report about? What else do we know about the suspects? Is this now part of a crime wave, whereby out-of-towners stake out ATM’s in distant cities, stalk the users of the ATMs and then rob them? This is certainly a story I want to know about, for sure. So why no reporting of such investigative facts?
Same things can be said about the reporting with respect to the looming pension disaster. Who is keeping information from you? Why is critical information not being reported? For whose benefit is this?
Do I have any analysis on any of this and can I offer any insight as to what I see? Sort of, but not really, because it is all so tenuous, and basically devolves back to sound money, which is only possible if the system suddenly transforms itself from this fiat ponzi scheme robbing savers. With sound money, there should be no problems. Like Mike Maloney says, we are basically in the gold re-evaluation phase. Turmoil will be the order of the day. For that, I am certain. Absolutely certain. The turmoil is all around, constantly. Just open your eyes and look.
As for re-evaluation and sound money? What do I know? It is totally uncharted territory going forward, but past history suggests a painful adjustment.
What I can do is monitor the pending bankruptcy cases in Detroit and San Bernardino [and others as they arise], and report, which I will do. Remember, in San Bernardino, CalPers, the huge California Pension system, wants all of its past due payments owed by the City for the City’s public workers. But, the City is broke, and cannot pay its current bills let alone past due millions, with interest, to CalPers, so the past due pension payments to CalPers have not been made and the debt to them is simply accruing, plus interest. The sums are enormous. Will there be haircuts? Who will bear the losses if there are haircuts? Is CalPers a secured or unsecured creditor? Are the pensioneers secured or unsecured creditors?
The bondholders, that is, the big banks who loaned the City all this money, who now are owed huge sums of money, what about them? Who takes priority in the repayment process of chapter 9 bankruptcy? That is, who gets paid first from what sums the City does actually have? What assumptions regarding future revenue streams will be made? Will those assumptions be accurate or hopelessly rosy, thus only delaying the problem? What happens to the City and its citizens after bankruptcy?
What if the City emerges from bankruptcy having wiped out MILLIONS of dollars in past due pension debt? Will OTHER cities then do what San Bernardino did, thus triggering yet more chaos and financial strain on the system?
Will the City have to sell assets to pay bills? If so, what are those assets worth, and who gets the money? Will this just be a giant wealth transfer scheme to the big bondholders? If so, will this not just be a death knell to the pensioneers?
There is some certainty here about some of this. Fact: the City cannot pay all of its current creditors, including City workers and CalPers and the bondholders 100 cents on the dollar. There WILL be losses incurred. These losses will eventually trickle down to the regular folks. If Bernanke prints, bails out the bondholders or the Fed Govt bails out California, then the entire world bears the losses from devalued dollars which lose their purchasing power. It is a guarantee at this point that losses will be incurred, and the only questions are by whom and for how much. How much longer will this unsustainable system last?
To thus prepare accordingly, means to think about the long term view, intelligently, and reason to conclusions. If one agrees that TEOTGKE is upon us, then that opens up many productive thinking opportunities. This may not be pleasant. If so, don’t do it. And stop criticizing those of us who view it differently. Just skip over these posts and comments. There are a WEALTH of divergent viewpoints coming at you, courtesy of TF and his minions.
Besides, who is right here anyway, those with the long term view, or those who wish to ignore that view, and focus on a narrow slice of the investment landscape? There is NO WAY to know until the future happens.
One should focus on the big picture, the macro view, and PREPARE ACCORDINGLY!