Tuesday, January 18, 2011

States warned of $2.5 Trillion pension deficit

What a shock. The states have been lying to us for decades and using accounting tricks that would make Enron's bookkeepers blush. Here is the bottom line. Most of the states are in reality bankrupt. They can't even do what the Federal Government can (print their own money) so they are well and truly screwed. Or more accurately, their bondholders are. Look for the Federal Government to step up with a massive multi-Trillion dollar bailout with the next two to three years. And where will all of THAT money come from...? I wouldn't count on China. I think they have finally figured that we have been running a giant ponzi-scheme and that Bernie Madoff has really been our Secretary of the Treasury for the last ten years. My guess is Helicopter Ben will be called on. QE3 anyone?
US public pensions face a shortfall of $2,500 billion that will force state and local governments to sell assets and make deep cuts to services, according to the former chairman of New Jersey’s pension fund.

The severe US economic recession has cast a spotlight on years of fiscal mismanagement, including chronic underfunding of retirement promises.

“States face cost pressure, most prominently from retirement benefits and Medicaid [the health programme for the poor],” Orin Kramer told the Financial Times.

“One consequence is that asset sales and privatisation will pick up. The very unfortunate consequence is that various safety nets for the most vulnerable citizens will be cut back.”

Mr Kramer, an influential figure in the Democratic party and still a member of the investment council that oversees the New Jersey pension fund, has been an outspoken critic of public pension accounting, which allows for the averaging of investment gains and losses over a number of years through a process called “smoothing”.
Read the rest here.


Anonymous said...

More scare tactics setting up another shock in order to destroy what's left of public services.

The "state will wither" to be replaced by corporations.

John (Ad Orientem) said...

If you have evidence that the report is false feel free to post it. Otherwise I can live without more of the vacuous rhetoric of the political left.