Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Pension

Puerto Rico to Default on $422M Payment Today; Likely Another $2B in July

This article appeared online at TheNewAmerican.com on Monday, May 2, 2016:  

Puerto Rico continued its “death spiral,” with its failure to make a $422 million interest payment on Monday on some of the island’s gigantic $73 billion debt. This comes on the heels of missed payments over the last year, and will be followed up by a $2 billion payment due on July 1, which it is also widely anticipated to miss. The payment is due from the island’s Government Development Bank (GDB), the main bond issuer and the island’s fiscal agent.

So far Governor Alejandro Garcia Padilla (above) has, as noted previously in The New American, been able to keep the lights on and the water running by moving money around on the island’s balance sheet, paying only those with the highest and most enforceable claims and dealing as best he can with those holding lower credits. It was Padilla who said his island was in a “death spiral” as far back as last July, because his 3.5 million inhabitants, half of whom live in poverty, didn’t have the money.

But for decades Padilla and his predecessors acted as if they did have it,

Keep Reading…

Nothing is Likely to Change in Brazil

This article was published by The McAlvany Intelligence Advisor on Wednesday, April 20, 2016: 

One of Warren Buffett’s favorite expressions is “when the tide goes out, everyone will see who’s been swimming naked.”  In Brazil the tide went out at the start of the Great Recession and now the whole world can see who was swimming naked.

When President Lula was elected in 2002 the commodity boom was underway, and Brazil was enjoying the ride. Its major exports are soybeans, sugar, and iron ore, and under Lula Brazil’s GDP was running 10 percent a year. Lula implemented major expansions of the welfare state, including putting in place such generous pension plans that state workers could retire at age 54 for men and at age 52 for women at 90 percent of their final pay. The average Brazilian’s household income rose, and statists worldwide pointed to Brazil’s success story, naming it as one of the BRIC countries that would soon overtake the developed nations of the world, and doing it while expanding government spending.

But when Dilma Rousseff took over in 2011 the Great Recession was revealing the true nature of spending far beyond the ability of the economy to sustain it. In 2014 the government’s finances were in such dreadful shape that

Keep Reading…

Are Federal Bailouts of States’ Pension Plans Inevitable?

This article was published by The McAlvany Intelligence Advisor on Wednesday, April 13, 2016:

English: Devin Nunes, U.S. Representative from California (Photo credit: Wikipedia)

California Representative Devin Nunes, a middle-of-the-road Republican from the state’s 22ndDistrict with a middling voting record (a Freedom Index rating of just 53), got something right: he sees the coming implosion of underfunded pension and health care plans across the country, and offered a bill to do something about it: force the states and the pension managers to tell the truth about the numbers:

Keep Reading…

States’ Pension, Health Plans Increasingly Vastly Underfunded

This article appeared online at TheNewAmerican.com on Monday, April 11, 2016:  

The numbers being reported by pension fund managers are so out of touch with reality that Representative Devin Nunes (R-Calif.) has proposed legislation to correct them. Said Nunes: “It has been clear for years that many cities and states are critically underfunding their pension programs and hiding the fiscal holes with accounting tricks. When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”

According to Joshua Rauh, a senior fellow at the Hoover Institute, the amount of underfunding is

Keep Reading…

Puerto Rico Stiffs Bond Investors on Monday

This article was published by The McAlvany Intelligence Advisor on Monday, January 4, 2015:  

Coat of Arms of Puertor Rico

Coat of Arms of Puertor Rico

Keep Reading…

Puerto Rico Defaults Today on Part of $1B Debt Payment

This article appeared online at TheNewAmerican.com on Monday, January 4, 2015:  

Both the Puerto Rican flag and the United Stat...

Both the Puerto Rican flag and the United States flag fly over Puerto Rico

Last June Puerto Rico’s Governor, Garcia Padilla, said his government was out of money and would have to default on some of the bonds issued by various government agencies. It owed some $54 million to the Public Finance Corporation and another $140 million to the government’s Development Bank. By moving some funds around on the government’s balance sheet, Padilla was able to make most of those payments.

Since then Padilla’s financial woes have snowballed.

Keep Reading…

The US Welfare State is One Gigantic Underfunded Pension Plan

This article was published by The McAlvany Intelligence Advisor on Monday, September 7, 2015:  

Think of it this way: a pension plan is a system or program whereby promises are made to beneficiaries based upon contributions made to the plan by those beneficiaries and by the plan sponsor, either a local or state government or a private entity, company, or corporation. The assumptions are that the monies will be invested carefully, prudently, and wisely until they are needed. For those services the plan sponsors take a fee.

A welfare state is

Keep Reading…

Public Pension Plans Cut Rate of Return Targets; Still Not Enough

This article appeared online at TheNewAmerican.com on Monday, September 7, 2015:  

Twenty million pension plan beneficiaries have just been warned: You won’t be getting what you have been promised when you retire. Part of the reason is that pension managers have been far too optimistic in estimating what they are able to earn on your money. And part of the reason is that they continue to remain so.

In its analysis of 126 public pension plans, the National Association of State Retirement Administrators (NASRA) noted that more than two-thirds of them have reduced their estimates, however slightly, since 2008, while 39 of them are still stuck

Keep Reading…

Greeks Shout “NO!”

This article was published by The McAlvany Intelligence Advisor on Monday, July 6, 2015:  

Greek citizens shouted “No!” to further austerity measures for the hapless country in exchange for more of what got it into trouble in the first place: other people’s money. The lopsided 60-40 vote astonished telephone pollsters, who predicted a much narrower victory for Greek Prime Minister Alexis Tsipras of the far-left Syriza party. Although the issues were far more complicated than the referendum made it appear, the 68-word ballot question made it easy: do you want more increases in taxes, more cuts in pension benefits, another increase in the VAT … or not?  Translated into English, the ballot read:

Keep Reading…

China Stock Market Tumbles Into Bear Market

This article appeared online at TheNewAmerican.com on Friday, July 3, 2015:  

Since June 12 the Shanghai Index of Chinese stocks has lost 30 percent, thanks to losses on Friday of nearly six percent, and 12 percent for the week. That index, reflective of the Chinese stock market in general, exploded between November and June thanks to some 90 million newly minted Chinese investors entering the market for the first time, many of them with borrowed money, hoping to cash in on the rise.

Brokerage houses were only too glad to oblige, with many of them allowing new investors to borrow up to six times their initial equity position. As the market went almost vertical, commentators have been calling it a bubble, with prognosticators predicting its end sometime before 2016.

That may have been too hopeful:

Keep Reading…

Will Sunday’s Greek vote Signal the end of Monnet’s Dream?

This article was published at The McAlvany Intelligence Advisor on Friday, July 3, 2015:  

Greece’s Prime Minister Alexis Tsipras said that Sunday’s vote is only about accepting or rejecting the troika’s terms to restart the flow of bailout funds that has been keeping the Greek economy from tanking. He said that a “no” vote “does not mean rupture with Europe but a return to Europe with values.”

Most assuredly Sunday’s vote is likely to, in hindsight, turn out to be much more than that. Historians might write that Sunday, July 5, 2015, ended Monnet’s dream.

Monnet was the architect, the primary driving force, behind the failing experiment in Europe called the European Union. He was head of the first genuine European executive body,

Keep Reading…

Greek Referendum to Determine European Union’s Viability

This article appeared online at TheNewAmerican.com on Thursday, July 2, 2015: 

Cover of "Confessions of an Economic Hit ...

The latest polls show that on Sunday Greek citizens are likely to reject the terms of the bailout from the troika — the European Union, the European Central Bank (ECB), and the International Monetary Fund (IMF) — but by a steadily decreasing plurality. Before Prime Minister Alexis Tsipras announced the referendum, polls showed voters were opposed to the bailout terms, 57 to 30 percent. When the banks closed and citizens were restricted to withdrawing just $67 a day from their ATMs and pensioners couldn’t cash their checks, polls showed a narrowing, 46 to 37 percent.

Tsipras repeatedly said that the referendum is only about accepting or rejecting the terms imposed by the troika, not about leaving the euro or the European Union: “No does not mean rupture with Europe but a return to Europe with values.”

Citizens weren’t impressed and

Keep Reading…

More Proof People Are Moving From High Tax States

This article appeared online at TheNewAmerican.com on Friday, June 26, 2015: 

The latest interactive graph from CNBC  shows more people moving from high tax states such as Connecticut, New York, New Jersey and Illinois to lower tax states such as Texas, Tennessee, Colorado, and Arizona. The authors of the latest study reviewed data from United Van Lines and Atlas Van Lines over the last 10 years and concluded that Connecticut was the poster child for out-migration from a high tax state.

For the year 2013, and for the 10 years prior, 55 percent of all moves by these movers took people out of Connecticut. The Nutmeg State levies more than

Keep Reading…

Moody’s Lowers Chicago’s Debt Rating to Junk Status

This article first appeared online at TheNewAmerican.com on Wednesday, May 13, 2015: 

Moody’s cut its rating on another $4 billion of Chicago’s debt to just above junk status, for a total of $13 billion that was downgraded on Tuesday. This is approaching two times the city’s total annual revenues, and fails to take into account the $550 million payment the city must make in December to keep the police and firemen’s pension plan solvent. Nor does it take into account the $230 million penalty the city must pay for terminating previous “swap” agreements that allowed it to continue to borrow at competitive rates.

With this two-level drop, $2 billion in additional penalties may come due, according to Moody’s: “[Our] current rating actions give the counterparties of these [swap] transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest [payments] and associated termination fees.”

Doing the math is frightening. But Chicago’s Budget Director Alex Holt seems unconcerned: 

Keep Reading…

Chicagoans had to Choose Between Venal and Feckless for Mayor

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, April 8, 2015: 

In Tuesday’s mayoral runoff in Chicago, voters had only two choices: to vote for the venal Rahm Emanuel or the feckless Chuy Garcia. Four years ago Emanuel rode Barack Obama’s coattails to victory, winning in a walk with 55 percent of the vote. In February, Emanuel couldn’t squeeze out a majority, getting only 46 percent of the vote and forcing a runoff with a far-left progressive on the Cook County Board of Commissioners, Jesus “Chuy” Garcia.

With the help of an estimated 100 “friends of Rahm,” Emanuel buried Garcia, raising some $30 million for his campaign, eight times what Garcia was able to raise. On Monday Emanuel held an 18-point lead over Garcia.

Garcia was hoping for a miracle.

Keep Reading…

Mayor Rahm Emanuel’s Election Win Will Cost Chicago Even More

This article first appeared online at TheNewAmerican.com on Tuesday, April 7, 2015:

, former White House Chief of Staff

Going into Tuesday’s runoff election, Mayor Rahm Emanuel held nearly a 20-point advantage over his rival, Jesus “Chuy” Garcia, a hard-left progressive member of the Cook County Board of Commissioners. Four years ago Emanuel won in a walk, taking 55 percent of the vote. In February he couldn’t even manage a majority, with just 46 percent, forcing Tuesday’s runoff. As a North Side small business owner explained:

[In February] I cast an “anybody-but-Rahm” vote. Rahm is not a likeable guy. Sadly, he has no competition. Chuy is a nice guy but doesn’t seem to have a clue what he would do if elected.

When I go back for the final vote, I will vote for Rahm. Maybe he has a chance of fixing some of the [city’s] financial problems.

That’s hardly likely. In the past four years, Emanuel’s abrasive personality and his leftist worldview have added immensely to Chicago’s woes:

Keep Reading…

Memphis Police, Firemen Quitting Following Pension Plan Reductions

This article first appeared online at TheNewAmerican.com on Monday, March 16, 2015: 

English: Memphis, Tennessee skyline from the a...

Memphis, Tennessee skyline from the air

Last July more than half of Memphis’ police officers took sick days off to protest the reductions in the city’s contributions to their pension plan and increases in their contributions to the city’s health benefits plan. The national media was sympathetic with cases of “blue flu,” instead of recognizing the new economic reality: Because public pensions are underfunded, everyone expecting benefits from the city will now take a hit, not just new hires.

Some of those who took sick days in July now are quitting altogether, finding other better opportunities elsewhere. In fact, other departments from nearby states are advertising in local papers and setting up job fairs to entice the discontented to new positions.

In a word, those unhappy with the new reality are adjusting.

Most solutions proposed to bring underfunded pension plans back into balance have involved

Keep Reading…

Boston University Economist Calls Out Congress on Enormous Fiscal Gap

This article first appeared online at TheNewAmerican.com on Thursday, March 12, 2015:

Logo of the United States Government Accountab...

Logo of the United States Government Accountability Office

During his annual trek to Washington, D.C., to lecture Congress on its spendthrift habits, Boston University economist Laurence Kotlikoff took the gloves off this year. He dressed down Senator Mike Enzi, chairman of the Senate Budget Committee, along with the committee’s members:

Let me get right to the point. Our country is broke. It’s not broke in 75 years or 50 years or 25 years or 10 years.

 

It’s broke today.

 

Indeed, it may well be in worse fiscal shape than any development country, including Greece.

It isn’t just Enzi, or his committee, or the present Congress, that’s responsible for a fiscal gap that’s vastly larger than that projected by the Congressional Budget Office (CBO). It’s the idea that the country can borrow without limit because

Keep Reading…

Politics and Mathematics Collide in Chicago

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, March 4, 2015:

English: Downtown Chicago, Illinois at night. ...

Downtown Chicago, Illinois at night.

Chicago is a microcosm of Illinois: it has a determined unwillingness to face reality. Even Moody’s, in its latest downgrade of Chicago debt, has failed to grasp the enormity of the shortfalls facing the city and the state.

Moody’s tried to be realistic, using unrealistic numbers:

[Our rating] incorporates expected growth in Chicago’s already highly-elevated unfunded pension liabilities and continued growth in costs to service those liabilities, even if recent pension reforms proceed and are not overturned….

The “expected growth” will likely surprise to the downside even the realists at Moody’s, as the real shortfall in the five pension plans the state is funding is vastly greater than even the $100+ billion the state faces. A “special pension briefing” performed back in November by the state’s Commission on Forecasting and Accountability showed the accrued liabilities on those plans to be

Keep Reading…

Moody’s Downgrades Chicago Again

This article first appeared online at TheNewAmerican.com on Tuesday, March 3, 2015:

English: in Chicago, Illinois, USA.

Downtown Chicago, Illinois

Within hours of Moody’s Investors Service announcing another downgrade to Chicago’s general obligation bonds last Friday, Mayor Rahm Emanuel’s administration responded, saying that Moody’s was out of touch with reality:

We strongly disagree with Moody’s decision to reduce the city’s credit rating and would note that Moody’s has been consistently and substantially out of step with the other rating agencies [Standard & Poor’s and Fitch Ratings], ignoring progress that has been achieved.

At the moment those other two agencies rate Chicago’s debt at A-plus or A-minus, each with a negative outlook. But in light of an imminent court ruling that could invalidate efforts to cut pension benefits, along with the crushing and increasing burden of those benefits, observers are just waiting for the next two shoes to drop.

As Moody’s noted, its downgrade will stand even if the court validates those pension modifications: 

Keep Reading…

Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.