Ricks Picks

The Coming Pension Bust

EST

(I wrote here earlier that a public-pension bust is coming that will usher in the Second Great Depression. Could California, Illinois, Connecticut, New Jersey et al. avoid disaster by raising taxes? That’s what John Jay, a regular contributor to the Rick’s Picks forum, thinks they will do. I strongly doubt it, however, since there is no way the revenuers will be able to squeeze blood from a stone. It is therefore predictable that the workers will ultimately get stiffed on their pensions because there won’t be sufficient funds to honor their contractual claims.

A catastrophic deflation is coming because it is the only way our massive, manifestly unpayable debts can ever be settled. Hyperinflation could do the job in theory, but I’ve written extensively on why this “option” is extremely unlikely, especially during the initial stages of a global economic collapse. Following are John’s comments, which are interesting regardless of how one believes the endgame will play out. RA)

As far as public pensions go, the states you mentioned already have a solution: Just raise taxes to the point of confiscation. Illinois is planning to give state assets to the pensions, California is working on killing Prop 13 so they can make $20k a year in property taxes on a 60-year-old, termite-infested shack a reality. None of them are backing down on taxes. Good luck finding a judge anywhere who will rule that pensions must be cut to balance the state budget.

Drifting into Feudalism

The population of Connecticut has remained more or less stable for decades, but the size of government budgets has tripled. In California, 13 million people are on the Medi-Cal state health care program. Anyone with an interest in history can see the accelerating drift into Feudalism. Twenty-two million government workers who produce nothing of value are paid two to three times what the job should pay. They have gold-plated pension and health plans, and they can’t be fired.

The government has no qualms about de facto confiscation of real estate, cars, boats, aircraft, whatever, to keep the taxes rolling in. When the Roman Empire was in its death throes, it faced the same problem of tax fugitives. Their solution? Simple. Laws were passed that forbade anyone from moving, or from pursuing any career other than the one of their father. And so the Dark Ages and Feudalism came to pass.  Oh yeah, that solution is in the on-deck circle, you can be sure about that!

Comments on this entry are closed.

John Jay February 28, 2019, 11:18 pm

LOL!
Here you go boys:
https://tinyurl.com/y47dttkr
315,000 results for “Connecticut tax increases”

And you just KNOW, Governors everywhere are thinking, “Great idea those Romans had about forbidding anyone to leave to avoid the taxman! Let’s see, now how can we get a law like that passed in my State? Hmmmmm…”

Arjuna February 28, 2019, 6:51 pm

I won’t be holding my breath for that. I lost money holding my breath in metals back in 12′. The assessment above is correct but good luck with the timing. Therein is the rub. The rub of all things financial. We could be dust and bones by the time the Goths finally storm the gates and come pouring over the walls. Incidentally, I have an old friend who worked 35 years for the Water Department in Cal. A disastrously corrupt outfit. He enjoys his endless and early retirement now, his bloated pension funds his monthly vacations and yearly trips to Italy with his wife of many years, also a dedicated veteran of the same gangland operation. They have decided not to talk to me anymore since I announced my allegiance to Trump populism back in 16′. I guess one could say that their sense of delusional entitlement is ‘off the charts’. RT

none February 28, 2019, 6:03 pm

If if happen in Cyprus Greece it can happen anywhere.

‘Haircut’ as you suggest will be the outcome, to what degree? Well over 50% on those retire already and those upcoming to retire and all those that are working in government.

Pension assets, ‘Haircut’ again payoff check will be 50% and less on all government workers.

This outcome is base towards the IRA holder and its waves of changes over the decades.

1) When you invest it is for the long-term…so, likely those funds are held particular items.

2) The funds are taxed as ordinary income even though a lot of it is long-term capital gains (and you are restricted in what you can invest in). On some portion LT gains into ordinary income….deducting the contribution did not turn out to be as good as suggested.

3) At 1st we match 2:1 and then 1:1 and then you get what you put in.

USA is not the Roman Empire though it will follow ‘liked’ cycles of such, the 2 are completely different in many ways.

Have a great weekend Rick.



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