Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Will the Pension Time Bomb Set Off a Crime Explosion?

Politics / Pensions & Retirement Aug 15, 2010 - 06:30 AM GMT

By: Justice_Litle

Politics

Best Financial Markets Analysis ArticleWhen state and local budgets fall short, services are cut. That means critical services like police and fire and transport... and with the pension crisis looming, the unkindest cuts of all still lay ahead.

Diane Cunningham of Colorado Springs, Colo., no longer has a flat-screen television. She decided to sell it... so she could buy a shotgun.


Colorado Springs shut off a third of its streetlights this past winter, The New York Times reports, in order to save $12 million on electricity. Shortly thereafter, a chain of events convinced Ms. Cunningham she needed to be armed.

"Her tires were slashed, she said. Her car was broken into. Strange men showed up on her porch. Her neighborhood had grown deserted at night..."

Meanwhile, in East St. Louis, Mo., Reverend Joseph Tracy is convinced guns are the problem. (Guns in the hands of criminals, that is.)

"It's open field day now," Tracy says. "The criminals are going to run wild." That dire prediction came from a decision by city council members, as reported on stltoday.com, to reduce the ranks of the East St. Louis police force by 30%.

Alvin Parks, the mayor of East St. Louis, says the city had no choice but to lay off 37 employees, including 19 police officers and 11 firefighters. There was simply not enough money to pay them, and attempts to negotiate with the police and fire unions came to naught.

Officer Michael Hubbard will reportedly be "the lone patrolman for East St. Louis' midnight shift" as a result of the cuts. One lone beat cop, to cover a crime and poverty-stricken region, at the most dangerous time of night. One.

Meanwhile, in Philadelphia, Pa., the "rolling brownout" policy imposed on city fire stations is being questioned in light of a child's death. When the call came to respond to a house fire in which a 12-year old autistic boy died, the nearest station was closed.

When the Money Runs Out

What do the above tales of woe have to do with public pensions? It's simple: Most states and municipalities have balanced budget laws. Unlike the federal government, they are not allowed to run deficits. And so, when the money runs out, services are cut. Budget areas critical to residential safety - like police, fire and street lighting - are not spared the axe.

And when the pension time bomb well and truly explodes, cash-strapped states and cities will find themselves even shorter on cash... with huge payout requirements they can't legally dodge... and the Hobson's choice of slashing services to the bone or going belly up.

As police and fire services are scaled back, some residents arm themselves against the night. Others simply pack up and leave. In Clayton County, a suburb of Atlanta, Ga., evidence of the downward spiral is clear. The county was forced to shut down its public transportation system earlier this year, the NYT reports, for lack of funds to support it. An estimated 8,400 riders were left stranded, two-thirds of them with no car for backup.

When the exodus from a cash-strapped city or county begins, it is typically those with the financial means to leave who hit the exits first. This reduces gross tax revenues, which hurts the budget situation even more.

And all this is happening as public pension recipients gear up for a fight...

The Right to Be Stimulated?

In Milwaukee, Wis., they are not fighting for reinstated police coverage or fully operational fire stations. They are fighting over erectile dysfunction pills.

"With the district in a financial crisis and hundreds of its members facing layoffs," the AP reports, "the Milwaukee teachers union is taking a peculiar stand: fighting to get its taxpayer-funded Viagra back."

The union says the little blue pills are necessary for "an exclusively gender-related condition." The school board retorts that Viagra, Cialis, Levitra and the like are of recreational use and not genuinely necessary.

The insanity of the Viagra fight is elevated (no pun intended) by the fact that Milwaukee educators are losing their jobs. The teachers' union is shortsighted enough to ignore the well-being of Wisconsin children and its own dues-paying members in pursuit of a Quixotic demand.

Sadly, the attitude in Milwaukee is reflective of what's ahead nationwide as underfunded pension budgets collide with reality. For years and years, pensions have been funded on the assumption of completely unrealistic annual returns.

By punching higher than realistic rates of return into their spreadsheets - and getting useless financial consultants to rubber stamp the calculations - states and local municipalities have gotten away with shortchanging the pot year after year. But now, as tens of millions of graying baby boomers reach the age where those pension promises come due, the size of the "hole" is becoming starkly apparent.

According to a study by the Pew Research Center released in February of this year, the fiscal gap between what states have promised and what they can actually pay is on the order of $1 trillion. And according to Northwestern University economist Joshua Rauh, the Pew figures could actually be far too conservative, with the true multiple at least three times that.

Public Versus Private

The animosity could truly get intense when private and public interests clash.

On one side of the divide there will be John Q. Taxpayer, fuming at the deep cuts in services and local tax hikes he has bitterly endured, and at the same time loudly wondering why he should have to pay for fat public pensions - lush promises made in far richer times - while he has no such safety cushion at all.

On the other side of the divide will be public servants - the teachers, cops, firemen and the like whom we have come to regard as salt of the earth - arguing that a deal is a deal, and that decades of honorable service to the community should not go shortchanged.

It will be a brutal clash, and likely one with no true winners.

Personal Implications

And how will all of this affect you?

For one, that depends on where you live - keeping in mind the pension problem is also severe outside the United States. (Says the U.K. Telegraph: "The size of public sector pension liabilities [in Britain] has been estimated at £770bn by the Treasury and £1.18 trillion by actuaries Towers Watson," with inadequate funding compared to "an unstable Ponzi scheme.")

At minimum, you should probably lower your expectations for timely law enforcement help in the event of a crime. In urban areas, police response time could be noticeably extended as fewer cars patrol the streets. And in more rural areas, one might have no realistic hope of a police response at all... or at least, not until the next day.

At the very least, such realities argue for serious consideration of a firearm (if you do not already own one and know how to use it)...

In terms of investing realities, the pension "time bomb" is in some ways less like a bomb and more like a slow-moving glacier. As a fiscal issue, it is massive and chilling and 10 skyscrapers tall... and there is absolutely nothing anyone can do to stop it.

Before all is said and done, pension shortfalls could cause multiple U.S. states to fall into the fiscal black hole of de facto bankruptcy, without legal recourse to true bankruptcy. This is a recipe for utter mayhem, with financially aggrieved parties screaming at each other until they are beet red in the face.

It is also a recipe for eventual U.S. state bailouts by Uncle Sam - which takes us to a whole new level of frightening, considering that Social Security, too, is poised to go into the red this year for the first time since 1983.

Don't forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

Source : http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-081110.html

By Justice Litle
http://www.taipanpublishinggroup.com/

Justice Litle is the Editorial Director of Taipan Publishing Group, Editor of Justice Litle’s Macro Trader and Managing Editor to the free investing and trading e-letter Taipan Daily. Justice began his career by pursuing a Ph.D. in literature and philosophy at Oxford University in England, and continued his education at Pulacki University in Olomouc, Czech Republic, and Macquarie University in Sydney, Australia.

Aside from his career in the financial industry, Justice enjoys playing chess and poker; he enjoys scuba diving, snowboarding, hiking and traveling. The Cliffs of Moher in Ireland and Fox Glacier in New Zealand are two of his favorite places in the world, especially for hiking. What he loves most about traveling is the scenery and the friendly locals.

Copyright © 2010, Taipan Publishing Group

Justice_Litle Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules