Posted on 03/18/2016 8:16:08 AM PDT by SeekAndFind
When Detroit went bankrupt in 2013, investors were shocked to learn that the city had promised pensions worth billions more than anyone knew — creating a financial pileup that ultimately meant big, unexpected losses for Detroit’s bondholders.
Now, researchers at Citigroup say the groundwork has been laid for similar conflicts across the developed world: Governments have promised much more than they can most likely pay to current and future retirees, without revealing the disparity to investors who bought government bonds and whose investments could be at risk.
Twenty countries of the Organization for Economic Cooperation and Development have promised their retirees a total $78 trillion, much of it unfunded, according to the Citigroup report.
That is close to twice the $44 trillion total national debt of those 20 countries, and the pension obligations are “not on government balance sheets,” Citigroup said.
“Total global government debt may be three times as large as people currently think it is,” the researchers warned, after gathering as much information as they could about various government pension plans and adjusting the amounts where necessary, to permit fair comparisons with bond debt.
Getting each country’s unstated pension obligations down on paper, along with the sovereign debt, showed that some countries have almost certainly promised more than they can deliver.
“If you owed student loans of $44,000, and the bank called you up and said, ‘actually you owe $134,000,’ you’d fall off your chair,” said Charles E. F. Millard, head of pension relations at Citigroup. “That’s what this is.”
He said he did not expect all the overextended governments to experience sudden head-on collisions between bondholders and pensioners the way Detroit did. Instead, he said many of those countries — as well as many American states, cities, school districts and other jurisdictions — would keep struggling along,
(Excerpt) Read more at nytimes.com ...
Duh.....
NO! That can't be! Say it isn't so!
Another wasted study about the OBVIOUS! What a bunch of morons...
No kidding, you can’t pay someone $50,000 a year from age 60 to age 90 and provide health benefits when you only have a few hundred thousand to back up each person in a defined benefits account.
The DB accounts are massively underfunded because the pols and the union bosses promised stuff they were never going to be able to deliver on,,all to get re-elected,.
In a related study, it is also discovered that illegal alien public services rendered greatly outweigh the savings from their slavery wages.
I am currently employed by a university, and and participate in a state reirment plan.
I had two options:
1. A plan where I pay x amount into a state managed plan. They match my contribution and totally administer the plan.
2. I pay into a plan managed by a private investment company. The state still matches, but I never deal with them again.
I chose #2. Don’t want the state raiding my money and then coming up broke when I choose to retire.
Well, we knew there wasn’t going to be enough money to pay all of the public pensions in the sixties and seventies. I read debates on the issue in the Tulsa Tribune and the Tulsa World fairly often when I was growing up.
In other news, water is wet and the sun rises in the east.
Most of the bond holders are well qualified investors and are aware of the risks. They just assume that the tax payers will be forced at the point of a gun to pay up.
This is a WORLD-WIDE study. The USA is not even in the worst trouble, that would be Europe and Japan.
The people have known this for years. Politicians needed a study and no doubt will need more studies to figure out how best to ignore the problem.
And the pundits who keep misunderestimating peoples’ hatred of politicians still can’t figure out the appeal of Trump. They think we’re too stupid because we understand and don’t mind sentences with non-words and they’ll focus on the mistake in the previous sentence instead of the implications of the first paragraph.
“In a related study, it is also discovered that illegal alien public services rendered greatly outweigh the savings from their slavery wages.”
Gosh, TWO shocks in one morning. I gotta go lie down.
“If you owed student loans of $44,000, and the bank called you up and said, ‘actually you owe $134,000,’ you’d fall off your chair,” said Charles E. F. Millard, head of pension relations at Citigroup. “That’s what this is.”
And if that was the case, I think one would have a case against the bank as a fraudulent lender. So does that end of the analogy extend to the government entities that set up these fraudulent programs? Well of course not.
And the elite wonder why the people are flocking to anti-establishment candidates.
Exactly, people are tired of the constant LIES from politicians who ONLY want to get re-elected and could care less about constituents.
I work for a university (private) and do the 401K with a 5% match. They also have a pension that kicks in at 65. It all adds up to penury.
have promised their retirees a total $78 trillion, much of it unfunded,
An Unfunded Liability is a SLAVE CONTRACT on Future Generations!
And these same lie-tired people keep re-electing these same politicians....
“No kidding, you can’t pay someone $50,000 a year from age 60 to age 90 and provide health benefits when you only have a few hundred thousand to back up each person in a defined benefits account.”
I think what they were banking on is that enough of these people would die before they got too old. Also, when obamacare came on the scene they figured the death panels would bail them out as well.
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