The Trillion-Dollar Pension Crisis Is Only Getting Worse Because People Are Living Too Long

BI ^ | 2-16-2014 | John Mauldin

[blam]

John Mauldin
February 16, 2015

We do not have to look to Greece to find massively underfunded obligations. Here in the US we can find hundreds of examples, willingly created by politicians and businessmen who proclaim they are working for the public good.

We call them pension funds, but they’re just another form of unfunded debt.

A sovereign bond is a promise to pay a certain amount of money over time. A defined-benefit pension fund is a promise to pay a certain amount of income over time. The value of either is determined by the ability of the government or the pension fund (or its sponsor) to pay.

I am in the Cayman Islands as I write this letter, to speak at an alternative investment conference attended by the management of some of the largest pension funds in the US and Europe, both public and private. Being here has motivated me to write this week’s letter on the problems that pension funds face. The pension fund managers I have talked with take their fiduciary obligations seriously, and they face some serious challenges.

I was on the stage with Nouriel Roubini (who makes me come off as the optimist), and we were talking about macroeconomic risks.

(snip)

[Lou L]

There are others who misled and perhaps should be executed for the damage they have caused to the future of others and the economy as a whole.

I couldn't help but think the same. There are people with fiduciary responsibilities at the helm of state and federal governments who--and I'm giving them the benefit of the doubt--probably couldn't advise the truth about their respective finances. The reason why? Someone in a political position didn't want the impact to hit home with taxpayers. There'd be a revolt. The answers are raise retirement ages, reduce retirement benefits, or raise taxes to cover the shortfall.

Now, there is movement afoot to work from the opposite direction: with Obamacare, we're hearing more discussion that the solution is to kill off our elderly sooner. That's the real underlying message.

[Forward the Light Brigade]

A few good nuclear wars could solve this. Famines and plauges could quickly reduce the population to One billion in less than a decade.

[clearcarbon]

"Obama's Death Squads/Panels should correct this problem, eh?"

The more seniors he kills with obamacare, the less he has to pay in benefits and the more he collects in estate taxes. If he wants to stay in office indefinitely he can use that money saved to buy a lot of immigrant votes.