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Thread: That Which Is Unsustainable Will Go Away: Pensions -Tyler Durden

  1. #21
    [QUOTE=Winstonbiggs;4470369]If you had told me we would have the lowest energy prices in the world because of new natural gas finds and drilling techniques 10 years ago I would have told you no way. Oil from sand in Canada or from shale in the US? If back in 1975 you told me we would be importing deflation from China while having full employment for 10 plus years I would have said crazy talk.

    Apple is going to be the biggest company in the world, lunacy.

    In 10 years we may not need a drop of the oil we store in the strategic oil reserve for all any of us know. Todays unsustainable budget may look reasonable in 10 years if our economy goes through a massive growth cycle.
    Facebook is going public tomorrow. People are inventing, doing research, changing the world while we speak.

    Worry about the land mines in front of you not the ones that are planted on a road you might not travel.[/QUOTE]

    Rainbows and lollipops wont erase 17 trillion in debt. In your 10 years from now scenario we will be close to 40 trillion in debt. I hope I'm wrong. I hope the Romney presidency brings our country back on the path to prosperity but realistically I think it may be too late. The structural deficit is too big for anyone to deal with now. I think that if the country smartens up and elects pols that stress fiscal responsibility we may avoid Armageddon but we can't avoid a major devaluation of the currency.

    The question is not if it will happen. It will because it must. The question is how do we protect ourselves from the pain and how to profit from the devaluation. I'm not sure of the answer. The finance 101 answer is that in a dime of high inflation hard assets like real estate fare the best. There is always a caveat. If the economy tanks because of the deflation hard assets could go down in value as well. Maybe gold is the answer? Gold has run up quite a bit though. Hard to take a position after the massive run gold has made. Maybe Treasutr Inflation Protected Securities are the way to go. Can hurt to own some. Maybe we convert free cash to a foreign currency like the Swiss Franc. That might work best for smaller investors but the regulations around holding foreign accounts make them a real hassle during tax season.

    I'm not really sure what the best path is.

  2. #22
    [QUOTE=chiefst2000;4470168]And you are saying that the United States is growing today or has the potential to grow in the current environment at the same rates as we did between 1950 and 2000 when globalization was non-existent and we didn't have the burden of entitlements and unfunded pensions and the massive social programs of today? Would you agree or disagree with the following statement:

    Past performance is not indicative of future results.
    [/QUOTE]

    So you are saying you know how the market will be performing in the future years?

  3. #23
    [QUOTE=FF2;4470391]So you are saying you know how the market will be performing in the future years?[/QUOTE]

    I am saying that counting on the historical 8% rate of return is a farce. The country was in major expansion mode after WW2. Times have changed. Treasuries return less then 1% and the Fed has promised to keep rates low for the forseeable future. The calculations involved in determining contribution requirements for defined benefits pensions have proven to be incorrect. Municipalities have also proven that when the markets go up and times are good they will opt not to make the contributions and prefer to spend the money elsewhere further exacerbating the problems.

    In short the system doesn't work. The calculations were off. Even when the markets grow the calculations don't work because governments will always choose not to contribute to the system in those years.

    The answer is clear. New state and federal employees get 401K plans like the rest of us. They can negotiate the employer match to be a nice high number. Even make it a 100% employer contribution for all I care. Then let the individuals invest their funds as they see fit just like the rest of the country does. I'd even be happy to let the unions themselves handle it if the workers prefer it. Cities and states agree to total compensation. Lets say $80K per year for a tenered teacher plus 70% of their healthcare and a 12% of salary contribution to a 401K or union run pension.

    The system today puts all of the investment risk on municipalities and states. That is asking for trouble. If the stockmarket were to return below average returns for a few years it would become a systemic crisis. Wait, that already happened. Markets returned below average for the past 12 years and we have a systemic crisis. Damn I'm good at this.

  4. #24
    [QUOTE=Winstonbiggs;4470369]If you had told me we would have the lowest energy prices in the world because of new natural gas finds and drilling techniques 10 years ago I would have told you no way. Oil from sand in Canada or from shale in the US? If back in 1975 you told me we would be importing deflation from China while having full employment for 10 plus years I would have said crazy talk.

    Apple is going to be the biggest company in the world, lunacy.

    In 10 years we may not need a drop of the oil we store in the strategic oil reserve for all any of us know. Todays unsustainable budget may look reasonable in 10 years if our economy goes through a massive growth cycle.
    Facebook is going public tomorrow. People are inventing, doing research, changing the world while we speak.

    Worry about the land mines in front of you not the ones that are planted on a road you might not travel.[/QUOTE]

    The picture you paint, while very likely, is globalization. It is fueling the growth of the 1 percenters.

    It is eliminating jobs at a tremendous pace.

    This elimination of jobs creates a decrease in consumption thus making growth near impossible.

    I am surprised we haven't had a thread on the FB co founder fleeing the US.

  5. #25
    [QUOTE=southparkcpa;4470404]The picture you paint, while very likely, is globalization. It is fueling the growth of the 1 percenters.

    It is eliminating jobs at a tremendous pace.

    This elimination of jobs creates a decrease in consumption thus making growth near impossible.

    I am surprised we haven't had a thread on the FB co founder fleeing the US.[/QUOTE]

    Globalizaton has brought 100's of millions of people who were in abject poverty to a middle class lifestyle in a very short time span. Those people are now consuming. Demand is not restricted to national boundries. China a country of millions of bicycles just a decade ago is now the second largets market for Automobiles and the largest buyer of aircraft in the world.

    Globalization is much less a problem for jobs than the structural change taking place through innovation. I have no doubt GM and Ford cars will be built with robots in both the US and China.

  6. #26
    [QUOTE=Winstonbiggs;4470435]Globalizaton has brought 100's of millions of people who were in abject poverty to a middle class lifestyle in a very short time span. Those people are now consuming. Demand is not restricted to national boundries. China a country of millions of bicycles just a decade ago is now the second largets market for Automobiles and the largest buyer of aircraft in the world.

    Globalization is much less a problem for jobs than the structural change taking place through innovation. I have no doubt GM and Ford cars will be built with robots in both the US and China.[/QUOTE]

    So you are saying we can tax the Chinese so our thousands upon thousands od civil servants with pensions above 75K can be paid?:rolleyes:

  7. #27
    [QUOTE=southparkcpa;4470448]So you are saying we can tax the Chinese so our thousands upon thousands od civil servants with pensions above 75K can be paid?:rolleyes:[/QUOTE]

    Were going to have to grow our economy and create wealth massive amounts of it and I think we will.

  8. #28
    [QUOTE=JetPotato;4469557]What's with the Tyler Durden thing?[/QUOTE]
    I believe every post at ZeroHedge not penned by Mark Taibbi is penned by "Tyler Durden", ie. anonymous. "I am Spartacus" of the financial internet.

    Consensus: pretty gay. But there is routinely content on there that more than makes up for it.

  9. #29
    [QUOTE=Winstonbiggs;4470466]Were going to have to grow our economy and create wealth massive amounts of it and I think we will.[/QUOTE]

    Disagree....their is a REAL and unstoppable reason why the poor are growing and the 1 percents are also.

    The wealth you speak of..like the new Apple wealth and FB wealth are in the top 1 percent.

    How is that healthy?

  10. #30
    [QUOTE=southparkcpa;4470529]Disagree....their is a REAL and unstoppable reason why the poor are growing and the 1 percents are also.

    The wealth you speak of..like the new Apple wealth and FB wealth are in the top 1 percent.

    How is that healthy?[/QUOTE]

    Nobody said life is fair, the telephone put a ton of people who made their living understanding code out of work. We have to redistribute through education, and government.

  11. #31
    [QUOTE=Winstonbiggs;4470546]Nobody said life is fair, the telephone put a ton of people who made their living understanding code out of work. We have to redistribute through education, and government.[/QUOTE]

    OK..... we'll see. But sir, IMO, you are so wrong.

    Technology now is incredible. This 4 year recession is here for a reason.... and the telephone analogy is not a true comparison (all due respect).

  12. #32
    [QUOTE=chiefst2000;4470124]This has nothing to do with taxes. There isn't enough money in this country to pay for the pension system. It is already bankrupt across the country. They are essentially living off "principal" for a few years but the damage has already been done.[/QUOTE]

    Part of the problem is once a gov't person is retired, they remain on the 'take'. So we wind up paying for some ratio of gov't employee retired to the 1 that is working today.

    Those numbers are just unsustainable.

  13. #33
    [QUOTE=southparkcpa;4470556]OK..... we'll see. But sir, IMO, you are so wrong.

    Technology now is incredible. This 4 year recession is here for a reason.... and the telephone analogy is not a true comparison (all due respect).[/QUOTE]

    The telephone employs tens of millions of people...

    True story.

  14. #34
    [QUOTE=southparkcpa;4470556]OK..... we'll see. But sir, IMO, you are so wrong.

    Technology now is incredible. This 4 year recession is here for a reason.... and the telephone analogy is not a true comparison (all due respect).[/QUOTE]

    The recession is here because of massive amounts of debt built up over a long period of time by households, businesses and governments. Markets lost faith in the ability of people to pay back that debt. The recession is a deleveraging process that must continue until markets have faith that lending money will be paid back.

    Technology being incredible allows people to be more productive. Productivity is a key component in creating greater wealth. The problem right now is until we deleverage demand is likely to be depressed and much of our productivity is likely to stay on the sidelines.

    That doesn't mean the potential for incredible wealth creation that accelerates won't happen at some point. It usually does. The biggest problems we face is demographic changes and a greater population of our young people not getting the skills they need to be as productive as people from other parts of the world. At the same time a very well educated competitive portion of our country is leaving the work force. If we continue to have to import skilled labor while dolling out benefits to a growing under class it will be a huge tax on the capital needed to finance the growth we need.

  15. #35
    [QUOTE=Winstonbiggs;4470870]The recession is here because of massive amounts of debt built up over a long period of time by households, businesses and governments. Markets lost faith in the ability of people to pay back that debt. The recession is a deleveraging process that must continue until markets have faith that lending money will be paid back.

    Technology being incredible allows people to be more productive. Productivity is a key component in creating greater wealth. The problem right now is until we deleverage demand is likely to be depressed and much of our productivity is likely to stay on the sidelines.

    That doesn't mean the potential for incredible wealth creation that accelerates won't happen at some point. It usually does. The biggest problems we face is demographic changes and a greater population of our young people not getting the skills they need to be as productive as people from other parts of the world. At the same time a very well educated competitive portion of our country is leaving the work force. [B]If we continue to have to import skilled labor while dolling out benefits to a growing under class it will be a huge tax on the capital needed to finance the growth we need[/B].[/QUOTE]

    Well put and astute except one issue. We wont be able to import the labor. So we export the jobs.


    Steve Jobs made it VERY CLEAR to OBAMA why Apple produces overseas. Our kids cant do the work. Its THAT Simple.

  16. #36
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    While I agree in spirit, the implementation would have to take into account salaries. As it is now, my agency has only a 20% competency level (20% of workers competent, 80% incompetent). Pensions and medical bennies make up for sub-market wages. They just started making us contribute to medical (the non-union people, anyway).
    Take away pensions and the people that are employable in the real world will take off.

  17. #37
    [QUOTE=quantum;4470914]While I agree in spirit, the implementation would have to take into account salaries. As it is now, my agency has only a 20% competency level [B][SIZE="5"](20% of workers competent, 80% incompetent). [/SIZE][/B]Pensions and medical bennies make up for sub-market wages. They just started making us contribute to medical (the non-union people, anyway).
    Take away pensions and the people that are employable in the real world will take off.[/QUOTE]


    That is typical government..........

  18. #38
    [QUOTE=quantum;4470914]Pensions and medical bennies make up for sub-market wages.[/QUOTE]

    So here's the million dollar question.

    Is the public willing to raise the salaries when they drop the benefits?

  19. #39
    [QUOTE=FF2;4470978]So here's the million dollar question.

    Is the public willing to raise the salaries when they drop the benefits?[/QUOTE]

    The last 10 years has proven, with NO DOUBT, that there aren't sub market wages.

    Public teachers out earn private teachers by double
    Police and Firemen in NY earn on average 100K (google it)
    In Quantams workplace, accountants earn between 50 and 125K

  20. #40
    [QUOTE=FF2;4470978]So here's the million dollar question.

    Is the public willing to raise the salaries when they drop the benefits?[/QUOTE]

    Here is my POV. The thing we need in clarity of cost. No more no less. I am happy to increase salaries if that is called for as long as we take the mystery out of the cost. There is no way to calculate the cost of promising a worker a defined benefit at retirement. Politicians that offer these packages are government workers themselves and they know they will be long gone before the real costs kick in. The system is flawed. It doesn't work at all.

    My small county of Rockland in Ny will need to fork up 60 Million this year to make up for a shortfall in our pension system. For reference the entire county budget is around 180 Million a year. We have some of the highest property taxes in the country already. So now we will borrow 60million to make up this years shortfall. What are we supposed to do next year or the following when the shortfall hits again? Borrow more.

    The solution? No more mystery. Employees get a predetermined dollar amount and a defined contribution retirement package. Politicians are now forced to account for salaries and benefits in the year they are paid. No more debt bombs. Workers can choose to invest their retirement contribution in a 401K type plan or hand it over to their Unions which can administer their defined benefit plans as they see fit. I'd personally choose the 401K because I can promise you the unions will blow the pension money even faster then the municipalities did.

    Would you be on board with this type of system FF?

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