Friday, April 1, 2016

Another nail in the coffin for retirement


It's the same story pretty much everywhere: Cities and states promised ridiculously generous (by today's standards) pensions to teachers, cops and firefighters, failed to sufficiently fund the plans and invested the money they did have very badly. And now the weight of the resulting unfunded obligations are crushing not just plan recipients but entire communities. 


At the risk of belaboring the point, imploding pensions, like most other modern problems, can be traced back to easy money. Put a monetary printing press in the hands of government and the resulting corruption flows from Washington outward to every state capital and mayor's office. With interest rates artificially low and inflation artificially high, generating 8% returns as far as the eye can see looks not just possible, but easy. So promising benefits based on high rates of return seems reasonable to elected officials anxious to buy labor peace. And once the Ponzi scheme is in place, there's no way to turn it off without creating chaos.
The only solution (again at the risk of repetition) is to take the easy money program to its logical extreme and devalue the dollar by an amount large enough to make nominal pension benefits affordable. That's functionally the same as honestly cutting benefits and will impoverish everyone who doesn't own lots of real assets, but it will be easier to hide.

Politicians made promises to these government employees for another reason. Most of these workers are union. The unions made contributions to the politicians re-election efforts. In addition, the unions get out and provide foot soldiers in the campaigns by phone banking, door knocking, handing out literature, providing bodies to fill the seats at political rallies etc..

Now the chickens are coming home to roost. The wage slaves have figured out that they are not part of this club and yet are expected to pay for it. The average schmo is expected to to endure a lower standard of living so that the privileged few can enjoy guaranteed pensions. Higher taxes and less services will not be tolerated by the masses and that is why we see the rise of Sanders and Trump. The ponzi is beginning to seep into the average persons consciousness. 

In the end it does not matter as this cannot be fixed. As the author points out this all ends in a depreciated currency and general lower standard of living. However if one educates themselves and chooses to take ownership of their future you can in fact prosper and not end up a victim.  

The key is choosing to look at things for what they are and not for what we want them to be. It does not matter if politicians made promises that cannot be kept. It does not matter that you paid into social security your life. What is done is done. Accept if for the way it is and make a plan to protect yourself. 

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