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Us - Borrowing To Replenish Depleted Pensions

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http://www.nytimes.com/2015/05/28/business/dealbook/borrowing-to-replenish-depleted-pensions.html?ref=business&_r=0

Pennsylvania is proposing to issue $3 billion in bonds, despite the role that such bonds have already played in the fiscal woes of other places.

And he is not alone. Several states and municipalities are considering similar action as they struggle with ballooning pension costs.

Interest in so-called pension obligation bonds is expected to intensify in the wake of a recent Illinois Supreme Court decision that rejected the state’s attempt to overhaul its severely depleted pension system. The court ruled unanimously that Illinois could not legally cut its public workers’ retirement benefits to lower costs, forcing lawmakers to scramble for the billions of dollars it will take to keep the system intact.

While the Illinois ruling is not binding on other states, analysts think it may influence lawmakers elsewhere to look to alternatives to cutting public pensions. The Illinois justices offered a list of all the times since 1917 that state lawmakers had ignored expert warnings and diverted pension money to other projects. They said, in effect, that the lawmakers had to restore the money.

While the Illinois ruling is not binding on other states, analysts think it may influence lawmakers elsewhere to look to alternatives to cutting public pensions. The Illinois justices offered a list of all the times since 1917 that state lawmakers had ignored expert warnings and diverted pension money to other projects. They said, in effect, that the lawmakers had to restore the money.

What could possible go wrong with this.....

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First the unsustainable subprime mortgages blew up. Now it's time for the unsustainable mortgage to blow up and given the demographic issues (UK, EU, USA) that's no surprise.

No need to guess what will happen. There will be more currency debasing (theft) from those that have to pay those that promised themselves lots of freebies. Hopefully China get's in the way this time and the whole lot blows up in the central banks faces.

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It is going to be interesting that is for sure.

People living longer and longer with 0% interest rates. There must be some very worried pension providers out there.

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Hey pensioners!

Buy our pensioner bonds.

Pay yourselves twice!

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The trouble with pension obligations is they cannot be inflated away because the pensions are index linked. If the state really spent the pension fund on other things it's difficult to see why they should not now restore it. However where a fund is simply insufficient it does seem reasonable to cap the pay outs.

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Yes. It was the advent of the low inflation world that did for the likes of Equitable Life. They only offered a measly guarantee of about 3% on endowment policies when it seemed to be a problem that would never arise. Basically Life Assurance companies, pensions and many, many other areas are under growing stress. Returns have collapsed - both due to this low inflation and also to claw back the obligations of the past from current customers. Note they were forced out of equities and the like by the regulator at the bottom of the market too for false 'risk' reasons.

Equitable was aware of their potential exposure to diminishing returns for a long time but failed to hedge adequately against it, falsely assuming a legal entitlement to stiff future annuity holders instead. They lost in court.

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Equitable was aware of their potential exposure to diminishing returns for a long time but failed to hedge adequately against it, falsely assuming a legal entitlement to stiff future annuity holders instead. They lost in court.

They basically came up with annuity guarantees, just like the State does with state retirement pension and health promises beyond what the growth in investment returns could cope with and indeed what our economy can cope with now. Of course they are putting back the retirement age because you can't keep having each departing soul (as at present) having taken a quarter of a million in excess welfare over tax contributions during their lifetimes. And to add insult to injury, no inheritance tax redress for the money they have taken from the unborn.

Innteresting, the Equitable fund has gone into overdrive since the nadir of 2009, they suddenly have found billions in free assets which they are now redistributing as policies are encashed. The policy values have increased 50% in 5 years, nobody saw this coming.

Sit it out and the last man standing could get riches beyond his dreams because the free assets are not budging much and the policy holders are decling in run down mode.

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