Calpers on the Brink of Insolvency, by
Martin Armstrong, 3/4/18
The largest public pension fund in the
United States is the California Public Employees Retirement System (CalPERS)
for civil servants. California is in a state of very serious insolvency. We
strongly advise our clients to get out before it is too late. I have been
warning that CalPERS was on the verge of insolvency. I have warned that
they were secretly lobbying Congress to seize all 401K private pensions and
hand it to them to be managed. Mingling private money with the public
would enable them to hold off insolvency a bit longer. Of course, CalPERS
cannot manage the money they do have so why should anyone expect them to
score a different performance with private money? Indeed, they would just rob
private citizens to pay the pensions of state employees and politicians.
CalPERS has been making investments
to be politically correct with the environment rather than looking at
projects that are economically based. Then, CalPERS has been desperate to cover this and other facts up to deny the public any
transparency. Then, because stocks they thought were overpriced last year,
they moved to bonds buying right into the Bond Bubble. Clearly, California’s
economy peaked right on target and ever since there has been a steady
migration of residents out of the state.
Meanwhile, Governor Jerry Brown has been
more concerned about bucking the trend with Trump effectively threatening treason against the Constitution. The
insolvency at CalPERS has exceeded $100,000 owed by every private citizen in
California to government employees. It was $93,000 that every Californian owed back
in 2016 for their state employees. In January 2017, Jerry Brown wanted
a 42% increase in gas taxes to bailout CalPERS. California
is an extremely liberal state – but that means they are also LIBERAL in spending the FUTURE earning of residents on public
employees.
The pension crisis at CalPERS is getting
worse by the day. The State looks to be totally bankrupt by 2021-2022. CalPERS
has just decided to increase the contribution of local governments and cities
to their fund. The cities say they are approaching bankruptcy because of rising
subsidies, but CalPERS itself is approaching insolvency. The problem is that
there really is no honest reform in sight.
The choice is clear – CUT pension benefits of government
employees or RAISE TAXES! CalPERS simply needs a bailout and
very soon. It looks like they are hunting for ways to tax whatever they can for
it only now about state employees getting their piece of your future income.
This is a trend that will bring down Western society as a whole – the Sovereign
Debt Crisis of untold proportions. Board Member Steve Westly even told The Mercury News that a bailout was needed and soon.
Currently, CalPERS manages
approximately $350 billion of future pension claims of its members. Recently,
CalPERS passed an amendment to the statutes, which resulted in higher
contributions for the California municipalities. The amount of contributions
has been increased several times over the past few years and this time the
cities do not appear to be able to handle the increased costs. With the Trump
tax reform, the real incompetence of local government is coming to a head.
Once CalPERS was 100% funded with assets
under management. In fact, they had a surplus in the good old days before Quantitative
Easing. Right now,
the system no longer has more than two-thirds of future claims covered. CalPERS
itself expects an annual return of 7% on its financial investments when it
needs 8% minimum. Most pension funds run by the States are insolvent or on the
brink of financial disaster.
This is what I have been warning about
that the Quantitative Easing set the stage for the next crisis –
the Pension Crisis. The Illinois Pension Fund needs to borrow up to $107
billion to meet its payment obligations with no prayer of repayment. Promises
to state employees are over the top and off the charts.
This is why Janet Yellen at the Fed kept
trying to raise rates stating that interest rates had to be “normalized” for this was the crisis she knew was coming. And
guess what – Europe is even worse and Draghi will not raise rates for fear that
government will be unable to fund themselves. The ECB is creating a vast
European Pension Crisis while trying to keep member state governments on
life-support. It has purchased 40% of all sovereign debt and appears trapped
and cannot reverse this process. The choice is pensions collapse or state
collapse.
There is NO
WAY out of
this crisis. The portfolio would have to be completely restructured and
benefits reduced. Jerry Brown will do everything in his power to raise
taxes and
fees to try to hold CalPERS together.
That is by no means a long-term solution. If you can transfer to one of the 7
states without income state – do it NOW before it is too late. Get out of town before you
cannot sell property anymore!
Norb
Leahy, Dunwoody GA Tea Party Leader
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