Pension Under-funding Is the Emerging Global Dragon

Bloomberg ^ | May 31, 2004 | John Wasik

[sarcasm]

May 31 (Bloomberg) -- Pension plan funding across the world is much like a dragon that has just begun to emerge from its cave.

Spurred by stock market declines, poor investment decisions,aging populations and underfunding of defined-benefit pension plans, the beast is beginning to inflame the political process.

[sarcasm]

``This legislation will weaken the pension insurance system,'' says Bodie, referring to the U.S. law, which he says may require a PBGC rescue similar to the $200 billion U.S. savings and loan bailout in the early 1980s.

[thoughtomator]

Younger generations, prepare yourselves once again to be sodomized by boomer greed.

[CasearianDaoist]

More anti-bush electioneering. There was an article about "the Greenspan Credit Depression of 2006" the other day. They cannot find anything real to latch onto to talk down the economy so now they sky is going to fall in the future somewhere, surely during another Bush Presidency.This seems to be the talking point of the week.

[jackbill]

``This legislation will weaken the pension insurance system,'' says Bodie, referring to the U.S. law, which he says may require a PBGC rescue similar to the $200 billion U.S. savings and loan bailout in the early 1980s.

If memory serves, the total bill for the S&L bailout was more like $500 billion and it lasted through the end of the 1980's. It was one cause of the large G.H.W. Bush deficits.

[Poundstone]

All I can say is thank God I'm a federal employee, with a guaranteed government pension available to me once I turn 50.

[neutrino]

Thanks for the paint, Sarcasm! Pension insurance, though, will never be able to stem the fundamental crisis behind the funding gap. Benefits can only be paid when combined investment returns and contributions cover future payments.

As the article points out, new accounting rules require that pension fund obligations be reflected in corporate earnings statements. Over the past century there has never been a period when price-earnings ratios of the overall market do not revert to the mean.

This implies that we will probably see a decline to an average price-earnings ratio of ten over the next decade. If we're lucky, this will occur slowly and will reflect a time of anemic stockmarket returns. If were not lucky, the reversion will be rapid and will result in a severe and painful recession.

The pension insurance system will be used to bail out corporations that made wildly optimistic assumptions -assumptions that inflated earnings in the short term - and $200 billion will hardly be a down payment.

It is interesting the Corporations demand unfettered capitalism when times are good, but howl for taxpayer assistance when their own extravagant promises cause them discomfort.

Corporate socialism at its finest.

[Wonder Warthog]

"Younger generations, prepare yourselves once again to be sodomized by boomer greed."

Uh, it wasn't the boomers who passed Social Security, Medicare, Medicaid, etc. It was "The Great Generation" who fought WWII.

Not to worry, though. The standard practice these days is for companies to lay off folks just as they approach retirement age, then screw them out of their pensions. "Company" pension plans AND "Social Security" are ALL now bogus.

My personal preference is to privatize Social Security and get every employee on an individual IRA, into which the "payroll taxes" (both individual and company) AND personal additional contributions may be placed.

[meenie]

Not to worry. With the Federal Reserve able to create the money at will, just inflate the currency and the suckers will be dead before they realize they have been taken.

[Hardastarboard]

That's very creative. Liberals are always so creative. It's too bad they can't put that creativity to a constructive purpose. Of course, that would require discipline and focus, something they're not very good at.

[sarcasm]

Corporate socialism at its finest.

I prefer to call it corporatism.

[CasearianDaoist]

You said it.

[neutrino]

Not to worry. With the Federal Reserve able to create the money at will, just inflate the currency and the suckers will be dead before they realize they have been taken.

It may not take that long. Inflation is starting up as we speak, and if it increases to just 8% annually, prices will double in nine years.