Daily Digest

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Daily Digest 3/25 - Funding Shortfalls Put Pensions in Peril, Spanish Youth Unemployment Triples

Wednesday, March 25, 2015, 7:22 AM


Funding Shortfalls Put Pensions in Peril

Faced with rising health costs and retirees living longer than expected, many state and local governments are failing to keep up with the annual payments. A CNBC analysis of financial data for 150 state and local pension plans collected by Boston College's research center found that 91 had set aside less than 80 percent of the money needed to meet current and future obligations to retirees. Only six were fully funded.

Pension Funds Seek Shelter From Dollar’s Rise

Exposure to the rising dollar has dented U.S. investors’ profits by about 6%, according to State Street, another firm that has seen a rush of clients seeking to hedge their currency exposure. This year, stock markets in Europe and Japan have outpaced that of the U.S., but the rising dollar would have eroded U.S. investors’ return in these markets.

Phoenix, other Valley cities reel from pension spikes

About a decade ago, when the pension plans were better funded, Tempe paid $1.9 million for the two plans, compared with the estimated $18.3 million it expects to pay next year.

Greece runs out of cash by April 20 without new aid: report

Greece will run out of cash by April 20 unless it receives an infusion of fresh aid from its international creditors, Reuters reported Tuesday, citing an unidentified source.

Unemployment rate amongst young Spaniards has tripled in seven years

The unemployment rate among young Spaniards is quoted at 51.8% across the whole of Spain, having almost tripled from 17.9% in the third quarter of 2007.

Chicago Schools Selling First Bonds Since 2013 as Finances Teeter

The winner will take over as the city of 2.7 million approaches a fiscal cliff. Chicago has $20 billion in unfunded pension liabilities, with a $600 million payment due next year.

ECB's balance sheet expands as stimulus plan gains momentum

The balance sheet of the European Central Bank and the euro zone's national central banks expanded by 15.725 billion euros (11.6 billion pounds) to 2.158 trillion euros in the week to March 20, the ECB said on Tuesday.

ECB to Continue Buying Debt Until Inflation Stabilizes

The European Central Bank will purchase large amounts of public and private debt for at least 18 months and until it is convinced that inflation will stabilize near annual rates of 2%, the bank’s president Mario Draghi said on Monday, underscoring the ECB’s willingness to flood the eurozone with freshly minted money far into the future.

China central bank lowers benchmark money rate

The PBOC has been moving to ease tight lending conditions in China, which have remained stubbornly high after the spring festival holiday in late February, showing that easing measures to reserve requirement ratios and lending rates are failing to work their way into real lending rates.

Hungary Central Bank Slashes Key Interest Rate For First Time Since July

Hungary's central bank on Tuesday cut its key interest rate to a new low, after holding it steady for seven straight months amid falling prices and improving growth.

Gold & Silver

Click to read the PM Daily Market Commentary: 3/24/15

Provided daily by the Peak Prosperity Gold & Silver Group

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DennisC's picture
Status: Gold Member (Offline)
Joined: Mar 19 2011
Posts: 342
Pension Funding

I appreciate all the links that the membership has been posting, particulary the pension-related articles.  A special shout-out to Saxplayer.  I live in an area that is proudly in the top 10 states with the most underfunded public pension(s).  Also, each year, public worker costs (wages, benefits, healthcare, etc.) consume a larger portion of state and local revenue.  It would be nice to see a graph, similar to the one DaveF posted the other day, that displays "public sector" average wage increases.  I'm thinking it might be greater than the roughly 2 percent number indicated for "private sector" wage increases.

I found this paper produced by the Society of Actuaries titled Report of the Blue Ribbon Panel on Public Pension Plan Funding.  Source (PDF format): https://www.soa.org/brpreport364

Some charts in the report are telling (on pages 13 and 15, respectively):

In Fig. 2, notice the steady climb of the light blue and red bars (funded status under 60 percent, and between 60 and 79 percent, respectively).  Figure 5 shows steady increases in Annual Required Contributions, and Figure 6 shows a steady reduction of Fixed Income type investments and increasing investments in Alternatives.  Cash.  Who needs cash?  This will end well, don't cha' know!  Perhaps another opportunity for a "QE" event.  Just print enough to get everyone back to 100 percent funded (or just transfer the money from private sector 401k's and IRA's).

P.S. I tried inserting snippets of the charts from the report but don't see them when I go to preview mode, so here we go.


saxplayer00o1's picture
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4239
Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
My Dark Side.

Oh Horrors!  I have discovered my dark side.

I found myself chuckling in amusement at Joe Hocky's discomfort. (thanks Sax). 


Instead of spending up big on social security, Australia should have used the commodities windfall to buy, say  (off the top of my head), solar cell factories or some such. Then any person who found the them themselves in difficulties would be given work, shelter and most important, training.

The all hallowed profit margin could take a hike. Show me the profit in the dole.

But no. We made the decision to Party On. I guess that is how one gets into power.

sand_puppy's picture
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 2039
Dimitri Orlov channels Chris and Charles

 Financial Feudalism

I thought that Orlov out did himself on explaining how the world works with the evolution of power (non)sharing arrangements.  It is also fun to see CHS and CM's words and ideas influencing others in the blog-o-sphere.  His writing style has such a dry humor.  He makes me laugh.

The feudal system:

And the the Capitalist system where power depends on the amount of money each person has to buy influence.

And what happens as the post capitalist (no oil, no more real money creation) society flounders:

I can't do him justice.


pinecarr's picture
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2259
Too funny, Sand Puppy!! 

Too funny, Sand Puppy!! 

thc0655's picture
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1714
Keeping the status quo running a little longer

And here are our owners keeping their status quo/cash cow running just a little longer:

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