Thursday, October 13, 2016

Beginning Stages Of A Public Pension Crisis
Daniel Amerman provides a detailed analysis of the California Public Employees Retirement System (Calpers) & its challenges in meeting its obligations given the current investment & financial environment .. "Calpers also faces an extraordinary dilemma. It is drastically underfunded, even using relatively aggressive assumptions about future long-term investment returns. These assumptions do not take into account the current policies of the Federal Reserve and other central banks .. Based on current interest rate levels, there has been discussion that if the United States enters another recession, then negative interest rates may come here as well. And if that were to happen and if low or negative economic growth were to also bring stock yields into negative territory, then there is an inversion, and more money must be set aside today than what will be paid out in the future .. Many government bodies, including states, cities and school districts, are all making binding promises about decades of payments to public employees which are based upon relatively high investment yields generating much of the cash. Simultaneously, another part of government - the Federal Reserve - is massively intervening in the markets, and pushing yields to all-time lows. These federal policies have a potentially catastrophic impact on public finances on a nationwide basis, yet are being generally ignored with current pension shortfall estimates of state & local governments."
LINK HERE to the analysis

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