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Pensions and AIG in common

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March 17, 2009 – Comments (3)

All of a sudden it seems news of pensions is everywhere.  Naked Capitalism has post about AIG, the ponzi scheme that it was, and then argues that pension funds are also a ponzi scheme, which I tend to agree with.

This I could not have said better:

I would throw all the crooks who ran AIG's Financial Products Unit in jail and prosecute them under the full extent of the law for criminal negligence that has caused irreparable damage to the U.S. and global economy.

 And there is truth to this:

And just like AIG, when their financial solvency eventually reaches a breaking point, these pension funds are going to require billions, if not trillions, in bailout funds to allow them to meet their pension obligations.

 

3 Comments – Post Your Own

#1) On March 17, 2009 at 1:29 PM, angusthermopylae (39.54) wrote:

I've followed your posts on pension funds, both because I agree and because I've felt that big pension programs are the ultimate game of musical chairs:  As long as more chairs (increased productivity) are added, then chairs being taken away (retirements) are acceptable.   But when the retirees start to outpace productivity...you're screwed.

Being a believer in a holistic approach to the economy, I am waiting for the big bad news to come from some of the bigger state and federal pension plans:  We're broke.  That, to me, will be the catalyst for a whole 'nother round of market "correction."

I never would have predicted that housing/mortgages would have set this off, but (along with others) I wasn't too surprised.   But it's a fairly sure thing that the shock waves are still bouncing around the system...and pension plans are due for a hit.

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#2) On March 17, 2009 at 3:55 PM, FoolishChemist (96.97) wrote:

And don't forget the biggest ponzi scheme of them all.  The government calls it Social Security.

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#3) On March 18, 2009 at 12:41 AM, dwot (66.58) wrote:

anquthermopylae,

Being at the age I am, 47, I am kind of glad that it got set off early.  It means adjustments will have to come sooner.  I was born in the year with the largest cohort of babies and competition has simply always been high and everything has been cut as I arrive, educational funding, tax breaks that benefitted younger people, programs to help buy a first home, all gutted just as I might have used.

I think we might see significant adjustments to pensions in the next 5 years, where I was thinking it would be more like 10-15 years before.  The fact that these plans are gross wealth redistribution from youth to age, and from less able to pay generation to much better off generation, well the sooner it is made more fair to everyone, the better.

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