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alstry (35.96)

What Happens When The Savings Runs Out?

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February 19, 2010 – Comments (2)

Our Pension Funds are now over One Trillion Dollars underwater....and that is marking assets at high valuations.  Our Banks are concealing the value of assets making capitalization look stronger.  Are we running out of ability to pretend as revenues to cities, counties and states evaporate as fewer and fewer have access to credit.

Borrowing money basically drove our economy for the past ten years.  Everyone borrowed to create the illusion of a productive economy when in fact we had production because we borrowed and spent.  This is not a USA centric issue, but one that faces the entire world as evidenced by Greece, Dubai and others.

The BIG difference is that much of the world's debt is owned by the American people in Pension Plans, Retirement Accounts, Investment Accounts, and Insurance Policies.  As long as the debt is serviced, the value remains.....but when the debt can't be serviced, the value collapses.  The question is how much of America's and the World's current debt is simply serviced because we kept lending to keep things going?

In essence, has our economy morphed into something not much more than a Ponzi Scheme of Borrowing, Spending, Saving, and Lending to keep the Borrowing and Spending going as we draw down our savings.

Now that credit is being pulled back.....it is getting impossible to service an increasing percentage of the debt as collateral values implode and revenues evaporate.  Evidencing this is the HUGE deficit in our pension plans and declining revenues to cities, counties and states.

Where this goes is anybody's guess as Zombulation sets in when the savings runs out.

2 Comments – Post Your Own

#1) On February 19, 2010 at 9:26 PM, lquadland10 (< 20) wrote:

NJ is using the pension funds to stimulate the state economy.

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#2) On February 19, 2010 at 9:40 PM, goalie37 (90.98) wrote:

At age 41, I'm about 75% sure the pension from my union won't be there when it comes time for me to retire.

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