Public Pension Ponzi Scheme; New York Cities Borrow From Pension Plan to Make Contributions.

The definition of Financial Repression:

Several measures that governments employ to channel funds to themselves, that, in a deregulated market, would go elsewhere.

Elsewhere indeed. I feel for the public sector employees who made calculated decisions to take less pay in their careers in return for early retirement opportunities and generous retirement benefits. Of Course that pay disadvantage was pre-2008, because today government employees make more than average private sector employees according to the CBO. But, these were promises made by politicians that could not possibly be kept.

Homeowners have no one to blame for their predicament if they drained the equity out of their houses during the bubble via bank loans and used the cash to buy cars and TVs of ephemeral value and now find their house is worth less than their loan balance. Sadly, public pensioners should also have seen this coming. Grey swan number 8 may be closer than we think.

http://amarginofsafety.com/2012/02/24/a-herd-of-grey-swans/

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 http://www.cnbc.com/id/41969508

Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

“The U.S. economy has become alarmingly dependent on government stimulus,” said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

The economist gives the country two stark choices. In order to get welfare back to its pre-recession ratio of 26 percent of pay, “either wages and salaries would have to increase $2.3 trillion, or 35 percent, to $8.8 trillion, or social welfare benefits would have to decline $500 billion, or 23 percent, to $1.7 trillion,” she said.

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