{"id":38645,"date":"2018-10-03T18:59:25","date_gmt":"2018-10-03T23:59:25","guid":{"rendered":"http:\/\/olduvai.ca\/?p=38645"},"modified":"2018-10-03T18:59:25","modified_gmt":"2018-10-03T23:59:25","slug":"pensions-now-depend-on-bubbles-never-popping-but-all-bubbles-pop","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=38645","title":{"rendered":"Pensions Now Depend on Bubbles Never Popping (But All Bubbles Pop)"},"content":{"rendered":"

Pensions Now Depend on Bubbles Never Popping (But All Bubbles Pop)<\/a><\/h3>\n
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We’re living in a fantasy, folks. Bubbles pop, period.<\/i><\/div>\n
The nice thing about the “wealth” generated by bubbles is it’s so easy:<\/b>\u00a0no need to earn wealth the hard way, by scrimping and saving capital and investing it wisely. Just sit back and let central bank stimulus push assets higher.<\/div>\n
The problem with bubble “wealth” is it’s like an addictive narcotic:<\/b>\u00a0now our entire pension system, public and private, is dependent on the current bubbles in stocks, real estate, junk bonds and other risk assets never popping.<\/div>\n
But a funny thing eventually happens to financial bubbles: they all pop.<\/b>\u00a0And when the current bubbles pop, they will gut pension reserves, projections and promises.<\/div>\n
Take a look at the chart below of taxpayer contributions to Calpers, the California public pension fund.<\/b>\u00a0Note that in the heady days of Bubble #1, the dot-com era, enormous gains in Calpers’ stock holdings meant taxpayers’ contributions were a modest $159 million annually.<\/div>\n
Based on bubbles never popping and monumental annual gains continuing forever<\/b>, Calpers projected taxpayer contributions in 2010 of $6.6 billion. But since Bubble #2 had popped in 2008-09, stock market gains had cratered and as a consequence taxpayers had to pay almost four times the Calpers projection: $24.6 billion.<\/div>\n
In a few short years, taxpayer contributions have nearly doubled, despite the outsized returns generated by Bubble #3, the largest of them all.<\/b>\u00a0By 2015, taxpayer contributions to Calpers totaled $45 billion, even as Calpers reaped huge gains in its stock portfolio.<\/div>\n
So what happens to taxpayer contributions when all the asset bubbles pop?<\/b>They go through the roof right when taxpayers are themselves facing staggering declines in their own personal wealth and the inevitable declines in income that accompany recessions. (What’s a recession? I thought the Fed banned those.)<\/div>\n
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\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Pensions Now Depend on Bubbles Never Popping (But All Bubbles Pop) We’re living in a fantasy, folks. Bubbles pop, period. The nice thing about the “wealth” generated by bubbles is it’s so easy:\u00a0no need to earn wealth the hard way, by scrimping and saving capital and investing it wisely. Just sit back and let central […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1799,127,587,1816],"class_list":["post-38645","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bubbles","tag-charles-hugh-smith","tag-of-two-minds","tag-pensions"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=38645"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38645\/revisions"}],"predecessor-version":[{"id":38646,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38645\/revisions\/38646"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=38645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=38645"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=38645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}