{"id":42863,"date":"2019-01-17T06:47:41","date_gmt":"2019-01-17T11:47:41","guid":{"rendered":"https:\/\/olduvai.ca\/?p=42863"},"modified":"2019-01-17T06:47:41","modified_gmt":"2019-01-17T11:47:41","slug":"were-reaching-the-beginning-of-the-end-of-the-pension-fund-crisis","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=42863","title":{"rendered":"We\u2019re Reaching the Beginning of the End of the Pension Fund Crisis"},"content":{"rendered":"
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We\u2019re Reaching the Beginning of the End of the Pension Fund Crisis<\/a><\/h3>\n

\"pensions
\nPhoto<\/a> by Bank of England | CC BY<\/a>\u00a0| Photoshopped from original<\/p>\n

The pension crisis has been escalating for quite some time, and accounting for pension shortfalls seems next to impossible for state governments.<\/p>\n

The shortfall between pension assets and liabilities is a major problem<\/a>. But another problem may be spelling the beginning of the end for public pensions altogether.<\/p>\n

The Beginning of the \u201cEnd\u201d<\/strong><\/p>\n

Typically, public pensions assume a 7-percent discount rate so they need to generate a return higher than that. But according to Bloomberg, they aren\u2019t getting those returns often enough.<\/p>\n

The Bloomberg<\/a> article states that the average returns for pension-fund-like portfolios have only generated returns of 7 percent or greater for 50-year periods twice since 1871.<\/p>\n

The article continues, saying the problem is worse because of two primary reasons:<\/p>\n

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  1. \u201cCumulative returns are lower than the averages.\u201d<\/li>\n
  2. \u201cAn extended period of bad returns cannot be made up even with astronomical returns later.\u201d<\/li>\n<\/ol>\n

    For example:<\/strong> Over a 50 year period, if a fund were to have zero returns in the first 15 years, and goes broke, it wouldn\u2019t matter what it did (or could do) after that. If that seems obvious, that\u2019s because it is.<\/p>\n

    And this example applies even if a fund started in June 1949 and earned an average of 7.99%, according to Bloomberg. Even if the pension is fully funded, \u201cthere is no chance existing assets are enough to pay already-contracted liabilities.\u201d<\/p>\n

    If that sounds dire, once the base of assets start to decline it\u2019s game over, because shrinking<\/em> assets can\u2019t keep paying increasing<\/em> liabilities. And according to Pew Research<\/a>, they have been in decline since 2016.<\/p>\n

    So worrying about the next 50 years is \u201cpointless\u201d,\u00a0says Bloomberg<\/a>:<\/p>\n

    Worrying about the next five decades is pointless, because there\u2019s also no chance the current system will survive long enough to discover what the next 50-year average returns will be.<\/p><\/blockquote>\n

    \u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    We\u2019re Reaching the Beginning of the End of the Pension Fund Crisis Photo by Bank of England | CC BY\u00a0| Photoshopped from original The pension crisis has been escalating for quite some time, and accounting for pension shortfalls seems next to impossible for state governments. The shortfall between pension assets and liabilities is a major […]<\/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":[18769,83,12248,24007,7384,1816],"class_list":["post-42863","post","type-post","status-publish","format-standard","hentry","category-economics","tag-birch-gold-group","tag-bloomberg","tag-pension-crisis","tag-pension-funding","tag-pension-liabilities","tag-pensions"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42863","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=42863"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42863\/revisions"}],"predecessor-version":[{"id":42864,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42863\/revisions\/42864"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=42863"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=42863"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=42863"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}