The scale of it is what amazes:
Earlier today the Kersten Institute for Governance and Public Policy highlighted an updated pension study, released by the Stanford Institute for Economic Policy Research, which revealed some fairly startling realities about California’s public pension underfunding levels. After averaging $77,700 per household in 2014, the amount of public pension underfunding for the state of California jumped to a staggering $92,748 per household in 2015. But don’t worry, we’re sure pension managers can grow their way out of the problem…hedge fund returns have been stellar recently, right?
Stanford University’s pension tracker database pegs the market value of California’s total pension debt at $1 trillion or $93,000 per California household in 2015.
So it basically added $15,000 per household – in a year – and that rate will increase now exponentially, year to year. By the time the collapse comes in a decade and a half or so, this could be $500,000 per household and it will hit just as the economic collapse wipes out most wealth.
And that is just state pensions. From national debt, to municipal debt, to corporate debt, to credit card debt, to student loan debt, to auto debt, to personal debt, to federal entitlements, it goes on and on. By the time all is said and done, everyone could owe a million dollars per household or more – just as all wealth evaporates.
Intellectually I know resources are limited, and yet even I have a tough time imagining these pensions needing to be paid, and not being able to just have the State vote to take a loan and write the checks. And yet, that is what is coming. That is K-selection – a state we have never truly seen.
I hate to admit I am so r-selected myself it boggles my mind when I think about it. I want to say, “What do you tell people?” and yet in reality we will probably all be unable to even glance away from our own struggles for survival to console others.
It will be a long road back once we start down that path.
[…] California Pensions Underfunded By $93,000 Per Household […]
It’s literally unimaginable to me, and I am in the 99.99% of understanding this dynamic thanks to this blog. When I try to explain it to people they mostly fee sorry for me thinking I’m a crazy man.
They won’t be laughing in 2025 – that is if TPTB can put it off that long.
Now add to this that CalPers owns a shitload of US treasuries whose value goes to hell once interest rates rise – which they currently do at a frantic pace.
ten year US bond:
https://www.comdirect.de/inf/indizes/detail/uebersicht.html?ID_NOTATION=11416586
i wish Obama could have served a 3rd term, history will proof that he is/ was/ and will be the greatest President in all history
At the macro level for California it looks like foreign real estate buyers are the only higher end tax stream left. Problem is that the main clients are chinese, and only can convert Yuan to USD at 50k per year. 69% of them buy housing all cash, this rate is currently falling- China simply doesn’t create high earners fast enough, even with its tremendous (unsustainable) growth. This has been slowing and will be slowing faster under Trump. I would wager the entire West Coast (Seattle&Vancouver especially) is due for an EPIC real estate bubble pop in the next 48 months. If Trump blinks though and bails Cali out, expect more rabbits hopping in for cheap but that just kills the Cali budget faster. This state is obviously lost, it just would be nice if it didn’t take North America with it, at least before Trump is re-elected. At this point the guys with 15 years in their plan will be lucky to make it to 20 to cash out, after that *poof* its gone- US States can’t declare bankruptcy so assets are just seized. If you live in CA, move. California is the catalyst for the end though, after it goes global fiat has a decade at most.
Interesting analysis.