After struggling to raise debt from third parties to repair crumbling infrastructure, the state of New Jersey has come up with a “clever” approach to fundraising that entails selling debt to their own insolvent pension funds…something we’ve dubbed the “Pension Ponzi Squared.” Of course, because when everybody else shuns your debt for being too risky who better to sell it to than yourself?
With $3.4 billion in annual benefits payments versus only $1.9 billion in contributions, funds like the New Jersey Public Employees’ Retirement System already qualified as a plain vanilla ponzi scheme. But, using what little pension assets they have left (38% net funded) to buy debt in the entity that ultimately backstops their liabilities is a whole new level of madness.
Already, not only are resource streams drying up, but debt streams that are being used to mimic resource streams are drying up too. So now they are looking to borrow possible future money which they don’t have yet, from other areas they have already borrowed into insolvency.
It is unclear if Trump can ignite a bubble, but if he does, that is probably all it will be. Enjoy it, but also try to get your money into your own hands wherever you can, because if you don’t, it will be “loaned” to try and keep the party going a little longer. The name of the game for those who are in charge is to fake free resource availability using any unaccompanied uwealth they can get their hands on, in the hopes people will stay r just a little longer, and the crash will happen after they have left office.
Whether it is a bank, a government, or any other place you can park resources, do not lose sight of the fact that in that environment, once your money is “loaned” out temporarily, it is gone, and you will not be getting it back.