Taxes cannot be raised high enough to pay the total state and local government debt and promised pension and medical benefits in Illinois—the tax donkeys will flee. From Ted Dabrowski and John Klingner at wirepoints.org:
Illinois’ combined state and local pensioner debts have reached absurd levels. When divvied up between Illinois’ households, the “shadow mortgage” each one is on the hook for now totals hundreds of thousands of dollars per household, if not more, depending on who politicians target to repay those debts.
As Gov. J.B. Pritzker and other lawmakers try to extract that kind of money from Illinoisans, they’ll fail, for the simple reason that the amounts have become overwhelming. Too many households don’t have the means, while others won’t stick around to pay for it. They’ll just leave.
And as Illinoisans leave, the shadow mortgage on those who remain will jump. The crisis will only deepen.
Slashing health-care benefits is going to be a powerful trend. From Tyler Durden at zerohedge.com:
Pension-fund managers from across the US stopped to take note of an unsettling development in their industry, and perhaps thought to themselves: ‘There but for the grace of God go I’.
For the first time in years, a major public pension system has slashed benefits for retirees: The Ohio Public Employees’ Retirement System voted last week to cut health care benefits provided to the pension’s current and future retirees beginning in 2022 to try and prevent the fund from plunging into insolvency in the not-too-distant future.
It’s just the latest reminder that America’s ‘pension timebomb’ isn’t as far off into the future as many retirees, investors and public officials would like to believe.
“There is no available funding for health care,” a report from the board said. “All of the employer contribution[s] must be allocated to pension funding until that funding improves. Based on current projections, no funding will be available for health care for 15 or more years.”
Is the repo crisis prelude to market rejection of US government debt at anything close to current interest rate levels such that the Federal Reserve will have to monetize an ever-increasing portion of that debt? Dmitry Orlov thinks so, and he could well be right. From Orlov at cluborlov.blogspot.com:
In processing the flow of information about the goings on in the US, it is impossible to get rid of a most unsettling sense of unreality—of a population trapped in a dark cave filled with little glowing screens, all displaying different images yet all broadcasting essentially the same message. That message is that everything is fine, same as ever, and can go on and on. But whatever it is that’s going on can’t go on forever, and therefore it won’t. More specifically, a certain coal mine canary has recently died, and I want to tell you about it.
It’s easy to see why that particular message is stuck on replay even as the situation changes irrevocably. As of 2019, 90% of the media in the United States is controlled by four media conglomerates: Comcast (via NBCUniversal), Disney, ViacomCBS (controlled by National Amusements), and AT&T (via WarnerMedia). Together they have formed a corporate media monoculture designed to most effectively maximize shareholder value.
As I wrote in Reinventing Collapse in 2008, “…In a consumer society, anything that puts people off their shopping is dangerously disruptive, and all consumers sense this. Any expression of the truth about our lack of prospects for continued existence as a highly developed, prosperous industrial society is disruptive to the consumerist collective unconscious. There is a herd instinct to reject it, and therefore it fails, not through any overt action, but by failing to turn a profit because it is unpopular.”
Demographic charts say deleveraging, deflation, and depression are in our future. Read ’em and weep. From Chris Hamilton at econimica.blogspot.com:
First, chart of the century…literally. For those engrossed in the current and engulfing repo fiasco, QE, and monetization…it is helpful to pull back and clarify what it is that is causing the existing economic and financial system to fail? It was, is, and will be a Ponzi to its last day and Ponzi’s fail for lack of new suckers. In this case, those willing and able to undertake new credit (debt) that enlarges the money supply in our fractional reserve system. The chart below shows the global annual growth of the 20 to 65 year-olds versus 65+ year-olds (both excluding Africa). 20 to 65 year-olds world over utilize credit (debt) while 65+ year-olds extinguish debt (deleverage). So long as the growth of those levering up outstripped those deleveraging, the system could continue. But as you’ll note, in 2008, the entire global system shuddered as accelerating growth of potential workers ceased and began decelerating…while the growth of non-workers accelerated. By about 2024, the annual growth of non-workers (deleveragers) will overtake annual growth of potential workers (debtors). Those rapidly extinguishing debt in old age will outnumber those undertaking the new debt. Those in retirement or in death offloading assets will outnumber those buying those assets. The non-technical name for this is a “shit-show” and this is why central banks, federal governments, and ultra wealthy are aligning ever tighter to save themselves.
You can have market-driven financial markets or you can have central bank-driven financial markets, but you can’t have both. From Raúl Ilargi Meijer at theautomaticearth.com:
It wasn’t really the plan to make this a series, but it seems to have turned into one. Part 1 is here: The Fed Detests Free Markets. Part 3 will follow soon. And yeah, I did think perhaps I should have called this one “End The Fed” Is No Longer Enough. Because that’s the idea here. But what’s in a name?
Okay, let’s talk a bit more about finance again. Though I still think this requires caution, because the meaning of the terminology used in such conversations appears to have acquired ever more diverse meanings for different groups of people. Up to the point where you must ask: are we really still talking about the same thing here?I’ve said multiple times before that there are no more markets really, or investors, because central banks have killed off the markets. There are still “contraptions” that look like them, like the real thing, but they’re fake. You can see this every time a Fed chief opens their mouth and every single person involved in the fake markets hangs on their lips.
They do that because that Fed head actually determines what anything will be worth tomorrow, not the markets, since the Fed buys everything up, and puts interest rates down so more people can buy grossly overpriced property and assets, and allows companies to buy their own shares so nobody knows what they’re worth anymore.
Negative interest rates are playing havoc with people’s retirement planning. From Mark Nestmann at nestmann.com:
At the end of this past August, an astonishing $17 trillion in global debt had negative yields. About 30% of investment-grade bonds had yields below zero. If you bought these bonds and held them to maturity you were guaranteed to lose money.
Since then, the glut of bonds with negative yields has gone down by about $5 trillion. And that’s led to serious pain to anyone who bought them.
Interest rates throughout the world have been falling almost continuously since the 1980s. The first country to impose negative interest rates on a consistent basis was Sweden, which introduced a -0.25% rate on its “deposit interest rate” in 2009. The much larger European Central Bank (ECB), which sets monetary policy throughout the 19-country eurozone, followed suit in 2014 when it imposed a negative rate of -0.1%.
Negative interest rates were meant to be a temporary emergency measure to prop up moribund European economies. But they’re also a great way for cash-strapped governments to pay the bills.
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