Got an extra $700,000 laying around to pay your share of the national debt and unfunded liabilities? No? Well somebody’s got to pay it. From Tyler Durden at zerohedge.com:
Truth In Accounting (TIA), a 501(c)(3) – focused on government financial information, published a new report that suggests the federal government’s overall financial conditions worsened by $4.5 trillion in 2018. The report also calculates the actual national debt on a per taxpayer basis.
With assets of $3.84 trillion, the federal government’s unfunded obligations and debt total $108.94 trillion, which contributed to a $105 trillion debt burden.
“Our elected officials have made repeated financial decisions that have left the federal government with a debt burden of $105 trillion, including unfunded Social Security and Medicare promises. That equates to a $696,000 burden for every federal taxpayer,” TIA states.
TIA rated the federal federal government with an “F” for its financial outlook and worsening fiscal situation that could trigger a crisis in the not too distant future.
One guess as to who is on the hook for that negative $75 trillion. From Simon Black at sovereignman.com:
Usually around the middle of February each year, the US Treasury Department releases an annual report of the federal government’s financial condition.
It’s called the Financial Report of the US Government… and it looks a lot like an annual report that you might see filed by a big company like Apple or Facebook.
Except that, unlike Apple and Facebook, the US government’s annual report is absolutely gruesome.
This year’s report is no exception, save for one humorous anecdote: they -just- released it. In other words, they’re a month and a half LATE (given that the report is typically released in mid-February).
I actually CALLED the Treasury Department myself in early March, asking when they would publish the report.
The bewildered individual on the other end of the line said that he had no earthly idea, given that the government had been shut down for so long earlier this year.
Anyhow, if you want to see the report for yourself, you can download it here.
California is a great place to be…during a bull market. From John Rubino at dollarcollapse.com:
California Governor Jerry Brown inherited a $27 billion deficit from Arnold Schwarzenegger eight years ago. This month he’s leaving his successor a $13.8 billion surplus and a $14.5 billion rainy day fund balance. Pretty good right? Approximately 48 other governors would kill for those numbers.
Unfortunately it’s all a mirage. California, as home to Silicon Valley and Hollywood, lives and dies with capital gains taxes. In bull markets, when lots of stocks are rising and tech startups are going public, the state is flush. But in bear markets capital gains turn into capital losses and Sacramento’s revenues plunge. Put another way, the state’s top 1% highest-income taxpayers generate about half of personal income taxes. When their incomes fall, tax revenues crater.
That’s happening right now, as tech stocks plunge, IPOs are pulled and billion-dollar unicorns endure “down rounds” that shave major bucks from their valuations. So if this is a replay of the 2008-2009 bear market, expect California’s deficits to return to the double-digit billions.
There’s no bigger global issue right now than debt. From John Mauldin at mauldineconomics.com:
The selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun… (and later) Don’t be fooled by bond prices holding up, because trading volumes are down. There are fewer bids in the market, and the dispersion of bids is wider. It is time to jog—not walk—to the exits of credit and liquidity risk.
– Scott Minerd, Guggenheim Partners Chief Investment Officer
From a 50,000-feet viewpoint, we’re probably in a global debt bubble…Global debt to GDP is at an all-time high…This is going to be a very challenging time for policymakers moving forward.
– Paul Tudor Jones at the Greenwich Economic Forum in Connecticut, November 15, 2018
Last week, I talked about Ray Dalio’s new book on debt cycles. He describes how debt is inherently cyclical, because it enables more spending now that must be offset by less spending later.
Ray’s book helped me refine my description of The Great Reset. It’s a critical refinement, too. After reading the book, I realized it is entirely possible we will have another debt crisis before what I think of as The Great Reset. I firmly believe the latter is still coming, but there may be another “mere” credit crisis beforehand.
New York City has quietly stacked up a mound of promises it will never be able to repay. From John Rubino at dollarcollapse.com:
The “public pension crisis” is the kind of subject that’s easy to over-analyze, in part because there are so many different examples of bad behavior out there and in part because the aggregate damage these entities will do when they start blowing up is immense.
But most people see pensions as essentially an accounting issue – and therefore boring – so it doesn’t pay to go back to this particular well too often. Still, New York City’s missing $100 billion can’t be ignored:
(Bloomberg) – New York City faces future health costs for its retired workers of $103.2 billion, an increase of $40 billion over a decade. It has about $5 billion set aside to pay the bill.
The so-called “other post-employment benefits” liability was disclosed in New York’s comprehensive annual financial report released by the city comptroller’s office Wednesday. The city’s $98 billion unfunded liability for retiree health care exceeds the city’s $93 billion of bond debt and $48 billion pension-fund shortfall.
Big pots of money and government attract bad people like shit attract flies. From Simon Black at sovereignman.com:
Last week, the head of a New York state pension fund found herself a new job.
Vicki Fuller, the former head of New York’s $209 billion fund, now earns $275,000 per year working part time for a natural gas group called The Williams Companies– good work if you can get it.
It’s noteworthy that when Ms. Fuller ran her state pension fund, she invested $110 million of taxpayer money to buy bonds issued by none other than The Williams Companies.
Bear in mind that Moody’s, the credit rating agency, downgraded Williams’ financial outlook to “negative” because of the company’s high leverage and risk.
The pension crisis is barreling down the tracks and there’s no way to stop it or get out of the way. From Simon Black at sovereignman.com:
If your retirement plans consist entirely of that pension you’ve been promised, it’s time to start looking elsewhere.
As you probably know, pensions are giant pools of capital responsible for paying out retirement benefits to workers.
And right now many pension funds around the world simply don’t have enough assets to cover the retirement obligations they owe to millions of workers.
In the US alone, federal, state, and local governments, pensions are about $7 TRILLION short of the funding they need to pay out all the benefits they’ve promised.
(** And that doesn’t include another $49 trillion in unfunded Social Security obligations…)