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Thursday, November 7, 2013

A Bird in the Hand is worth More than Two in the Pension Fund

The previous post we mentioned among other things how 'funny' it would be if one could videotape adults finding out their pensions were taken and 'gobbled' up by cities and municipalities much in the same way those Jimmy Kimmel videos show kids crying deeply at the mention of their Halloween candy stolen from them...

We wonder how many adults would sob vs how many would simply be in a state of paralyzed shock or run for the liquor bottle..

Perhaps many think this will never happen..  You work and pay into it and you will get what's coming or at absolute worst maybe get 95cents of the dollar..
~ "Zip-A-Dee Do Dah... Zip-A-Dee-Ay...  My oh My how's We's gonna' pay.."

Certainly someone will save or 'bail out' the working Joe & Jane..

Sorry but if you think that way, you're living in a dream world..

Currently Detroit owes $20 billion (less than 7 days of Federal Reserve QE to enrich the stock market) is going through Chapter 13 bankruptcy to get their financial house in order..  And guess who has first dibs on debt repayment?

Hint:  Its not the pensioners..
"Mr Bluebird on my shoulder..  I'm a hurtin'.. Got me some workin'?"

Holders of financial derivatives (those lovely people on Wall Street.. the Investors we're all conditioned to admire) enjoy super-priority in bankruptcy.

Thanks to changes to bankruptcy law in 2005, they are not subject to the 'automatic stay' provision intended to prevent a disorderly grab for collateral by competing creditors.

That Bankruptcy Overhaul Bill pushed through by Bush wasn't just meant to make it harder for everyday folk to file.. it was much broader than that.
So as such, they are able to press their claim immediately, prior to bankruptcy proceedings and therefore before claims by competing creditors are considered. This may potentially leave nothing for other creditors to divide during subsequent proceedings.

A recent FoxNews headline puts things succinctly:

"Detroit bankruptcy proposal would leave pensioners with 16 cents on the dollar"

16 cents..
So if you live in Detroit and were expecting $30k annually, that becomes $4,800;   If you were expecting $40k, lower your expectations to $6,400 a year ($533.33/mo)

Now had the bankruptcy taken place in Michigan state court, the pensioners would have been protected by Michigan law..  But instead its Federal law so..

God help the pensioners of Detroit..

Speaking of which, even the Church can't seem to guarantee pensions anymore..
Philly.com headline:  "Archdiocese to freeze pensions for 8,500"

Oh, Lordy Lordy...

And its not only an American problem...

BBC News Headline:  "University pensions black hole 'even worse than thought'"

Blimey!
That's what happens when you have 33% of a nation's population not working for one reason or another...   Its what happens when good paying jobs get outsourced and workers have to take shit jobs to make ends meet..

Remember how the whole pension program works..

While theoretically a worker puts in $$ to his or her pension to be available to them upon retirement age, in fact the way it works is the 30 yr old worker-bee pays for the 75yr old former worker-bee's pension
And this is done based on the promise... well, rather the assumption that when that 30 yr old worker bee turns into an old-fart,  there will be another 30 something bee paying for That pension

But when you have more and more collecting and less and less paying, then you get shortfalls followed by assurances and lies and ultimately bankruptcy and reduced payouts (if lucky)

Its a ponzi of sorts..  And really that's how this entire economy functions..

For instance, you have cash and you put it into a bank.. The teller takes it, counts it, says 'thank you' and hands you a slip of paper with some digits on it..

The bank then takes your $$ and lends it out and excessively profits off the interest while paying half a percent to hold it..
And what do you really have?

In reality nothing..  But the assumption that those digits on that piece of paper translate to accessibility of funds whenever needed is enough to soothe and calm most panic stricken savage beasts..

Of course we dare you to go to your local bank and ask the teller to withdraw $15,000 in cash..   Money that is yours to begin with..

Yes, real real easy..
There are no guarantees in life but death and taxes, as the adage states..  And we will add two other things to that list..

1) Is it Much easier to put $$ into something than to take it out or receive it back..

2) When you 'assume' anything, you make an 'ass' out of 'u' and 'me' (Well, not "Me"..  More like just you alone..  you know what we mean..)