Unfunded Liabilities Of State, Local Governments Could Be $4 Trillion Or More

That's what I read in the new State Budget Crisis Task Force Report, here:

Under current assumptions used by actuaries to value liabilities, state and local government pensions are underfunded by approximately $1 trillion. Economists and financial analysts generally believe that liabilities should be valued using “low risk” discount rates, which would lead to much higher liability estimates. Under this approach, estimated unfunded pension liabilities are $3 trillion or more. ...

Most state and local governments have promised, in addition to pensions, substantial retirement health care benefits to their workforces. These benefits have barely any funding. In addition to health care, sometimes there are other benefits provided in retirement, such as life insurance; in combination all of these are known as “Other Post-Employment Benefits” (OPEB). Until the Governmental Accounting Standards Board in 2004 issued standards requiring disclosure, governments did not regularly make these liabilities public. ...

State-administered OPEB plans have unfunded liabilities of more than $600 billion. Similar liabilities for locally administered plans are likely even larger, since local workforces are almost three times as large as state workforces. The combined state and local government liabilities are likely to be well above $1 trillion. If the federal government increases the eligibility age for Medicare, OPEB liabilities could increase further, because state and local government retiree health plans generally provide substantial benefits for the transition period between retirement (usually under age 65) and eligibility for Medicare.

Most governments fund these benefits on a pay-as-you-go basis rather than contributing to a funded plan.

The New York Times discusses the report, as reproduced here.

Municipal bond investors will want to weigh seriously this language from the report:

Recently, the number of municipal bond downgrades for governments has outnumbered upgrades. States are finding it difficult to ignore their local governments’ increasing fiscal distress. A few states, including North Carolina, New Jersey, and Pennsylvania, have well-established, effective procedures for monitoring and assisting local governments before they encounter acute fiscal distress . . .. More recently, Michigan has established significantly expanded oversight procedures. But most states wait until local governments approach fiscal insolvency or seek aid from the state before intervening. There appears to be growing recognition in the financial community and the states themselves that state monitoring, supervision, and early state involvement in solving local government fiscal problems is sound policy for both levels of government. But it will require skilled political leadership at the state level to overcome local government resistance to what localities often regard as intrusions on their right to self-government.

Mark Hamill Says Romney's Not Actually Human

Oh yeah? Mark Hamill's not actually Luke Skywalker.

So there.

The answer is -2.18 percent per annum

The question is what is the annual rate of return with dividends fully re-invested and adjusted for inflation for the Standard and Poor's 500 Index for the full five years between May 2007 and May 2012.

For ten years through May it's +1.69 percent per annum.

For fifteen years through May it's +2.55 percent per annum. 

Dead Lefty Accused Obama Of Complicity With The Right And Ethnic Cleansing

It's a fascinating paper delivered by one Robert Fitch, here, shortly after Obama's election in 2008.

He paints a history of Obama you've probably never heard, one which doesn't fit the neat little categories of Left and Right because Obama's Third Way politics, going back at least to Bill Clinton's Hope VI program, is really about the partnership between the status quo, especially the FIRE (finance, insurance, real estate) sector, and government.

Fitch wrote about the same phenomenon in Democrat-controlled New York, which gives you an idea why he was kind of a man without a constituency, especially since he thought the American labor movement got co-opted for the enterprise.

We used to call that sort of partnering fascism, and unfortunately, Robert Fitch is dead and we can no longer ask him to think about it that way.

But we should call it that, and we should still think about it that way if we're ever going to escape the police state which looms on the horizon and is in many respects already here:

"When the Third Way advocates insist that we share a common good; when they refuse to recognize that the interests of the oppressed and the interests of the oppressors don't exist on the same moral plane; when they counsel us to stop being partisans of those interests -- they're not being non or post partisan; they're siding with the powers that be.

"In the same way, Obama's notion of change claims to transcend the politics of interest while it steers sharply to the right. ...

"What we see is that the Chicago core of the Obama coalition is made up of blacks who've moved up by moving poor blacks out of the community. And very wealthy whites who've advanced their community development agenda by hiring blacks. Will this be the pattern for the future in an Obama administration? I can't read the envelope. But I do believe that if we want to disrupt the pattern of the past we have to make some distinctions: between the change they believe in and the change we believe in; between our interests and theirs; between a notion of community that scapegoats the poor and one that respects their human rights -- one of which is not to be the object of ethnic cleaning. Between Hope VI and genuine human hope."

In the same way, one can't help but think that the broader impoverishment of America's home-owning classes was intentional, that the powers that be saw all that wealth locked-up in decades-long built-up home equity and wanted to unleash it, skim it, and junk it so that they could take it over one day, enrich themselves and their friends, and install themselves in power permanently.

Another Person Notices Declining Savings Fueled Personal Consumption

Jeffrey Snider here:

To maintain the post-recovery muddle required a serious correction in the personal savings rate – from a high of around 6% in mid-2010 all the way down to 3.2% earlier in 2012. Without that decline in the savings rate personal spending and consumption would have likely contracted long before 2012. The savings rate has backed up toward 4%, and it appears retail sales are following that.

We noticed the phenomenon already last November here, calling attention to the role that the Social Security tax reprieve was playing in the equation.

Imagine how bad the savings rate and retail sales would look now without that extra cash sloshing around. As it is we're still robbing Peter to pay Paul from Social Security, if anyone out there remembers anymore who those two guys were.

If anyone in the media bothered to check, regular folks out here are getting crushed in this economy at the same time that they are paying for all the handouts given up and down the ladder.

Unfortunately no one will listen to those of us who say stopping the run-away spending train is job one. Not Bush, and now not even Romney.

YOU PEOPLE ARE IN DENIAL.

S&P500 Real Rate Of Return, Dividends Fully Re-Invested, From October 2007 . . .

. . . is -2.83 percent, annualized, through May.

Bob Diamond Has A New Gig: LIBORACE

See it, here.

How The World Will End: The Myrmikan Edition

Good stuff from Daniel Oliver, here, describing how the banking system has become the key institution through which American-style fascism expresses itself:

[T]his is why politicians engage in complicity with the bankers to lower interest rates: first, because money flowing into sovereign debt enables them to spend more money and, second, because the promise of higher asset prices makes for happier voters. But none of this adds to wealth, merely the perception and distortion of wealth.

Moreover, Bernanke’s thesis is not working: the transmission mechanism into higher general assets prices is broken. The banks are insolvent. They flee from one safe haven to another. As Herbert Hoover once lamented: “capital is acting like a loose cannon on the deck of a ship in the middle of a storm.” The banks buy Treasuries not for the income, but because they can pledge them as collateral for more credit, which they require to remain liquid. They are pushed into taking sovereign duration risk because they are too weak to take business risk.

When the market does finally overpower the manipulations, sovereign debt markets will pop, interest rates will rise, the banks will tumble along with the markets they have rigged, and then the real witch-hunts will begin. It is this outcome, not more rounds of money printing, that will send gold up vertically in terms of the major currencies. The current inflation/deflation seesaw is merely the prelude to debt failure and currency revaluation.

Just Say "No" To Work: Why Some Free Men Say "Take This Job And Shove It"

As seen here:

[F]rom the factory to the office tower, the American workplace has been morphing for many into a tightly-managed torture chamber of exploitation and domination. Bosses strut about making stupid commands. Employees trapped by ridiculous bureaucratic procedures censor themselves for fear of getting a pink slip. Inefficiencies are everywhere. Bad management and draconian policies prop up the system of command and control where the boss is God and the workers are so many expendable units in the great capitalist machine. The iron handmaidens of high unemployment and economic inequality keep the show going.

I'm Shocked: George W. Bush Warns Against Spending Cuts Same As Romney

The Keynesian grip on the Republican Party continues apace, which is why it is no match for the real Keynesian deal in the form of the Democrats:

[W]hile warning of the consequences of spiraling federal debt, the book cautions against deficit reduction as an immediate goal, saying tax increases and spending cuts in the short term could strangle growth.

Read all about it here.

The reason these clowns are against spending cuts is they don't have enough confidence in their growth measures. Without the GDP gained from government spending, their policies look weak.

Because they are.

Obama Plagiarizes Elizabeth Warren, But She's The More Articulate Redistributionist

Obama quoted here on Saturday:

Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business -- you didn’t build that.  Somebody else made that happen.

Elizabeth Warren quoted here last September:

There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did.

All the social contributions claimed to have been made by others by these two wack jobs were also made by the successful business builders, in addition to their own superlative efforts, but those go unacknowledged by Obama and Warren.

The biggest lies are always about what is left out. 

Irwin Stelzer Wonders Why Romney Isn't Attacking Democrat Crony Capitalism

Maybe because Romney isn't the right candidate?

It's a pretty good piece on American-style fascism by Irwin Stelzer for The Weekly Standard here, but I couldn't help but notice once again how even very smart people pour their ideas into and project their hopes onto candidates even though there isn't the slightest bit of evidence to justify it. Consider all these phrases from the article, which on every issue Stelzer recommends as conservative reveal that Romney is already NOT on board:

... doesn’t mean that Romney should refuse ...

And where is Mitt Romney ...

Alas, that statement came not from Romney ...

Romney must know better than anyone ...

Why does Romney not agree with ...

Romney can propose a simple rule ...

Romney can propose eliminating ...

Finally, where is Romney every time . . ..

If Gov. Romney isn't already showing a firm grasp of free-market conservatism as defined by the neoconservative Weekly Standard, what is he on board with?

Don't we already know that Romney thinks ObamaCare is nothing to get angry about?

Or how about out-of-control government spending (is there any other kind?), the cri de coeur of the Tea Party movement? Romney has explicitly stated that he will not slash spending as president, even though it's the very ground cronyism walks on. His answer for that? Because cutting government spending in a slow-growth environment would throw America into a depression.

This tells you that Romney is no different than Obama in one very important respect: he's cool, in the deceitful sense that he allows supporters to think he shares their passions when he doesn't. Just as Obama has deeply disappointed the American far left, a president Romney will do the same to the right on every issue dear to them.

The caution and calculation of such cool cats often gives the first impression of ulterior motives. Alternatively, however, the coolness may simply be a mask for an underlying mediocrity, or even stupidity.

For example, the single stupidest thing that Obama and the Democrats have done to date was to insist that they prevented a depression and bailed-out everybody to do it. Arguably what they should have done is embraced the depression which did in fact occur in 2008-2009 and blamed it on Bush. They also should have let the depression happen big-time, cleansing the debt-overhang for the good of the country and punishing their enemies in the process. Republicans would have been finished for decades to come, just like in 1932.

And you thought Obama was the smartest president ever.

Can Romney be far behind him? At this juncture in the campaign you would think a smarter candidate would be consistently avoiding everything which depresses the mood of the base of his party. If the neocons aren't happy with Romney, who is?

Not that it really matters much what Romney says or doesn't say about this, that or the other thing when it comes to actual governing. After all, the president proposes, but it is the Congress which disposes. (Unless, of course, you're Obama, who disposes of the Congress fairly routinely, whether on war powers in Libya, recess appointments or immigration.) America's problem with crony capitalism can indeed be made much worse by a president like Obama for whom it becomes his motto, no doubt about it. An awful lot of money has been wasted on failed green energy schemes.

But cronyism in America is really the specialty of our ever more remote representatives to the US House and Senate. Our nearly intractable problems of waste, corruption, and deceit which they are responsible for have taken over ninety years to develop, and they won't go away in an instant. What we most certainly need is to destroy the concentration of spending power in the hands of a few powerful men and women in the House and Senate.

One way to do that is to restore representation numbers to the constitutional ratio of 1 to 30,000, the number one answer to the constitution's number one perceived deficiency during the ratification process over two centuries ago. The immediate effect of installing thousands of new Congressmen today would be to dilute the power of the existing cabal of skilled cronies. It is true that as happened in the 1920s there seems to be nothing that would again prevent Congress from flouting that provision of the constitution even if we restore representation to the status quo ante. The last thing we need is 10,267 corrupt representatives instead of the 435 we've already got. Still, short of revolution in the streets, it's probably the best and most constructive alternative we have presently available, and probably a more certain guarantee of keeping things like ObamaCare from happening in future than mere reliance on one political party controlling the levers of a government distant from the people.

Another way which would help is to repeal the 17th Amendment, and return election of senators to the States and take it away from the globalized monied interests. That is no guarantee against cronyism, to be sure, but at least States would have actual representation in Washington again as the Founders intended. As it is, the only representation they have is before the bar of justice, if it agrees to hear the case at all. Ask the 26 States who lost in front of John Roberts how good they're feeling about that today. ObamaCare, after all, originated in the Senate. All things being equal, senators from those 26 States would not have voted for it and we wouldn't be having this enormous controversy.

These sorts of returns to originalism might actually make a difference going forward, but all the evidence we have right now is that Romney has as little interest in them as he does in the issues animating the base of his party.

A Romney in the White House will most likely mean just another dutiful tax collector for the crony welfare state, like the rest of them.

Luigi Zingales: Democrat Crony Capitalism Fosters Liberal Agenda

Luigi Zingales, quoted here:

“Democrats have promoted crony capitalism to foster their liberal agenda. They are pro-business -- at least certain businesses -- but fundamentally anti-market. This is exactly the opposite of what most Americans want. .  .  . A pro-market, but not pro-big-business, platform would be a winner for Republicans.”

The more efficient locution is "Democrats promote liberal fascism".

Geithner's NY Fed Knew Of Barclays Bank LIBOR Lies In April 2008 And Did Nothing

The little twit who got away with failing to report income on his tax returns and became our Treasury Secretary should hang for failing to report this.

As reported here:

The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates.

At the time, a Barclays employee told a New York Fed official that "we know that we're not posting um, an honest" rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to "fit in with the rest of the crowd."

Although the New York Fed conferred with Britain and American regulators about the problems and recommended reforms, it failed to stop the illegal activity, which persisted through 2009.

America's LIBOR Banks' Silence Is Deafening

John Carney for NetNet, here:

I asked Bank of America, Citi, and JP Morgan Chase to provide answer[s] to four sets of questions about their Libor practices.

1. Who makes the Libor submission for your bank? How many people involved? Who does the submitter report to? How high up in management does decision go? Is it reviewed before or after submitted to BBA? Who signs off on changes?

2. How is the submission calculated?

3. Has this procedure changed over time?

4. Is it under review following Barclays scandal?

Not one of the banks would provide the information requested. Bank of America and JPMorgan declined to comment. Citigroup did not return phone calls.

BO's Got A Basketball Jones: One On One Against The World, Left-Handed

lyrics here

video here

HELOC Required Payments Are Set To Explode Between 2012-2018

Today, just $11 billion in home equity lines of credit require both principal and interest payments. By 2018 the number will be ten times that, $111 billion.

The four biggest banks alone hold HELOCs with credit lines approaching $300 billion.

Gretchen Morgenson has many of the details at The New York Times, here.

It is unclear from the story just how many first mortgages already underwater also have HELOCs. It is widely estimated that 25 percent of firsts are underwater. Add HELOCs on top of any of those and both lenders and borrowers are back in a world of hurt, as if they had actually gone anywhere but the purgatory we now inhabit.

At Best Meredith Whitney's Predicted Municipal Bond Market Meltdown Was Early

That seems to be the take away from this story examining the pros and cons of the US municipal bond market since 2010:

Whitney rocked the fixed income world when, during a December 2010 appearance on "60 Minutes" she forecast 50 to 100 muni defaults in 2011 that would cause damage in excess of $100 billion.

Though munis saw only 28 muni defaults in 2011 and about two dozen this year, most of which were comparatively small in dollar value, Whitney told CNBC as recently as March that a "tidal wave" of defaults looms.

"Ultimately, her numbers...are not out of the realm of possibility over the long term," Coffin says. ...

Overall, investors in the $3.7 trillion muni bond market seemed not to have cared much about the individual gloomy headlines.

But think about it: a worst case scenario $100 billion hit to a $3.7 trillion market is less than 3 percent. I seem to recall though that the prediction was reported as hundreds of billions of dollars.

As ever, whatever it is, diversification is key.

The Bane of Our Existence v. The Face of Bain Capital

The Financial Markets Are Completely Corrupt Monday Through Friday. On Weekends They Just Have The Staggers.

Simon Johnson on the completely corrupted financial markets, for The New York Times, here:

Robert E. Diamond Jr., who resigned last week as chief executive of Barclays, reportedly said, “On the majority of days, no requests were made at all” to cheat on Libor. The Economist, which does not make a general habit of criticizing prominent people in the financial sector, observed, “This was rather like an adulterer saying that he was faithful on most days.”