The Latest Pension Disaster …

It’s happening in the U.S. folks.

The sovereign debt crisis that I’ve been warning about is not just limited to governments outside the U.S. It’s quickly coming home to roost here in the U.S. via underfunded state and local pension plans.

The latest installment comes from the Dallas Police and Fire Pension System where the mayor of Dallas demanded that withdrawals from hard-earned pension plans be halted immediately.

You heard that right: No more withdrawals!

Why? Supposedly, to stop a run on the pension fund.

Come to find out, years of pie-in-the-sky investment-return projections, unrealistic promises to pensioners and fraud have forced the Dallas Pension board to look for a massive $1.1 billion bailout.

Those who offered a career of service to Dallas and who paid into the fund withdrew $600 million this year … with $500 million of that coming in the last four months alone. This compares to just $81 million withdrawn in all of 2015.

This, folks, is the classic definition of a sovereign debt crisis: Mind-boggling financial stresses caused by the inability of the government to manage its debt.

After risking their lives on patrol,, retired police in Dallas are now at-risk of losing their pensions.

With the mayor’s action, he stopped $154 million in pending withdrawals. But it’s not likely to work: That’s because the funded ratio plunged from 45% earlier in the year to its current level of 36%. And that means it has just 36-cents on hand for every dollar in obligations.

So, what’s the solution?

You guessed it. Higher taxes.

The City of Dallas indicated they would have to DOUBLE property taxes to satisfy the requested $1.1 billion bailout.

I don’t know about you, but if my property taxes doubled, I would be madder than a wet hen.

The fact is the latest shenanigans will surely raise the city’s funding costs, especially since Moody’s and Fitch already downgraded the city’s bonds in October because of pension problems.

There are also discussions about a reduction in retirement benefits to help restore solvency in the fund.

And it doesn’t stop there.

The city is already experiencing a significant drop in the police force, with nearly 100 experienced officers throwing in the towel in the last two months alone.

Dallas serves as a stark reminder about what can happen when governments bite off more that they can chew. And mark my words: It’s not just Dallas. Pensions in California, Illinois and New York are also on the ropes. And the largest Ponzi scheme of all – Social Security – is not far behind.

Now more than ever, it’s crucial to think outside the box and safeguard your investments against these seemingly Black Swan events.

What’s more, the growing distrust of governments gives way to more chaos, just like I’ve been warning about with my war cycles.

Unfortunately, it’s going to get worse before it gets better.

And that’s what my Real Wealth Report subscribers have come to rely on – avoiding disasters like this and finding ways to profit in spite of the chaos.

Stay safe and best wishes,

Larry

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

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Comments 32

Linda Trembly December 16, 2016

What about KPERS in Kansas?

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John folsom December 16, 2016

I believe Americans are in for a real financial problem in the coming years due to stupid spending !

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Bruce D. Noyes December 16, 2016

Thank you, we knew this was coming, I will pray for those involved.

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F151 December 16, 2016

Years and years of liberal politicians giving away the government treasuries to government unions (to then get their votes and stay in power).... have led to this disaster. And like you said, it is not just in one place....this thing is huge and the corrupt press hardly reports about. Obama doubled the national debt to $20 Trillion with his wild spending....Trump will get the blame (the press will "suddenly" discover the problem next year. And THAT...... is the unfortunate reality. The perps will walk and they and their comrades in the media will blame others.

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Armour1955 December 18, 2016

Liberal policies are not to blame for Dallas. This is TEXAS. Home of the ultra conservative and the alt-right. The pension fund is not run by democrats. Get you facts straight!

Jeff Narum December 16, 2016

This sort of thing is bound to happen all around the country. Managers of public pension funds have generally been overly optimistic on investment returns they will be able to earn. On top of that, the pensions themselves are unrealistically generous. In our area it is not uncommon to see police and firefighters retiring in their early to mid-50's and then getting pensions equivalent to 90% of their last year's compensation (often spiked) with full medical coverage for rest of life. This combination of retirement conditions is nearly impossible for workers in the private sector to realize, and articles like yours show that it can't continue much longer for public sector employees.

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Peter Danzo December 19, 2016

You are forgetting that because of the special nature and physical requirements of police work, many PD's (N.J. State Police for example) have a mandatory retirement age of 55 yrs., not to mention those who don't even make it to retirement. And yet regardless of their age we expect them to be there within minutes when called on. Let's not forget "the thin blue line". A line from a recent CW song says it best - while we slept in comfort behind our locked doors the cop put his life on the line. You can't even put a value on an officer's life or the loss to his family.

Craig Howe December 16, 2016

Can you please give some feedback about the Australian market , and do you think Gold has bottomed ?

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parker December 16, 2016

according to gibbon, rome fell due to invasion from abroad and corruption from within. good luck

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G13man December 16, 2016

hoping the federal government steps in and stops ALL deductions for land and taxes uniformly all property in the whole nation , ie , no charity gets free land ! hospitals , dog, cat , political party , school , land trust etc , i do not care ! and yes , this includes churches !!!!! ,city and gov buildings pay from their funds also ! ANY space pays a $1 per acre a year till the debt's paid ,no exceptions ! thats a start , now to clear out those people in government , and reduce redundancy .

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sparechange December 18, 2016

that makes way to much sense to be impemented by the current administration; lets also cap the spending, so we dont end up here AGAIN.

raptor December 16, 2016

u have been spot on about everything. please let us know if war with russia is cast in iron or will trump and rex change the coarse of this conflict. thank you

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H. Craig Bradley December 16, 2016

CHICAGO SOUTH-SIDERS Once the Police and Fire (Union) employees find out their pensions are bust and their (promised) retirement benefits are toast, then real changes will come to town. First of all, big time corruption ( Chicago Style). If you feel screwed, then you have to make it up somewhere, right? Survival is the strongest of human emotions. Hitting the evidence locker for narcotics, payola, bribes, etc. are all in the cards in ten years or so. In fact, it happened to Rome, according to economist Martin Armstrong. Once Roman Troops did not get paid anymore, they started taking it out of the average Roman citizen ( Shake-Down). Proximo, "Pay-Up or Die".

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James B December 16, 2016

The police cant catch and stop their own internal fraud !

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H. Craig Bradley December 17, 2016

Corrupt public employee unions ? Politicians ?

JAMES December 16, 2016

does this mean that soon all money in our banking system is subject to confiscation or tight government control like in Greece?

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Dan S December 16, 2016

Who created these pension plans was apparently having wet dreams. It would be a cold day in "H-E-double toothpicks" before I would pay taxes to a non-realistic pension fund. Who ever set these funds up should be put away never to see the light of day. The people, in this once great country, had better stand up and refuse anymore taxes of any kind.

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Harry December 16, 2016

I just read your report and it seems you might have made a boo,boo on New York pension fund. I just checked and they have 180 billon dollars in hand. This is the New York State pension for police, teachers, state workers ect . Now you might know something I don't but that's the info I have. Regards Harry

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Jeff Cunningham December 16, 2016

The main problem with most public sector pension plans is they are defined benefit plans. These plans offer a defined benefit at retirement based a multiplier based on the number of years of service and either the last year of service's compensation or some average of the last three years of compensation. These plans for the last almost 30 years have assumed an unrealistic rate of return resulting in the plans being under funded for years. These plans should be converted from defined benefit plans to defined contribution plans, but efforts to do so have been strongly opposed by public sector unions.

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$1,000 gold December 16, 2016

i wonder if the oil bust has anything to do with these problems in dallas?

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John m December 16, 2016

In the PVG at $8.25 for about 10,000 shares. Any T date you think it may exceed the price since it's down to $7.10 a share Now.

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Richard Stanley December 16, 2016

Larry, The article fails to mention where the withdrawals are coming from. Don't you think that should be part of explaining the problem. Otherwise your starting to sound like HYPE!

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lee December 16, 2016

Maybe they should call for a committee to investigate this problem--that way there would be no one responsible and the present culprits would be exhonorated. Or better yet cut the Mayors` and his Staff salary in half along with his bonuses

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Victor December 17, 2016

Better solution is end welfare payments. Corporate and social.

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Owen December 17, 2016

Think about the poor old pensioner who has a property. His benefits get cut and his taxes get raised. ouch! Police are leaving the force to cash in their pension funds. Here is South Africa people have been leaving state jobs for a while now so that they can cash in their pensions. No one here trusts our kleptomaniacs (sorry, government) anymore.

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Frank Z. December 17, 2016

I am not an economist, but in MHO, ...to fix this imbalance we need to get back to inflation, ....sorry to say. The first step has taking place this week by increasing the lending rate. This rate will need to go up by at least 5%, or more. We cannot expect salaries go up (mostly by union demands) and not have inflation. The Feds, have printed +8 trillion dollars, ...so who is going to pay for that. We all do by taking a deflated $ in our pay-check. Talking about negative interest rates the last little while.....what a bloody joke that is.!!! We All have to realize that there is NO free lunch....like it or not.

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roger stamper December 17, 2016

tks for post

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Mike December 17, 2016

Years of ZIRP from the Fed have essentially transferred hundreds of billions of dollars from savers, pension funds and other financial entities that depend on interest payments to the jackals on Wall Street. Speculation, stock buy backs and other non productive :investments" have yielded a hollow economy. These pension disasters are only the tip of the iceberg.

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sparechange December 18, 2016

How do "WE THE PEOPLE" peacefully unite and take back OUR country so that all legal,law abiding citizens of all color, can begin building a country that we can be proud to be an active working part of, standing shoulder to shoulder to keep it that way? Shall we begin to "DRAIN THE SWAMP"

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Dirtboy December 18, 2016

I understand the problem, but have seen a contributing factor that is rampant and really visible in many small towns. We have an annual event in the Fall, and require more police than our small force. When the word goes out to surrounding towns what comes back (like protocol) is a list of Chiefs & Senior officers approaching retirement. We take a hit in their salary for the detail, but they collect that money and it becomes part of their retirement entitlement. You often see these people retiring with pensions that are greater than their annual salary when they were working, it all goes into the State entitlement, and it is an annual recurring problem, this is in addition to overstated expectations of the funds growth. This requires some rule changes, as most of these individuals go into other lucrative positions.

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Lorne DeWitt December 19, 2016

I have just two words for you, "collective bargaining." Unions were originally founded to get workers more of the profits they helped create and improve working conditions. Government workers, however, don't generate profits. They merely negotiate for more of our tax dollars to be spent on self serving increases in pay and benefits. It's impossible to negotiate collectively with government. Government collective bargaining means voters do not have the final say on public spending and policy. Instead elected representatives must negotiate spending and policy decisions with unions. And because unions can afford to lobby, or what I call, buy votes, that is not exactly democratic, a fact that unions once recognized. Unions, if allowed to wield such influence and power clearly undermines the U.S. Constitution's single, central idea, limiting the power of government. That's tyranny. Germany's Nazi Party was formed from an alliance of two public sector unions that were allowed to get too strong? Fascist Italy came about similarly. Both the unions, Hitler and Mussolini said; it was for the children. Remember this, history has not been kind to tyrants! Fact: Ever since JFK signed executive order 10988, giving public sector unions collective bargaining rights in 1962, public education has consistently and steadily declined.

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Bob Robison sr December 28, 2016

To start with term limits, pork barrel spending lobbyist and other distractions. Parr government down to a reasonable size and do away all unnecessary spending.

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