By Michael Bargo, Jr.
A credit bubble is created when the amount of money borrowed exceeds the capacity of the borrower to pay it back. This concept is easy to understand, but the financial foundation of borrowing has been manipulated to an historic extreme by government. Not just through the national debt but through the agreements to create debt through public sector union contracts and municipal bond issuance.
The scale of the public pension and muni bond bubble has not been widely reported. There are 90,000 units of government in the U.S. A large number of these have public pension plans. In 2014 there were 19.5 million people enrolled in public pension plans and 9.6 million receiving pensions. In California alone there were 3.36 million people receiving public pensions. Since there were 23 million people in California age 21 and over this means that over one in seven California adults is currently receiving a public pension.......Biggs estimated that the entire amount of unfunded pension liability in the U.S. was $4.6 trillion in 2011, but this figure did not include municipal bond debt which, when combined, brings the total unfunded pension and muni bond liability to $8.3 trillion........
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