begin today with perhaps the most underreported story of our economic storm that is sweeping through this country. the utter collapse of the
, the millions of americans who are having their futures robbed by free spending politicians, big corporations, and greedy banksters. here is how they're pulling it off. it's a whole lot easier to promise someone more money tomorrow than it is to pay them today. enter your
, your retirement. it's been raided by your politicians, corporations, and banksters.
dipping into the
over and over
to cover their free spending ways. corporations promising payouts on money they don't have to boost their
. and banksters preying on desperate pension managers trying to keep up with those free spending politicians. as for you and me, well, they just want to cut your benefits. so how did we get here? simply put,
managers needed a way to get that fast cash to fill that hole. enter
. the vultures convincing the
to buy up all these high yielding but so-called aa securities called cdos except the banksters left out a key thing. they weren't real, nor were they really aaa. there was no money there at all in many cases. think about the
abacus deal. goldman custom builds it, takes the money from the buyer, and then bets on its implosion and makes out like a bandit when the taxpayer pays off the bets through aig. in the end the american taxpayer and american retiree and the children of this country are left holding a multitrillion dollar bag simply so our politicians and banksters can keep their jobs. and the government, which insures almost all of the pensions, keeps
to pretend your future isn't being stolen.
and let's bring in two experts on the
crisis is differing views. josh rawl from
, recently published a paper on the severity of the situation, and randy defrain. josh, put the size and scope of this problem in context.
i think you were talking about corporate systems versus government systems. with theg-o-v-e-r-n-m-e-n-t-s systems it's much worse. i think it's worth asking how did this happen? government
standards allow state and
that does not fully recognize the
of the promises that they're making. this is
that would never, ever fly in the
but it seems to be fine for governments, and that's how these governments charged up $3.6 trillion on a
belongs to the
and, you know, that's going to have to be paid. that's $30,000 per household that got charged up without their realizing it.
do you agree with that assessment?
i think there are differences between the
plans, but clearly there's been a problem as your intro stated it, that we really were all taken to the cleaners by
caught fire and then everything burned in the wake.
what do you suggest, randy, we do to begin the process of healing this knowing the government hasn't reformed the
to prevent them from continuing to prey on
managers? is the
just to leave the extraction in place and start cutting benefits and hope people don't riot?
actually, i think it's a little simpler than that. we've experienced a change over the past 30 years away from the traditional
which gives people a real retirement security. and we've moved to the defined contribution, your typical 401(k). the 401(k) has higher fees, yet you have all of the
shifted to the employee and you also have longevity risk that you have to fund. you don't know if you're going to live to be 90, but you have to fund for it just in case you outlive your money. i think the best thing we can try to do at this point for the remaining people, the 44 million people in the
that still have
plans, is to do something with the rules to allow those plans to continue and provide secure retirement benefits for those people.
i just want to back up --
i'd like to put --
go ahead, josh.
i want to put that in some perspective. who is actually guaranteeing those benefits for the work thaers do haers that have
plans? it is taxpayers. i think we have to ask whether that's still affordable.
there are ways to structure defined contribution plans --
hold on. one at a time, guys.
are you done, josh approximate.
there are ways to structure defined contribution plans that are not that expensive and that we can learn from some of the bad things that happened in 401(k) plans. you know, i think we have to ask, you know, how feasible is it to continue making these unfunded promises to public workers pretending it's not a promise taxpayers have to bear the burden of. it's $3.6 trillion, $30,000 per household, it's growing every day for state and local workers. i just think we need to look at some alternatives.
what about everybody else?
i want to add some context because quite honestly i take issue with the $3.6 trillion number that josh is referencing because as i see it the number is more like $60 trillion that is not there, and i want to refer back to a conversation that i had yesterday afternoon with
, who is the former
at the s.e.c. and currently does
out of colorado. here is what lynn had to say about what our actual liabilities are which make $3 trillion look like a flea on a dog's behind.
public dead today is in the 11 to $12 trillion number, but the off-
nonpublic debt is 3 to 4 times that amount. those are
we're going to have to pay out over the next two to three decades. if we aren't able to pay those elements, then we're literally going to have grandmas and grandpas and people on the street, which takes us back to the days of hooverville.
randy, are we kidding ourselves by setting these little marks, a billion here, a tral there, when the truth of the matter is we have committed to a massive group of
, public pension,
caretaking to the
order of magnitude
of $50 trillion to $60 trillion and we're sitting here fret being where we're going to come up with $1 trillion or two.
obviously, when you add in the
and all of the other entitlements, it's a massive program that we're going to have to be dealing with, and i know congress and the administration have an entitlements commission. they're going to come out with some recommendations, which i believe are going to require across the board cuts in areas we never imagined in december after the election. but the
on it is for those people who do have pensions and i think the number that has been issued by a study by
was $6.6 trillion, the shortfall today, including everyone who doesn't have access to a
or 401(k), that's the shortfall on the pension side of things. apart from
yeah. the one thing that seems to get lost in all of this, josh, is why are the
returns as lousy as they are? and we talk about the free spending politicians and the goofy
standards which is clearly a major issue, but is it not also a major issue that
as the primary mark for selling toxic securities and then when it comes down to a situation like
, the leverage to guarantee the taxpayer-funded bailout is the fact that all of the cops, all of the judges, all of the firemen, all of the teachers'
have been jacked full of these toxic securities so either the government pays out a few trillion or we wipe out the
. it gives the guys at
a lot of leverage when they go to a meeting at the
i think that's right. i think tough ask why is it that state and
took these investment strategies? the reason is the government
encourages them, gives them the incentives to underfund these liabilities and take risk. this is the way that state and
have been borrowing. most states have
budget amendments they're required to present on the books a
. how have they gotten around that? it's by promising pensioners money in the future, setting aside not nearly enough to cover it, and taking risks with the money. taxpayers bear the down side of that risk. i think that
needs to be take an very careful look at to examine how it has contributed and encouraged state and
to take that risk and to create debt, basically hidden borrowing off the
out of the view of taxpayers.
i'll one up that and say it's not just the
standards of our government, it's the
standards of our
in general. if you look at the entire bet made against the
by people like
, the bet was there's
at the root of the mortgage and
, that there's
at the root of the
system and guess what?
was right. there is
at the root of all ever these things, and instead of dealing with it, investigating it, and reconciling it, our government is printing trillions of
in order to cover it up and in the process spiking the price of food and obviously creating risk for our currency. randy, a pleasure to have some time with you. josh, the same. thank you, gentlemen. coming