Home › Forums › Financial Markets/Economics › Another crash in 2012? Any thoughts?
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paramount.
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January 10, 2012 at 12:00 AM #735611January 10, 2012 at 5:02 AM #735615
Anonymous
Guest[quote=CA renter]Taxes are being raised because revenues are down […][/quote]
http://www.mercurynews.com/elections/ci_19302567
While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers — the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.
Minor things? One of the biggest cities in CA is slashing its police force. That’s a minor thing?
Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That’s a minor thing?
I have mild constipation this morning. That is an example of a “minor” thing. It’s probably because of what I ate last night, but I’ll blame it on “Wall Street,” because apparently every problem is caused by “them.”
January 10, 2012 at 9:21 AM #735620CA renter
Participant[quote=pri_dk][quote=CA renter]Taxes are being raised because revenues are down […][/quote]
http://www.mercurynews.com/elections/ci_19302567
While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers — the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.
Minor things? One of the biggest cities in CA is slashing its police force. That’s a minor thing?
Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That’s a minor thing?
I have mild constipation this morning. That is an example of a “minor” thing. It’s probably because of what I ate last night, but I’ll blame it on “Wall Street,” because apparently every problem is caused by “them.”[/quote]
The economic recovery continues in the Golden State, and is even accelerating past the U.S. in many areas. Still, the failure of the additional $4 billion in revenues to materialize means that mid-year cuts may occur. That would affect K-12, community colleges, and the university systems in the state along with several other social services. Revenues continue to improve, but California is not out of the woods. There is still an imbalance between what’s being received and what we are spending. Ultimately, revenues will not be back to their pre-recession peaks for some time, which means that there are still many tough decisions ahead.
http://sco.ca.gov/Files-EO/12-11summary.pdf
The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.
I’ll post more info on that when I get some more time.
January 10, 2012 at 10:01 AM #735621(former)FormerSanDiegan
Participant[quote=CA renter]
The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.
[/quote]
Not exactly … but the cycle did play a role
The pension shortfalls are caused by Governments that used unrealistic projections based on the boom to overpromise unsustainable levels of benefits to government employees.
January 10, 2012 at 10:35 AM #735622SD Realtor
ParticipantNo way man. It is all Wall Streets fault.
Governments never make faulty projections nor do they ever overspend. Furthermore they are responsible for making sure that everyone has everything they need regardless of citizenship status or individual effort.
You guys better get with the program man!
January 10, 2012 at 3:35 PM #735629Participant[quote=SD Realtor]No way man. It is all Wall Streets fault.
Governments never make faulty projections nor do they ever overspend. Furthermore they are responsible for making sure that everyone has everything they need regardless of citizenship status or individual effort.
You guys better get with the program man![/quote]
You’re right… my bad. I want my cake now.
January 10, 2012 at 5:26 PM #735633briansd1
Guest[quote=CA renter]
The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.
[/quote]
You can’t have it both ways, CA renter.
The local and state governments relied on unrealistic Wall-Street forecasts for the contributions.
But they didn’t have to rely on those forecasts and they could have made larger contributions instead of spending money or promising generous benefits. Now it the time to cut benefits based on realistic estimates.
January 10, 2012 at 5:34 PM #735634Guest[quote=poorgradstudent]Short answer: No, there will not be another crash like 2008 in 2012.
Longer answer: I don’t think many intelligent people, those who actually have or manage real amounts of assets, believe in any of that Mayan Calendar hocus-pocus.
Asset values simply aren’t as inflated as they were in 2008. It’s entirely plausible we’ll see a 5% correction in the stock market at some point in 2012, and the major indexes could end the year down or flat. But the odds of another major crash are quite slim. Obviously there’s always a chance of some major, unexpected event like the Japan Tsunamis or worse, but you can’t plan for those.[/quote]
I go with that.
January 10, 2012 at 8:49 PM #735640sdrealtor
Participant[quote=CA renter][quote=pri_dk][quote=CA renter]Taxes are being raised because revenues are down […][/quote]
http://www.mercurynews.com/elections/ci_19302567
While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers — the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.
Minor things? One of the biggest cities in CA is slashing its police force. That’s a minor thing?
Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That’s a minor thing?
I have mild constipation this morning. That is an example of a “minor” thing. It’s probably because of what I ate last night, but I’ll blame it on “Wall Street,” because apparently every problem is caused by “them.”[/quo
The economic recovery continues in the Golden State, and is even accelerating past the U.S. in many areas. Still, the failure of the additional $4 billion in revenues to materialize means that mid-year cuts may occur. That would affect K-12, community colleges, and the university systems in the state along with several other social services. Revenues continue to improve, but California is not out of the woods. There is still an imbalance between what’s being received and what we are spending. Ultimately, revenues will not be back to their pre-recession peaks for some time, which means that there are still many tough decisions ahead.
http://sco.ca.gov/Files-EO/12-11summary.pdf
The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.
I’ll post more info on that when I get some more time.[/quote]
IMHO This post defines the saying “where you stand depends upon where you sit”
January 10, 2012 at 11:59 PM #735647Participant[quote=briansd1][quote=CA renter]
The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.
[/quote]
You can’t have it both ways, CA renter.
The local and state governments relied on unrealistic Wall-Street forecasts for the contributions.
But they didn’t have to rely on those forecasts and they could have made larger contributions instead of spending money or promising generous benefits. Now it the time to cut benefits based on realistic estimates.[/quote]
It’s much more complicated than that.
It’s not just the contribution amounts, but the benefit amounts that are affected by the investment returns. The return assumptions used by most public pension plans are actually very conservative relative to historical return rates and when compared to assumptions used by other large investment entities.
Public pension plans do not tend to rely on “Wall Street forecasts,” but rely instead on historical return rates and assumptions about events that would likely transpire under various conditions — like some fiscal/financial interventions (or lack of interventions) that might occur under different circumstances. As you probably know, Federal Reserve/govt intervention in the markets has been pretty universally acknowledged, and everyone played by the rules that had been established over many years and/or decades. The fund managers have to walk a fine line between taking on too much risk (possibly putting taxpayers at risk) or taking on too little risk (putting public employees at risk WRT inflation, contribution rates, etc.). Risk has been — and still is — grossly mispriced because of toxic “financial innovations” and inflationary Federal Reserve tactics. THAT is the cause of our “financial crisis,” not public employee unions.
They did and do have to rely on historical returns, as do all investment managers. They use historical return rates and follow current events in order to forecast future returns which they use to determine compensation and benefit amounts. Which other strategies and methods would you suggest they use?
You have to remember that there are real fund managers who work directly and indirectly for the pension funds, as well as private equity and hedge fund managers with whom the pension funds contract. If they promise 2% returns in a world of 9% returns, what do you think will happen to them? If you think they’d be kept on, you’re dreaming. Just like the banks during the bubble years, those who didn’t compete in the high-risk world suffered as everyone migrated to the high-risk investments/managers.
It’s a systemic problem that ties into how credit is used and how investments are managed on a macro level.
Additionally, if the pension funds were collecting 25% of an employee’s paycheck while keeping future benefits low, how do you think that would affect public employment? I’ve tried to explain before that high turnover rates would kill public employers even faster than a “pension crisis.” Hiring and training new employees in the public sector is very costly, and they cannot afford the turnover rates seen in the private sector. The process is very bureaucratic, and for good reason. Public employers and employees have more liability than most private sector workers because of the perception of “deep pockets.” If a private sector worker screws up, they might lose their jobs; but if a public sector employee screws up, they could end up in jail and/or face stiff legal penalties.
Public employers cannot just file for bankruptcy and walk away when they screw up. They have to last far, far longer than the vast majority of private companies, so they have to follow different rules.
These are jobs where experience, character, and integrity are often more highly valued than a new college degree. Public employers actively seek to recruit the most stable, dependable, security-minded job applicants, and the benefits packages offered by many public employers is their most powerful hiring tool. They have to hire a certain type of employee because public employees/employers are scrutinized far more than most private employees/employers. Contrary to popular myth, standards for public employment tend to be higher than those for private employment, both in terms of experience and education.
It’s a much more complex issue than you’d like to believe.
January 11, 2012 at 12:12 AM #735648Participant[quote=sdrealtor][quote=CA renter][quote=pri_dk][quote=CA renter]Taxes are being raised because revenues are down […][/quote]
http://www.mercurynews.com/elections/ci_19302567
While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers — the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.
Minor things? One of the biggest cities in CA is slashing its police force. That’s a minor thing?
Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That’s a minor thing?
I have mild constipation this morning. That is an example of a “minor” thing. It’s probably because of what I ate last night, but I’ll blame it on “Wall Street,” because apparently every problem is caused by “them.”[/quo
The economic recovery continues in the Golden State, and is even accelerating past the U.S. in many areas. Still, the failure of the additional $4 billion in revenues to materialize means that mid-year cuts may occur. That would affect K-12, community colleges, and the university systems in the state along with several other social services. Revenues continue to improve, but California is not out of the woods. There is still an imbalance between what’s being received and what we are spending. Ultimately, revenues will not be back to their pre-recession peaks for some time, which means that there are still many tough decisions ahead.
http://sco.ca.gov/Files-EO/12-11summary.pdf
The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.
I’ll post more info on that when I get some more time.[/quote]
IMHO This post defines the saying “where you stand depends upon where you sit”[/quote]
Are you trying to say that tax receipts didn’t go down, and that those declining receipts didn’t affect public entities?
Are you trying to say that the investment losses incurred as a result of the Fed’s/Wall Streets speculative gambles didn’t affect the financial health of public entities and cause the “pension crisis”?
Are you trying to say that the greater burden placed on govt entities during recessions (unemployment, “stimulus” spending, etc.) didn’t negatively affect the financial health of public entities?
Put down that wine glass, sdr, and look at the facts.
January 11, 2012 at 5:52 AM #735649ParticipantAre you saying that there were no budget problems in California before the real estate bubble? That declines in the quality of our public schools, state services, and other taxpayer supported programs only began with the bubble? Are you saying that the state has only within the past few years been fiscally unable to provide all these services for all these people didn’t fit in the budget?
January 11, 2012 at 6:27 AM #735650Guest[quote=CA renter]It’s much more complicated than that.[/quote]
No, it isn’t.
The only thing that is complicated are your desperate – borderline delusional – rationalizations.
[quote]Are you trying to say […][/quote]
Are you trying to say that public employees should be exempt from reality?
Are you trying to say that they should be compensated only based upon their demands and not based upon the economic situation?
Are you trying to say that only the private sector (the majority of Americans and the people that pay the salaries of the public sector) are the only ones that should be impacted by economic downturns?
Yes, you are.
January 11, 2012 at 8:22 AM #735653ParticipantYou mean I don’t get a pension with my private sector job?
darn….
I am in the wrong sector!
January 11, 2012 at 8:53 AM #735654Participant[quote=CA renter]
It’s a much more complex issue than you’d like to believe.[/quote]
Agreed, so it’s not just the wall street guys fault then, correct ?
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