.

[livinincali]

[quote=The-Shoveler]Kind of why I think all the Central banks are desperately inflating the markets in unison, they have no choice. They can’t afford another crash (at least or a while).

Can you imagine what a 50% decline in the market would do right now ?
[/quote]

You tell me. What would a 50% decline in the stock market really do to the average person on the street. The housing bubble pop seemed to effect the masses much greater than any stock market crash. I can think of a few things it does.

1) It shrinks the wealth gap. All of those wealthy people invested in stocks would see their fortunes decline.

2) It would give opportunity to people that recognized the feds easy money policy isn’t creating growth but instead creating bubbles.

3) In blows up a bunch of pension promises that are likely never going to be fulfilled and really what’s the harm in recognizing that now versus later.

[The-Shoveler]

#3 Is what the Fed is worried about mostly.

Well that and deflation/depression.

[spdrun]

General deflation is bad. Deflation in sectors that were artificially inflated can be a positive thing, despite the mewling of the muppets who bought homes they couldn’t afford in the 2000s bubble and are now under water.

[The-Shoveler]

[quote=spdrun]General deflation is bad. Deflation in sectors that were artificially inflated can be a positive thing, despite the mewling of the muppets who bought homes they couldn’t afford in the 2000s bubble and are now under water.[/quote]

Which again circles us back to #3,

They can’t afford the pension and promised benefits without the inflated home prices.

[spdrun]

Not every state has something like Prop 13… in a lot of places, taxes did NOT drop significantly because of lower home values, and valuations are sometimes not even based on purchase price.

(NYC does it by equivalent rent, I believe, some NJ towns use a similar formula to come up with an artificial number based on land area, sq ft, and amenities — i.e. one bath is worth x dollars — which is then multiplied by a millage multiplier.)

Really, the inflexible system in CA is CA’s own fault, though I’m reaping the benefits so I shouldn’t whinge about it.

[The-Shoveler]

Well if the stock market went back to the way it was in the 70’s (not saying that’s going to happen), but if banking suddenly became boring.

I think NY would be in the same boat as they were in the 70’s

Not far from Detroit actually,(part of that depression/”lack of wealth effect” type of thing).

For those who remember, or who have seen any number of movies set in NY at the time (Death Wish, etc.): New York City resembled a disutopian vision of a dark future. The city government was so broke the police had to go on strike to get paid. The perception, true or false, that crime and gang activity were threatening the survival of the middle class. Garbage strikes, decayed infrastructure, rat infestation. New York was a mess in a league of it’s own.

[spdrun]

Don’t be so sure. We have a lot of generally smart people, a huge influx of talented immigrants, media/arts/design, architecture/engineering/construction industry, multiple well-known universities, a growing technology/internet industry downtown, one of the more important ports on the East Coast, biotech and pharma (typically outside the city in NJ, but some companies actually moved back into NY), etc. It’s a far more diverse economy than you’d think, just like San Diego isn’t just squids, sand, and Seaworld 🙂

The decay of the 70s was actually nationwide, but even then NY didn’t have the demographic problems of Detroit (didn’t lose anywhere near 60% of its population).

[The-Shoveler]

When Godzilla comes into town, you don’t see him coming to shore in SD.
OK OK just kidding. (but the wealth effect/depression) would take it’s toll.

[spdrun]

The Stay Puffed marshmallow man would kick Gojira’s ass. That is all 🙂

[SK in CV]

[quote=spdrun]Really, the inflexible system in CA is CA’s own fault, though I’m reaping the benefits so I shouldn’t whinge about it.[/quote]

Aren’t you a rather recent buyer? So rather than reaping the benefits, you’d be bearing the more of the burden than long time owners, not less.

[spdrun]

The benefit is predictability — taxes are what they are, and can’t increase more than the statutory amount per annum. They can’t come to me and say that they’re tripling my taxes next year.

[SD Realtor]

No moral hazard for municipalities that screw up. Just make sure those pensioners get paid.

Taxpayers to the rescue!!!! Detroit here we come.

Next city up? Chicago perhaps?

[CDMA ENG]

[quote=CA renter]Yet another good article about the failures of privatization. Some very informed and intelligent commenters have made some excellent points as well.

—————-

“Some of America’s leading news analysts are beginning to recognize the fallacy of the “free market.” Said Ted Koppel, “We are privatizing ourselves into one disaster after another.” Fareed Zakaria admitted, “I am a big fan of the free market…But precisely because it is so powerful, in places where it doesn’t work well, it can cause huge distortions.” They’re right. A little analysis reveals that privatization doesn’t seem to work in any of the areas vital to the American public.”

https://www.commondreams.org/view/2013/08/05%5B/quote%5D

And the rest of us are uninformed clods?

I am not going to engage you in a debate. You tend to go all “borish girl” on us. I am not going to post “facts” as you request either. In fact I read some of the articles that you listed and I think they present pretty good counter arguement against your points and really are more op-eds than studies…

You should read your source material more chartiably.

As to privatition… I am all for it. Why? Because you get rid of unions. If the private sector fails you cancel the contract and you have the option to figure out if you can do it better internally or if another company can.

Simply… You have options.

With a union you have no options.

My company has struggled with these issues for years so yeah… I have experience with this.

CE

[CA renter]

[quote=livinincali][quote=CA renter]
Because of their long-term horizon, they’re able to get into long-term bonds. They have the flexibility to buy longer-term bonds when rates are higher, and shorter-term bonds when rates are lower. Only fools would be buying long-term bonds right now, IMHO.
[/quote]

I don’t think they have that much flexibility. In the past 5 years CalPRES has probably received about $25 billion in net contributions which makes up about 15-20% of their total portfolio. They obviously can’t have 20% of their portfolio tied up in short term bonds earning close to zero and also assume a 7.5% rate of return. They can’t just wait for better days if they assume 7.5% returns. They have to invest so they are investing out on the risk curve.

Remember the people making the decisions aren’t really worried about bad investment decisions because it’s somebody else’s money. You personally wouldn’t make that choice but they don’t care. Wouldn’t you rather have control over your money then a promise that somebody else is going to manage a pool of money so that you can get paid someday.

[quote=CA renter]
Of course, this is also where the Fed manipulation comes into play. If not for the Fed keeping interest rates well below where they would be without the interference, returns would be much higher and asset prices would be less volatile, IMHO. Less volatile booms and busts are far more preferable for institutions like pension funds (and people who prefer investing based on fundamentals instead of trying to time the next bubble).
[/quote]

The fed’s manipulation has actually been good for the total asset value calculation for CalPRES. Remember as rates go lower, older bonds with better yields go up in price. The 30 year bonds that CalPRES bought back in 2000 or 1990 are being held at values far greater than the face value on the bond. So when CalPRES says they have 150 billion in assets with maybe 50 billion in treasuries the face value of those treasuries might be 40 billion.[/quote]

Absolutely, today’s lower rates would artificially (IMHO) inflate the “funded” status of the pension funds. Of course, that’s assuming that they are using fair market values, and not “held to maturity” values, but that might not be totally correct (haven’t checked into that).

And you are also correct about them having to move out on the risk curve because of the **artificially suppressed** interest rate environment. And when/if interest rates rise, I expect the bond funds to be hit, yet again. This is precisely why I detest the Federal Reserve’s excessive manipulation of various markets. They are reducing risk premiums and forcing institutions and individuals to take on far too much risk, and these are often entities that cannot afford to do so.

And no, I’m not at all a fan of DC pension plans. IMHO, DB pension plans can absolutely work, but you have to keep everything in-house (no privatization!!!!), and use extremely conservative assumptions for both expenditures and returns. If that means that employees have to pay more/get less, so be it; but I want that to be decided only after the system is allowed to cleanse and heal itself…which will require a period of rather painful deflation, a shrinking wealth/income gap, and a more efficient/productive (and egalitarian, IMO) reallocation of resources.

[CA renter]

CE,

Opinions are fine, but you assert yours as if they are factual. They are not. You have yet to offer up any data, evidence, or logic to back up your claims, no matter how many times I’ve asked for anything factual or logical that would in any way prove your point.

The reason my posts are long is because I present facts, data, and logic (and there are plenty of facts and data to be found if you would only bother to look, which you don’t for some reason). Apparently, you find facts bothersome. Perhaps we should debate using only “opinions,” then?

The reason you consistently refuse to debate is because you can’t. There is nothing to back up what you’ve claimed, so you choose to make personal attacks, instead. You lose.

[Author]

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