CalPERS (California Public Employees’ Retirement System) posted a profit of just 2.4% for its fiscal year (which ended on June 30) that was well below its 7.5% investment target. This is illustrating the crisis emerging in pensions. Even the pensions that were funded are now underfunded because they counted for so long on 8% bond yields. Interest rates were lowered to help banks and this set the stage for the next real crisis post-2015.75. You cannot manipulate interest rates to help banks without screwing someone else.
Now the pension crisis looming on the horizon is becoming a major concern for the future. The pension funds are either not funded or seriously underfunded. Either way, when it comes to government workers we will see tax increases that will destroy the economy, transforming many cities into the next Detroit. What really crushed Detroit was when the pension payment exceeded 50% of total revenue. Pensions will continue to rise, crowding out current expenses.
