Confounded Interestjust posted a nice summary of a McKinsey report on the growth of global debt during what some persist in calling the “great deleveraging.” Turns out that since the crisis of 2008, debt has actually risen by $57 trillion, and the ratio of debt to GDP is up 17 percentage points to 286%. Meanwhile, central banks are monetizing 100% of newly-issued sovereign debt.
The obvious response to this is
wow, nothing has been fixed; in fact just the opposite, and
these stats, horrendous as they are, are incomplete because they don’t include unfunded liabilities of governments and private pensions, which are just as real as any other kind of debt.
But unfunded liabilities must be getting better, what with the stocks and bonds in pension fund portfolios soaring lately. Right? Since that’s an effortless Google search, that’s what I did. And the results were both counterintuitive and scary. It seems that even with pension fund investment portfolios booming, obligations to future retirees are rising even faster, making these entities even more underfunded today than in 2007. Here’s a sampling of the headlines just from February, in the order they appear in the search window:
Now, easy money advocates argue that the solution to this and all other unbalanced economic equations is to borrow and spend enough new cash to get asset prices up and put people back to work. But stocks and bonds are currently at record highs and the unemployment rate is below 6% (peak-of-the-cycle kinds of numbers that have historically preceded corrections in which investment returns and tax receipts both plunge, raising unfunded liabilities).
So it looks like we’ve thrown our best punch and the problem is still standing there, wondering if that’s all we’ve got. Which leaves the US and the rest of the world — where debt and unfunded liabilities also continue to rise — with the question: If debt was the thing that nearly destroyed the global financial system in 2008 and debt — both narrowly and broadly defined — is way up since then, what happens in the next downturn? The answer is who knows, because this is uncharted territory both in terms of the size of the imbalances and governments’ policy responses.
The only thing that’s certain is that there are more cities, states and related pension funds poised to blow up than ever before.
Speaking at AARP headqusrters in Washington, President Obama will announce ORDERS to the Labor Department to write new rules for financial managers who handle retirement accounts for working Americans.
As USA Today reports, The White House says the goal is to end "hidden fees that hurt consumers and back-door payments that help Wall Street brokers," deals that costs retirees billions of dollars in savings.
White House officials said they want new fiduciary standards that would require financial advisers to put clients' interests ahead of their own... and "buy our bonds."
We wonder how long before there will be an official asset allocation by dictat...
30 - Pension - Entitlement Crisis
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - Feb. 22nd, 2015 - Feb. 28th, 2015
"This a modern day "Doomsday" Book, the same as William the Conqueror Implemented in 1066 after conquering England. He needed to know where the wealth was so he could tax it"
"This is Not Really About Tax There are Easier Ways to Solve Tax Tracking - Its about a Common Reporting Standard. Its about the ability to track Capital"
"FATCA is a decoy for the Common Reporting Standard"
"There is an incredibly aggressive urgency of implementation - an unprecedentedly quick agreement between 57 governments"
Either to Tax it , Expropriation it or Control Its Free Movement
"Era of Banking Secrecy is Over!"
"A Complete Misunderstanding by Banks"
NEW ACRONYMS IN THE ERA OF FINANCIAL REPRESSION
FATCA - Foreign Accounts Tax Compliance Act
GATCA - Global Account Tax Compliance "Acts"
CRS - Common Reporting Standard
IGAs - Inter Governmental Agreements on FATCA
AEOI - OECD's Automatic Exchange of Information
AML/KYC Procedures - The term “AML/KYC Procedures” means the customer due diligence procedures of a Reporting Financial Institution pursuant to the anti-money laundering or similar requirements to which such Reporting Financial Institution is subject.
There will also be considerable customer backlash to FATCA and the documentation it requires. In the age of social media this matters, if this sounds like hyperbole please have a look at this URL
At a most basic level FATCA, the IGAs and the CRS are about making tax part of standard KYC/AML procedures and then reporting, for tax purposes, to those jurisdictions, in which the account holder has tax residence or citizenship.
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