Illinois On The Brink? The Whole Country Is On The Brink

The biggest problem facing Illinois is the public pension fund problem. I don’t care what the “official” number is for the degree to which it is underfunded. I can guarantee that even without marking-to-real-market the illiquid investments like private equity funds, derivatives, commercial real estate trusts and other assets that do not have truly visible markets, collectively the public pension system in Illinois is at least 60-70% underfunded. Then apply a realistic assumed actuarial rate of return on assets, which would be lower than the current assumption (likely 7.5% ad infinitum) and the underfunding goes to 80%. The problem is unsolvable without a complete and drastic restructuring.

I was in a Lyft ride today and the driver happened to be from the northwest suburban area of Chicago. There’s a lot bad things happening in that State that are not reported in the mainstream media. All road public road work has been halted except toll roads. The gun violence has worked its way from the South Side up through downtown into the Gold Coast neighborhood and is winding its way north. This is making it a dangerous place to live and is driving the price of things like home insurance up, although some companies still offer good deals – you can find what I think are the cheapest plans for IL here.

He said that his old house at peak prices in northwest burbs was worth over $500k. The current resident has it offered for $250k. Housing and real estate prices are plunging. He has a good friend who consults with Sears and the expectation is that SHLD could file bankruptcy any day (Short Seller Journal subscribers were shown this idea on April 2, 2017 at $11.49 – it’s been as low as $6.20 since then).

It’s not just Illinois. The entire system is crumbling beneath the surface. As long as the mainstream media isn’t reporting the truth, the “truth” can’t be that bad, can it? The truth is worse than any of us can possibly know.

There’s a 1%/99% in this country that’s different than the assumed meaning for that term. For 99% of the population, economic reality and systemic truth has been covered up and kicked down the road for so long that this segment of the populace is willing to believe there may well be a such thing as a “free lunch.” To 99%’ers, it’s inconceivable that the grim-reaper could or ever would show up to collect. Of the 1%, a small percentage not part of the insider elite can see most of the truth and can imagine that the whole truth is far worse than what can be perceived from publicly available information. The balance of the 1% are the insiders.

I stated in 2003, after watching the tech bubble collapse and the housing bubble inflate, that the inside elitists were going to keep the system propped up with printed money and easy credit until they had swept every last crumb of middle class wealth off the table and into their own pockets. I also said that nation’s retirement assets would be last crumbs remaining. Enabling pension underfunding is another form of debt used to confiscate wealth. That’s why the catastrophic underfunding of pensions was allowed to persist.

For purposes of my analysis, anyone who does not have enough money in the form of cash in hand to buy a Federal politician or buy the direct phone number to the Oval Office is “middle class.” There’s plenty of douche-bags running around with assets worth 8-figures but they don’t have enough spare change to buy their way in to the elitists’ card game.

We are at the point where the last crumbs are being swept off the table. It looks like Illinois will be the first to fall but there will be several others that follow. Part of the motivation by the Fed/Government to hold up the stock market like it has been doing is to keep the big State pension funds propped up for proper looting – like a prize-fighter being held up under the shoulders after passing out in order to deliver more punches to the face.

I suspect the time at which the system will be allowed to collapse is not too far off. The only question for me is whether or not the “Mad Max” scenario engulfs the country before the outbreak of World War 3…

7 thoughts on “Illinois On The Brink? The Whole Country Is On The Brink

  1. There has not been much discussion on Illinois since the “budget” was passed. even Moody’s said there was not much “concrete ” in that budget which was really something thrown up on the wall to see what would stick.

    Illinois plan to borrow to pay down vendor debt. Let’s say that’s 16 billion at 6%, and 6% is a great rate for an insolvent State.
    Assuming they find someone to buy that debt, thats 1 billion in new interest cost, or 20% of the proposed new taxes, of which Moodys said not to expect IL to receive that much for various reasons including business and people continuing to leave.
    So IL probably has to go BK to reorganize.

    If people and business leave IL, where do they go: Iowa? they are just a few years behind IL regarding unfunded pensions.

    As you point out this is a nationwide issue. As the dominos fall, and we see collateral damage, I would think the speed of the failures will accellerate.

  2. ” Of the 1%, a small percentage not part of the insider elite can see most of the truth and can imagine that the whole truth is far worse than what can be perceived from publicly available information. ”

    I don’t know . I think all it really takes to see what’s up is a healthy skepticism and an awareness of the situation, not a fat bank account. Indeed there are tons of stupid rich doctors etc. , ie 1%ers , that are just as unaware as the masses.

  3. Dave, love the douche bag reference…showing your age. The num I saw on the Illinois Pension underfunding was +$251 BILLION. My jaw dropped when I read it. Quarter of a Trillion dollars not exactly chump change. If that’s only 70% then you getting a whiff of a 1/3 Trillion $.How can that be anything but a massive haircut for all those folks.

    Saw this graphic and used it for illustration a few times since…no one has come close on a couple of the associations including a CPA friend of mine. (time associations between a billion and a trillion) Scary

  4. I have no idea what price levels gold and silver will reach per ounce. But I do know that whatever those prices are, the ounces still will exist, and they will be worth more than comparable weights of fiat paper. No comment on cryptocurrency equivalents or volumes of kryptonite.

  5. Get gold and silver while you still can. You just can’t go in during crisis and ask for metal. You may get metal but you will be paying dearly for it. That’s assuming any is available.

    Make no mistake this is a full blown crisis now but will get much worse until reset.

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