We are really screwed

Pension tracker

This is rough maths. US Pension Fund Tracker calculates the market based pension debt for all American public (i.e. state & local government) pension funds using a discount rate equal to 20-year Treasury yields rounded to the nearest one-quarter percentage point. The yield in 2014 was 3.00%. The use of this discount rate here is intended, as most financial economists agree, to more closely represent market realities and system liabilities.

US Pension tracker assumes that public pension funds have a market based pension deficit of $4.833 trillion. The actuarial base (using a discount rate of 7.5%) of the pension deficit is approximately $1.041 trillion. This assumes an unfunded portion of $3.8 trillion. Using the 2016 20-year US Treasury bond yield of 1.8% the market based pension deficit doubles to over $8.8 trillion or a $7.5 trillion unfunded portion equating to around $75,000 per household.

The more central banks push interest rates further south and drag the yield curve down the tougher life becomes to plug the holes in the sinking ship. Take the 20yr yield to 1% then the unfunded gap becomes $14 trillion and at 0.75% to $20 trillion or over 100% of US GDP. But don’t worry buy that stage these funds will collapse under the sheer weight of the law of low discount rates. These are rough back of the envelope calculations but they are absolutely dire whichever way you cut it and this is JUST the US public service at a state level.

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