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Expect Debt Defaults to Go from a Trickle to a Torrent
Underfunded public pensions are a big part of the nation's debt crisis

By Bob Stokes
Fri, 18 Oct 2013 14:15:00 ET
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The U.S. federal government showed again that it's good at kicking the can down the road now that the Congressional vote postponed the debt ceiling deadline until Feb. 7.   

It's true that a default on the nation's debt was averted, but an actual default did occur at the end of September.
The U.S. Postal Service has defaulted on a $5.6 billion payment for retiree health benefits that was due on [Sept. 30]. -- CNNMoney, October 3
That's the third such default for the U.S. Mail, according to the article. The Postal Service hit its debt limit in 2012, so it cannot borrow any more money from the U.S. Treasury.
The Postal Service's financial troubles, the bankruptcies of several major U.S. cities in recent years, and the precarious finances of state and federal government are similar to the picture that Robert Prechter painted in his 2002 business best seller, Conquer the Crash.
Don’t rely incautiously on government’s obligations to you if you are a retired government worker. In Argentina ... the government suspended state pension payments to 1.4 million retired state employees. It had no money to pay because times got tough, and it had never saved when times were good. The same thing could happen to many governments around the world, whether national, state or local, which pay billions of dollars annually in pensions. All of them are dependent either upon wealth transfer or upon managed funds that may or may not be properly invested. ...  In the 1930s, Fulton County, Georgia, where I grew up, was formed from two bankrupt counties that defaulted on their bonds. By 1938, state and local municipalities had defaulted on approximately 30 percent of the total value of their outstanding debt.
-- Conquer the Crash, second edition, p. 255
Public pension liabilities are a big part of what is financially crippling state and local governments.
A CNBC.com analysis of more than 120 of the nation's largest state and local pension plans finds they face a wide range of burdens as their aging workforces near retirement. ... It's not even clear just how big a financial hole many states and cities have dug for themselves. -- CNBC, August 5
A former Chairman of the Council of Economic Advisers told CNBC that "a lot of state and local governments have too much debt, too generous public pensions. We need a national conversation on how to fix this."
The comment about the need for a national conversation is well intentioned, but we've just seen how national conversations too often turn out: delay until another day.
Besides, Elliott Wave International believes that it's way too late for talk. Prepare ahead of time for the day of financial reckoning.

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