Why there will be many more Detroits – in one chart

Short answer to the question is:
Because America’s cities and states are in debt up to our eyebrows from unfunded pensions to public employees — pensions that, without exception, are based on the expectation that whatever money that’s paid into those funds gets 7% to 8% interest.
But the reality is the Federal Reserve is artificially suppressing interest rates because of the Godzilla-sized national debt of $16.9 trillion. That’s the official figure, according to our feral gummint. The real figure, according to a U.C. San Diego economics professor, is $70 trillion.
If the Federal Reserve lets interest rates go up, then our gargantuan national debt will balloon even quicker.
That is why the interest rates on bank savings, certificates of deposit (CD), and U.S. Treasury bonds and notes are so anemic. The highest interest rate being offered for a one-year CD currently is 1.05%. As for treasury notes, rates are going up. The latest 10-year Treasury note has a yield as high as 2.866%, a level not seen since July 29, 2011. But 2.866% is still a far cry (5.134% to be precise) from the 8% interest rate on which are based our public pensions.

Below is a chart showing how underfunded public pensions are, compared with private retirement funding. As Tyler Durden of ZeroHedge puts it:
The chart below explains, in the simplest possible terms, why there are many more “Detroits” on deck. It shows the underfunded status of public vs private retiree healthcare plans. It needs no commentary, although it may deserve one question: what happens when all those public servants who have been promised over a trillion in healthcare benefits upon retirement, realize it was all a lie? And then come… the pensions.

pensions~Eowyn

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[…] Why there will be many more Detroits – in one chart […]

japoa
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This is a huge recipe for disaster . When people come to the realization they worked their entire life to accrue a pension for retirement , and it all of the sudden is gone ; there will be hell to pay .

joandarc
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joandarc

Thank you Dr. Eowyn for this informative post. Yes, I wonder what federal public servants and their families are going to do. . . I say, do the best you can in your job, do what you are supposed to do when you are supposed to do it.

Alice Wolf
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Alice Wolf

People? EVERYONE should be screaming blue murder!!!!!!!!!!!!!!!! Everything is gone………………….healthcare, education, employment, housing NASA, you name it. WE HAVE TO ACT………………..reinstate Glass Steagall, call your congressman and say PASS THE RETURN TO PRUDENT BANKING ACT in the House and Elizabeth Warrens’ bill in the Senate. That will allow Congress to protect the people not the banks, and from there fplan a bright future for the entire planet.

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[…] I explained in my post of August 18, 2013 (“Why there will be many more Detroits – in one chart”) and as the graph below shows, public employees pensions are, without exception, severely […]

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[…] Eowyn is the Editor of Fellowship of the Minds and a regular contributor to The D.C. […]