Amazing chart shows one face of the debt Ponzi in graphic detail.

Long time readers of this blog know my long time, unwavering, dyed in the wool stance on things: that the world is a massive, pervasive and global Debt Ponzi.  Also, that no Ponzi lasted forever and when the collapse arrives, it generally does so with exponential speed such that most people get screwed.  Through the use of IOUs, debts, promises of all kinds (including contractual promises such as derivatives), the con men running this show are able to achieve a better quality of life for themselves at the expense of everyone else.  The really sad part about this (and any other Ponzi) is that it would have been a LOT cheaper to just pay off the con men up front to go away rather than to have them run the entire global economy into the ground.

In any case, one (but certainly not the only) aspect of the Debt Ponzi is public pensions.  Government has been telling these willing patsies all these fairy tales about how they are going to get all this money in retirement if they will just work for government today.  All of the patsies receive their monthly Madoffian feel good account statements which assure them that they can go ahead and spend more money today because they will have fat retirements waiting for them.

But, as I have always stated, the money is not there.  I know this because it is the one fact in common to all Ponzis: the stated value does not exist.  Not all participants can get out whole.  In fact, very few of them will.  This chart shows the math behind these statements.  It was created by John Mauldin (link is to a PDF that contains other charts and commentary worth your time) based on a database that was assembled from public records.  In fact, it is the assemblage of an admission of guilt by the collective con men.  What is says is that all states which are not colored green or blue have effectively admitted that they cannot meet their pension obligations by a long shot.  This might not be too concerning if the money would not be needed for another 10-20 years but the boomer retirement bubble is going exponential right now. These funds will be needed in just 2-5 years.

Some people might look at the map and say, well, yeah, there are some train wrecks in there but look at WA and  SD and NY and NC.  They are all blue.  Also, TX and FL and ME and a few others are green.  Well let me first say that green is normally associated with good and healthy but in this chart green mean that pensions are underfunded 10-25%.  Does that sound good?  What if they told you that you would only be receiving 75% of your previously promised pension?  Would that be good news?

Additionally, it's still early.  Give it time and all of these colors will certainly red-shift.  Why?  Because most of their "assets" are paper based and are probably held on the books at ridiculous valuations, just like the banks and their shadow properties.  It is in the best interest of the Ponzi operator to cook the books in ways that keep them within the law while screwing the patsies out of their retirements. Since that is what is in their best interest, that is what I am convinced will happen.  Too much control has been ceded to strangers and that is what always happens when this mistake is made.  And no, it's not going to be different this time.  Absolute power corrupts and when someone is in 100% control of the retirement money of millions of people, well, that is pretty much absolute power folks.

To paraphrase Warren Buffett, we will only know the truth about who is skinny dipping here and how much a$$ they are actually exposing when the tide goes out (meaning when the wave of boomers entering retirement begins to pick up with a vengeance).  This is going to require the sale of said assets in order to make required payments.  Stalling will not be possible.  Deferring this and that to hide the situation and to kick the can will not be possible.  Pensioners will want their checks, every single month.

So multiple things will happen which will result in a neap tide for the skinny dippers:

• real price discovery will occur on assets which have been kept off the market for the very reason that there is no market for them (at least not at the fantasy prices which they are being held on the books).  These assets will fetch pennies on the dollar, not full face value as is being reported by the con men running the pension funds.
• a lot of these assets will be dumped by all the various pensions onto the market at the same time in order to satisfy redemption demands by pensioners, thus lowering even more the street value of them due to simple supply and demand economics.
• assets that have been providing a real return will have to be sold simply because they will have some value at a time when the pensions need to raise cash.  So the pensions will be forced to sell their geese that lay golden eggs in order to meet "payroll" of the pensioners and they will be forced to do so at unattractive prices.  This act will in turn reduce their ability to pay future claims. It is in fact the driving force of the Debt Ponzi Death Spiral.

The result will be that Green states shift red and red states simply declare BK and tell the patsies it was nice knowing you but now can you please just Flock Off.  So, how should we model the workforce exodus?  Well, I always find it entertaining to use government's own numbers with an EW model overlay.  And so here you go.  The increase in civilian participation in the labor force took off into a bubble and perhaps into a mania starting in the early 60s.  That was when 1 man would work to feed a wife and several children.

But then money, driven by the increasingly obvious inflationary aspects of Bretton Woods, became the focus of our lives instead of family.  We began to live for making money instead of the core values of humanity.  Wives stopped taking care of kids and went to work.  We were taught that "greed is good" when in fact the truth that ambition is good but that ambition is not greed as the spin meisters would have us believe.  In fact, real ambition is the pursuit of happiness for the herd, not for the individual.  People, being a herding species, are only really happy when the herd is calm.  Those who are rich right now might have creature comforts but they live nervous, paranoid and in many cases downright uncomfortable lives, always worried that someone else in the herd will steal from them or harm them.

But I digress.  Bottom line is that the collapse of the Debt Ponzi will not feel good, just like going through drug withdrawal does not feel good.  In fact, that is a soft sell of the situation.  But if the Ponzi is allowed to go on too long then there is no hope for the addict.  An overdose will occur at some point.  Same for the Ponzi.

This is why we should be aware of the situation but that we should welcome it rather than fear it.  We should mentally prepare ourselves for the withdrawal pains and demand that it be allowed to occur quickly instead of stringing it out to consume what little number of years that any of us have on this planet.

We should laugh at those in power who tell us to be afraid of the truth and also to be confident in their lies.   They deserve our ridicule and our derision and nothing more.  Their only goal is to stay in power and to live beyond their means on the backs of the people.  We should brush them aside and throw the bums out. These are in fact the reasons that I have invested countless hours in writing this blog and with the inviolable ground rule that it never be used for ads or other distractions whose goal is to profit me.  I want to do my small part in helping people wake up and understand the problem so that we can all face the solution together.