CNN Money reports in “Retired Truck Drivers Could See Their Pension Checks Cut in Half” that:
“Retiree Bill Hendershot stands to lose $2,104 a month if his pension fund gets its way.
“The Central States Pension Fund is pursuing a plan that would slash pension checks in half for some former union truck drivers. The fund is on the brink of insolvency and says it needs to cut benefits for 273,000 current and future retirees in order to stay afloat.“
According to Hendershot,
“This is going to be rough. It’s quite likely that I’ll have to try to find some work. But who’s going to hire a 74-year-old?”
Previously, retirees would have been protected from these cuts. But a controversial law passed last December changed the rules of the game to allow multi-employer pension funds to reduce benefits if they are projected to run out of money. According to CNN Money, “A lot of these funds–which cover more than 10 million workers–are in financial trouble.”
There are two lines of argument here. The retirees can argue that their former employers and/or their current pension funds have a moral obligation to pay whatever was promised, no matter what.
On the other hand, there is the reality-based argument that “What can’t be paid, won’t be paid.” If previous employers and/or current pension funds are already bankrupt or nearly broke, court orders compelling them to pay the impossible will have no effect other than to bankrupt and destroy whichever firms or funds are deemed liable to make good on the pensions. In the end, before the courts rule on who is liable to pay pension and how they’re liable to pay, they’ll have to first ask: 1) Are the retirees better off with 50% (or less) of whatever was promised?; and 2) Are retirees better off demanding 100% of what was promised and thereby bankrupting the pension funds, and getting nothing?
Whether the court will rule in the next case that the pension funds must somehow pay off 100% of whatever was promised remains to be seen. But, however the courts might rule in the next few months, it’s going to become quickly apparent that reality will overrule any of the judiciary’s wishful thinking.
As I’ve warned and argued for most of five years, What Can’t Be Paid, Won’t Be Paid. The pension funds cannot pay out money that they don’t have and aren’t likely to get any time soon.
“The Central States Pension Fund covers workers and retirees from more than 1,500 companies across a range of industries including trucking, construction and even Disneyland workers. Truck drivers once made up a majority of participants, and are now a majority of those facing cuts. A lot of their companies went bankrupt after the industry was deregulated in the 1980s, which is a big reason why the fund is in trouble now. It has five retirees for every active worker.”
Interesting. They’re arguing that the primary cause of today’s retired truckers’ pension problems were the deregulation laws of the 1980s that drove many trucking companies into bankruptcy. It may be that such deregulation brought on more competition, slimmer profit margins for trucking firms, and created a new economic arena in which old-time trucking firms (that relied on government regulation to protect them from competition) went broke.
In other words, the government passed laws in the 1980s that increased competition, eventually drove some trucking firms out of business and thereby helped cripple pension plans 30 years later.
Assuming that chain of events is true, I’m reminded that the government has more recently passed a series of “free trade” treaties which can be expected to increase global competition (at least for laborers and employees). Do you suppose that the enhanced competition spawned by global free trade will drive a number of US corporations and industries out of business? Do you suppose that these corporate bankruptcies will further compromise the pensions promised to current employees?
All of which brings me back to my five-year mantra: “What can’t be paid, won’t be paid.”
If you are willing to trust your retirement to some corporation, pension fund or even government, good luck with that. Twenty years from now, some of your corporations will still be in business. Some of today’s pension funds will still be solvent. Some of the retirement accounts owned and operated by government will still pay out as promised. But most of the corporations, pension funds, and even governmental agencies will be insolvent and unable to keep whatever pension promises they’d previously made.
Hard lesson? If you want to ever retire with enough wealth to live even modestly, you can’t trust the promises of corporations, pension funds or government. You’d better figure out a way to save whatever wealth you’re going to need, on your own.
• We see that the pension debt owed to some truckers won’t be paid, and we say “Well, that’s too bad—but why should I care? I’m not a trucker.”
We see that the debts owed by the City of Detroit to some of its former employees and creditors won’t be paid, and we say, “Gee, that’s too bad—but why should I care? I never worked for Detroit.”
We see that the state of Illinois is virtually bankrupt and we say, “Golly, that’s awful—but why should I care? I don’t live in Illinois, I didn’t work for Illinois, and I’m not a creditor for Illinois.”
Well, we should care because we’re living at a time when, while each of these debt defaults may seem like isolated events, they are actually “dots” that can be connected to illuminate a growing reality and a pattern that threatens us all:
First, what can’t be paid, won’t be paid.
Second, despite what central banks and governments would have you believe, a promise to pay is not a payment. A “promise to pay” is only a debt. A written “promise to pay” is a debt-instrument. A debt-instrument isn’t really an asset. If you are accepting paper promises-to-pay as “payments,” you have not been paid. You’ve only received an IOU, regardless of whether it was signed by the Secretary of the Treasury, the Federal Reserve, your local bank or your employer. You have not been “paid” until you’ve converted those paper promises-to-pay into tangible goods or meaningful services provided by the same entity that issued and signed the “promise to pay”.
Third, right now, private, national and even global debts are so enormous that it’s all but certain that at least 50% of the debt will be repudiated, and there’s a high probability that 80% to 90% of the total debt will be repudiated.
That repudiated debt will include the governmental/”sovereign” debt of most nations’ governments—including the US. It’ll include most US bonds, most municipal bonds, most stocks, most pension funds, and most bank accounts—including yours.
When your bank repudiates the debt they owe you in “your” bank account, you will scream and shout that, “You can’t do that! I’m a depositor! My funds are guaranteed by the FDIC!!!”
And people will read about your plight in the newspaper and they’ll say, “Gee, that’s too bad—but why should I care? I don’t have any money in that bank.”
At which point, you might learn a lesson. You might remember when you asked “Why should I care” when the trucker’s pension was repudiated, Detroit went bankrupt, and Illinois became insolvent?
You might’ve (and should’ve) cared to the extent that those debt repudiations were among the first signs that most of the existing debt was going to be repudiated in the near future. Seeing those seemingly isolated events as repeated, and connected warnings, you might’ve cared enough to take whatever wealth you’d saved in the medium of paper debt-based monetary instruments and converted that wealth into real, tangible assets like land, tools, guns, bullets silver and gold that could not be “disappeared” when most of the world’s paper and digital debt-instruments are finally repudiated.
• Most people who read this article will fail to understand it. In the end, I’m warning people that anything that we regard as wealth that’s made of paper is not a “payment” but is only a “promise to pay”. It’s not easy for most people to understand the distinction between payments (something received that’s tangible) and promises to pay (something given that’s intangible or made of paper and is nothing but an IOU/debt).
If you can’t grasp the difference between a “payment” and a “promise to pay,” you’re headed for poverty and financial ruin.
Q: Why is it that most of our modern private, national and global debts can’t and therefore won’t be paid.
A: Because the vast majority of modern debt is nothing but promises to pay. It’s like me giving you a check for $10,000 when I have nothing in my bank account. That check is nothing but an empty promise to pay. I could just as easily write you a check for $100,000 or $1,000,000 ore even $1,000,000,000. They are all equally empty, worthless, promises to pay.
The point is that, while it’s hard for me to actually pay my debts with something tangible like a car, a home, gold or silver–it’s incredibly easy for the to appear to pay my debts by just writing a paper promise-to-pay that we call a “check”. In fact, I can live large so long as everyone will accept my paper “promises to pay” as if they were payments.
Of course, virtually everyone is wise enough to accept my $10,000 check with caution and to absolutely refuse to accept any check of mine for $100,000 or more.
But what about checks (promises to pay) issued by our government, Federal Reserve, or too-big-to-fail banks like JPMorgan? Are we also wise enough to treat those promises to pay with caution? Are we wise enough to recognize the “promises to pay” that’ve been issued by major institutions are intrinsically worthless and therefore are not “payments”?
No–we are not. About 99.9% of the American people have no idea of what I’m talking about. And, based on the public’s general ignorance and/or general lack of intelligence, they are going to wind up impoverished and scrambling to survive. Even in the midst of their calamity, 90% of ’em probably still won’t really understand the difference between payments and promises to pay or even understand why their survival, their very survival, may depend on grasping that distinction.
Our major institutions gave us promises rather than payments. They were able to write an endless stream of paper promises-to-pay just as easily as I could write a check for $1 billion. But, unlike me, they were never called on to redeem their paper-promises-to-pay. Result? The government, the Federal Reserve, and the major corporations have been able to thereby buy our homes, cars, land, government with nothing but paper IOUs!!!
Do you get that? Do you understand?!
Most of us have pissed away our effort, our work,our creativity and our lives working for the federal government and the Federal Reserve in return for nothing but promises-to-pay (debt instruments). These promises-to-pay are in the form of pieces of paper (and more recently electronic (digital) 1’s and 0’s on somebody’s hard drive) that are functionally and intrinsically.indistinguishable from Monopoly Money.
• Let me prove my point.
Historically, if a bank or the government issued a paper dollar the bank/government that issued that paper debt-instrument was required to redeem it by giving a mass of physical gold or silver to whoever held the paper dollar(s). That physical gold or silver had to come from the account of the bank and/or government that issued the paper debt-instrument.
The idea that the bank or government that issued a paper dollar (promise to pay, IOU) must redeem that paper dollar with gold or silver from the bank’s/government’s own account is virtually identical to modern checking account principles. If I issue a check (paper promise to pay; IOU) for $10,000 should it be redeemed by charging it to the account of Janet Yellen, Barack Obama or you, dear reader? Or should my check be redeemable only when charged to my personal checking account?
The answer’s obvious: the checks I write and sign must be redeemable against whatever funds I’ve deposited into my checking account. I give you a check for $10,000; you deposit my check into your bank account; your bank sends/charges my check to my bank which deducts $10,000 from my checking account and sends it back to your account. When you received $10,000 from my checking account, you are figuratively “paid”. Until that event, all the rest of deposits and transfers are nothing more than promises to pay.
Now, consider the Federal Reserve that issues the Federal Reserve Notes (FRNs) that you hold in your wallet. They issue paper debt-instruments that we call “dollars” and “money”. They buy things like US bonds with their freshly-minted paper dollars. Those paper dollars wind up in your wallets and mine. If we go to a Federal Reserve Bank and try to redeem those FRNs for anything tangible, we will be politely but firmly rebuffed. By law, the most you can get from a Federal Reserve Bank for a paper $100 FRN is a newer, crisper $100 FRN. That’s it.
The FRN issued by a Federal Reserve Bank will never be redeemed by the Federal Reserve Bank that issued it. Nevertheless, each FRN is “legal tender” for all debts, public and private.
Think about that. You are required by law to accept the Federal Reserve’s FRNs as “payment” for all debts owed to you, even though the FRN is, by law, not redeemable by the Federal Reserve banks.
Imagine that our government, in its infinite, infallible and benign wisdom, passed another law that declared every check issued by “ALFRED N ADASK” to be “legal tender for all debts, public and private”. If I issued a check, you’d be forced by law to accept it as payment for whatever you had for sale, even though you could never redeem my check against my checking account. Suppose you had a car, some acreage, a mansion or a corporate jet for sale. If I offered to buy and pay with one of my checks, you’d have to accept my check, even though you could never redeem it against my checking account. If I had only $1 in my checking account, I could still write checks for $100, for $100,000, for $1 trillion–and everyone in the US would be obligated to accept them.
If I could write checks that people must accept, but never be required to personally redeem them, how long do you suppose it would take me to buy all of Dallas, Texas? All of Texas? All of the United States?
The Federal Reserve issues FRNs that are used to purchase property even though its FRNs are apparently never redeemed against the Federal Reserves account.
That doesn’t sound possible, does it?
Well, it happening every day because . . .
• We are fools to accept the Fed’s debt instruments (FRNs) as “payments” for our work because they are intrinsically worthless and, by law, can’t and won’t be redeemed by the Federal Reserve. Nevertheless, even though these promises-to-pay (debt instruments) are not redeemable by the party that issued them, they do “spend“.
I may have been a fool to have accepted intrinsically-worthless and irredeemable FRNs (promises to pay) as if they were payments for my work. But if you think I’m a fool, just look at my neighbor–he’s an even “greater fool”! That moron is going to take $10,000 in cash (promises to pay) from me from me as if they were a payment for his used pickup truck.
Once I receive his pickup truck, I will have received some tangible good or service that I deem sufficient compensation for the $10,000 in cash I foolishly accepted for my work. That $10,000 will not have been redeemed by the entity (the Federal Reserve) that issued the $10,000 in cash, but it will have been spent to purchase a pickup truck and thereby converted (at least in relation to me) from a “promises to pay” into a tangible “payment”.
But note that I am not paid by the Federal Reserve that issued the $10,000 in cash. I was not “paid” by the Fed. But–because I was fortunate enough to find some fool across the street willing to trade his used, but tangible pickup truck for “my” $10,000 cash. But note that the $10,000 is never redeemed by the Fed–it’s redeemed (in relation to me) by the fool across the street.
Historically, paper cash had to be redeemed with gold from the account of the bank or government that issued it–remember? And, even today, paper checks have to be redeemed against the account of whoever wrote the check. But ordinary people cannot redeem paper FRNs against the Fed’s own account.
So, how do we “redeem” our worthless FRNs? We spend them among ourselves. This is where the “full faith and credit” of the people of the United States comes into play. So long as I remain confident that I can pass that worthless $10,000 off on the fool across the street, and that fool remains confident that he can pass the $10,000 again to some other fool down the block, and that third fool remains confident that he can pass the $10,000 off again to you–the system works.
So long as we remain confident that we can spend the paper and digital debt instruments issued by the Federal Reserve with “greater fools,” we don’t care, notice or comprehend that our FRNs aren’t redeemable by the entity that issued them. So long as we can spend those debt-instruments, that’s good enough for just about everyone. We don’t notice or care that, because the FRNs aren’t redeemable by the Fed, the Fed and/or its owners might acquire fabulous sums of unearned wealth. Likewise, we don’t notice or seem to mind that We the People (with our “full faith and credit” a/k/a “greater foolishness”) are redeeming the Fed’s FRNs. We are merrily redeeming the Fed’s debts. We–you and me–are redeeming/paying the Federal Reserves debt/promises-to-pay (FRNs) every time we accept a FRN in return for our labor or property.
• So (as former Secretary of State Hillary Clinton might say), what difference does it all make?
OK–I played the fool and accepted FRNs (promises to pay issued by the Federal Reserve and/or the federal government) as if they were payments for my work. So what? There were plenty of other “greater fools” willing to accept my worthless $10,000 in FRNs as if they were payments for tangible goods and services. I had virtually no trouble converting those promises-to-pay into a tangible pickup truck (payment) so I’m golden. So long as they spend, why should you or I care that paper debt-instruments (FRNs) are intrinsically worthless?
A: Because the entity that issued the FRNs (Federal Reserve and/or federal government) doesn’t have to redeem the FRNs they issued. The Fed and the feds don’t have to make good on their “promises to pay”.
Suppose I purchased my neighbor’s pickup truck with a $10,000 check. Is he “paid” when he accepts my check?
All he has is my personal, signed “promise to pay” $10,000. Figuratively speaking, he’s not paid until he’s deposited my check/promise-to-pay into his bank which forwards my check to my bank . . . which deducts $10,000 from my account . . . and sends that $10,000 to my neighbor’s bank account. Then, when the neighbor receives the $10,000 from my account, he will have been figuratively “paid”.
I will have “redeemed” my check (promise to pay) that I wrote and signed with the $10,000 that’s deducted from my bank account. I will have thereby personally kept and “redeemed” the $10,000 check/promise-to-pay that I issued.
But suppose that after I issued the $10,000 check/promise-to-pay for the neighbor’s pickup truck, the neighbor didn’t want to take the trouble to deposit that check into his bank account and instead signed it over to the next neighbor as if it were a “payment” for his bass boat. And then, that next neighbor also failed to deposit my check and signed it over to another neighbor, and then another, etc. etc. The net result would be that my check was being spent by one fool after another–but it would never be redeemed against the personal bank account of the man (me) who issued the check/promise-to-pay. While the fools and greater fools were “spending” my check over and over, I would never have to keep my “promise to pay”. My check would never be redeemed against my own account.
Pretty cool, hmm?
I just acquired a pickup truck with nothing but a promise to pay that I never had to keep. I got a pickup truck without paying for it. Is this a great country, or what?
In fact, if I can pass a $10,000 check for a used pickup that’s never redeemed at my personal bank account, why couldn’t I pass a $75,000 check for a new Cadillac Escalade, and a $1 million check (promise to pay) for the McMansion down the block? In fact, the more checks I pass (but not redeem) the richer I seem to be. The neighborhood’s “greater fools” will increasingly value my checks because they’ll see my Escalade and McMansion and say, “Gee, look how rich Al is! If he’s rich, you know you can trust in, and spend. his checks!” (In Al We Trust, hmm?)
But, in fact, I’ve been seemingly purchasing all these products, land and homes with irredeemable promises-to-pay. Because none of my checks ever were redeemed against my bank account, I never actually paid for the pickup, the Escalade,and the McManson! I am simply defrauding neighbors–annnnd–miracle of miracles–the more I defraud them, the richer they think I am and the more they are willing to be defrauded.
So long as the public will (increasingly) accept my checks (promises to pay) as spendable (among their neighbors) rather than redeemable (at my bank account), I could purchase my city. I could purchase my county. I could purchase my State and nation and even the world! All I have to do is be careful to maintain public confidence in the idiotic idea that if you bothered to submit any of my checks (mere promises to pay) to my bank account, they could and would be paid with some of my real wealth.
But, if the public ever found out that there was no real wealth in my checking account and understood that none of my checks (promises to pay) could ever be kept/redeemed from my bank account, then my checks would become less “spendable”. They’d probably still work for a while. But the pickup truck that I purchased for $10,000 (in my checks) would be priced at $20,000 (in my checks). The Escalade that I purchased for $75,000 (in my checks) would be priced at $200,000 (in my checks). The McMansion I purchased for $500,000 might now cost $3 million. We’d be an an era of inflation or even hyperinflation.
This hyperinflation would be evidence of the public’s growing distrust in my ability to keep the “promise-to-pay” that was inherent in every one of my checks. Eventually, the public’s confidence in my “promises-to-pay” would diminish to a point where no one would accept my checks (promises-to-pay), the system would collapse under the weight of all of my unpaid and unpayable “promises,” and I might have to borrow enough money to pay for an airline ticket to some country that doesn’t have an extradition agreement with the United States.
Of course, in realty, no one is dumb enough to take my checks and rely on being able to spend them among the public rather than redeeming them against my bank account. We’re no dummies, right? We’d never take some joker’s irredeemable promises to pay in hopes of being able to spend them in public rather than redeem them against the joker’s bank account, right?
That’s exactly what we’re doing every day, every hour, every minute that we hold and use Federal Reserve Notes. We don’t redeem any of our FRNs issued by the Federal Reserve against the Federal Reserve’s bank account. Instead, we are content, to merely spend the Fed’s FRNs among ourselves. We the People (a/k/a “we the greater fools”) are accepting worthless pieces of paper (promises to pay) rather than real payments (something tangible) in return for our lives and our property.
As a result, we are “selling” our land, our homes, our factories, and even our lives to people and institutions that give us nothing in return but irredeemable pieces of paper.
Result? We are becoming increasingly impoverished. And why not? We’re trading our property, our work and our lives for nothing! We the People are so damned dumb that we’ve been giving our nation away in return for nothing more than “promises to pay”–even though, by law, those promises can never be kept. I.e., the FRNs cannot be redeemed for something value (say, gold or silver) deducted from the bank accounts of the Federal Reserve or the federal government.
Is it any surprise that the federal government is growing bigger every day? Is it any surprise that our liberties are shrinking? Of course the federal government is growing bigger. It never has to redeem it’s promises to pay. It can purchase property, people, institutions, foreign countries, by using FRNs that are never really redeemed for tangible wealth against government accounts. (There is one exception; FRNs can be used to pay your taxes. In that regard, your FRNs are “redeemable”. But if your tax rate is 20%, 80% of the FRNs you’ve received in trade for your property, work and life will never been redeemable.)
Just as, in my previous example, I could ultimately own and rule the world if no one ever redeemed my checks against my bank account, but instead just spent my checks–the Federal Reserve and/or federal government could own and rule the world so long as no one tried to redeem FRNs with the Fed or feds. The government has grown gargantuan because it never has to pay its bills out of its own account! It never redeems its promises-to-pay. It lets you and me “redeem” its debts by letting us trade our property, work and lives between each other in return for the gov-co’s worthless FRNs.
Result? The nation is going to hell. Its wealth is disappearing. We might soon become a Third World Nation–and almost no one will understand why.
How could this be happening? It’s happening because We the People have been the “greatest fools” the world has ever seen. We’ve trusted our political leaders and the Federal Reserve. Our trust has been betrayed. We’ve ignored our express constitutional mandate that only gold or silver can be used as a “tender in Payment of Debts”. Our ignorance will be rewarded with poverty.
Result? Soon, almost all of us are going to feel the pain currently felt by some retired truck drivers.
What can’t be paid, won’t be paid. So, don’t sit around waiting to be paid. Don’t accept promises to pay. Get paid now.
Don’t take any wooden nickels and don’t hold onto any of their direct offspring–paper dollars–for long.