Socialism collapses rapidly when the public realizes that its government cannot pay its obligations AND taxes no longer cover those obligations. It is at this point the government will have lost the confidence of it own people. This is the catalyst that will bring everything down.
Nearly 600 State & Local governments are now in the hole and has reached nearly $1.2 trillion of unfunded pension liabilities in FY 2014. This reflects total pension liabilities of $4.798 trillion and total pension assets (or fiduciary net position) of $3.607 trillion. This staggering number is nearly 25% of the annual GDP and accounts for roughly 97% of all public pension funds in the United States. California is raising taxes to cover the short-fall for now, but this is going nowhere fast.
There are people on Capitol Hill who support confiscating all private 401 K plans in the country and replacing them with a monthly allotment. We know what will happen to that one, so you better have something else besides cash. The government cannot meet the promises for its own employees and they will turn to increasing taxes and confiscating private property. This will happen just as it has always happened in the past.
Government pensions are what destroyed the Roman Republic Empire and history is going to repeat sooner than later.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.