Sunday, September 19, 2010

Pension Fund Hell

September 18, 2010
Public pension funds could come up short

NEW YORK, Sept. 18 (UPI) -- Overly optimistic assumptions by pension-fund managers could leave U.S. retirement plans with a gap in coverage, an official said.


Many plans have kept the 8 percent return rate...

Click to enlarge.

The exponential growth rate trend in the chart above is calculated based on the 48 years of data from March 1952 to March 2000. It is a rate 7.6% above inflation.

Click to enlarge.

Here's another look of that same data on a log chart. Constant exponential growth will therefore appear as a straight line.

A growing workforce population (women entered the workforce) in a post World War II environment greatly contributed to the economic boom. It allowed the workforce population to grow faster than the population overall.

The chart above shows total nonfarm payrolls divided by the population. Note the growth from 1960 to 2000. Those days are over. Welcome to pension fund hell.

Source Data:
FRB: Flow of Funds Accounts
St. Louis Fed: CPI-U
St. Louis Fed: Population
St. Louis Fed: Total Nonfarm Payrolls


mab said...


It's beyond me that so few understand where the "excess" returns on investments came from over the last 60 years. Here's a hint - it had nothing to do with talented money (mis)managers.

Come on people, it's no that complicated.

Anyway, now that our eCONomy is supersaturated with debt (debt deflation looms), negative nominal and real returns are very probable if not inevitable.

Stagflationary Mark said...


"...supersaturated with debt..."

Wall Street keeps sticking us with the transfat though! ;)