- "Something Big Is Underway On All Fronts"
As of this writing, the increased U.S. troop presence in Eastern Europe includes a battalion-sized element of American troops being emplaced in the Suwalki Gap, Polish territory that borders Lithuania in a 60-mile stretch of corridor. The Russian Defense Ministry announced that 600 Russian and Belarussian airborne troops conducted training exercises in Brest, on the Belorussian-Polish border only a few miles from where the U.S. forces are deploying in Poland. This on the heels of Britain deploying 800 men, tanks, and jets to Estonia, along with pledges of Challenger 2 tanks, APC’s (Armored Personnel Carriers), and drones. Two companies of French and Danish Soldiers will join the British in the deployment to Estonia.
For the first time since 1945, Norway has violated its treaty with Russia (then the Soviet Union) not to station foreign troops on its soil. A company of U.S. Marines will soon be stationed for a 6-month deployment in Norway. The situation is heating up in Ukraine, according to a report on fort-russ.com entitled Ukraine Moves Massive Force up to Lugansk Frontline, published October 28, 2016. The report reveals the Ukrainian Army is deploying 3,500 soldiers and 200 armored vehicles of the 15th Motorized Infantry Brigade to Krasny Oktyabr in the district of Lugansk in Eastern Ukraine. For the first time in history, Romanian airspace is being patrolled by the RAF (Royal Air Force) of Britain.
In addition, the Ukrainian National Guard is deploying a tactical company equipped with 82 mm mortars and AGS-17 auto grenade launchers, along with APC’s and missile launchers. A separate reconnaissance battalion named the “Night Shades,” a nationalist volunteer battalion will be deploying to Lugansk as well. No doubt they will receive a “warm” reception, as the fighting has been ongoing in the region for more than two years. The area is a severe flashpoint, as the separatists are ethnic Russians of Ukrainian nationality who wish to secede in the manner that Crimea did…Russia annexed them after the popular vote to leave Ukraine. Now (since December 2015) the Congress gave the green light to send weapons and munitions to Ukraine; the “holdup” is due to Obama not wanting to jeopardize the election of Hillary Clinton, as the Russians have stated weapons to Ukraine means war with the U.S. and NATO.
Meanwhile the Varshankya-class stealth subs are deploying into the Black Sea as the Russian fleet is moving toward Syria. The Russian and Syrian armies continue to bomb and attack the al-Nusra/Jabhat Fatah ash-Sham fighters emplaced in the city of Aleppo. The mainstream media, meanwhile, is faltering in its attempt to create a “sacred U.S.-coalition crusade” to “free the city of Mosul,” as the offensive is not working quite as planned. There are also reports that the U.S. government has plans to “navigate” Islamic terrorists from Mosul into Syria, to cause more problems for Assad and the Russians; the mainstream media is notoriously silent on the collateral damages being caused by the U.S.-led Mosul attacks, in which U.S. aircraft are supporting with bombing missions.
Let’s be clear on this: The U.S. is beefing up conventional forces of American troops into Eastern Europe and convincing NATO countries to augment these deployments with soldiers and equipment. The Russians have been responding with opposing counter-deployments to offset the U.S.-NATO movements. The aggressive stance is being taken by the U.S.-NATO-IMF hegemony in its military buildup in Eastern Europe and the Baltic States, the very “backyard” of Russia.
The bottom line: the stage is being set to start WWIII on the slightest provocation.
The domestic perspective yields that just a few weeks after the ICANN (Internet Corporation for Assigned Names and Numbers) transfer from U.S. control to (basically) the UN on October 1, 2016, the U.S. has had a DDoS (Distributed Denial of Service) attack from hackers on October 21, 2016 affecting the east and west coast of the U.S. as well as Texas and part of Europe. Just one week before, on OCtobr 13, 2016 Obama signed an Executive Order for Space Weather anomalies just “in case” some “space weather anomaly” were to cripple the power grid and electrical infrastructure of the United States.
Something even worse that happened may really tie into this.
Last week it was reported by the U.S. Army that Major General John Rossi had committed suicide. Rossi had been slated to take over as the Commander of U.S. Army Space and Missile Defense Command, and the Army Forces Strategic Command. General Rossi was about to complete 33 years of service and was only 55 years old. He was “found” at Redstone Arsenal, and the Army just ruled it a suicide. The Daily Mail on dailymail.co.uk reported that a U.S. government official told USA Today: “It seemed that Rossi was overwhelmed by his responsibilities” as a potential reason for his suicide.
The problem is, he committed suicide on July 31, 2016…and it’s taken two months for the Army to rule it as being a suicide?
With the command assignment, Rossi would have been privy to every procedure and protocol to defend the United States against an ICBM (intercontinental ballistic missile) attack or an EMP (electromagnetic pulse) attack or event. He would know everything from the “top” down: that is, the Commander-in-Chief (Obama) would have to foster a one-on-one relationship with the man who would hold the key post to defending against a foreign missile attack.
Maybe this time the missile would not have been foreign, or if it was? It may not have been the leader of a foreign country to direct it against the United States.
It is almost impossible to believe that a Major General of the United States Army just receiving a top command post, a 55-year-old soldier…a general officer…with 33 years of service, a wife, and a loving family would “off” himself because of being “overwhelmed by responsibility.” Men such as Rossi (the highest-ranking member of the military to do such a thing) do not shirk responsibility: they meet it, head on. The whole thing stinks of a purge, in the manner that the entire military of the United States has been purged of hundreds of senior General Staff officers, Admiralty, and Senior Noncommissioned Officers…replaced by “yes” men over the course of Obama’s term.
The whole thing stinks of an assassination: no suicide note, no real press coverage, and nothing from his friends, family, or fellow soldiers. This occurs, and then Obama signs his Executive Order to “protect” us from the dreaded space anomaly that will take down our infrastructure. Could this have possibly been a suicide? Think of all of the heartache and grief his family is going through with his loss. What about the benefits and retirement that his family would lose with such an act? If he really committed suicide, then it was probably because he found out about something so heinous, so vile that would occur to the U.S. that he couldn’t live with it and probably couldn’t stop it.
Bottom line: Was he terminated when he wouldn’t go along with a false flag EMP-plan conceived by Obama to take down our grid, cripple our response time, and set the stage for martial law and the suspension of all rights under the Constitution of the United States?
As I have mentioned in the past, I repeat once again:
The next war will be initiated by an EMP device detonated above the continental United States followed by a limited nuclear exchange and then conventional warfare.
I never said that it wouldn’t be Obama who initiated the EMP device, and in all probability if he doesn’t initiate it…he’ll either provoke it, allow it, or request it. We haven’t even mentioned the voting (early voting) taking place where fraud is occurring in Maryland, Virginia, Illinois, and Florida, among others. The illusion of the vote: the joke of the year, but the joke is on us.
And Obama is the joker, setting the stage for the transfer of power. That transfer is not going to occur with the losing candidate (in either case) going gently into that good night. The stage is set for a war to begin. The stage is set for a false flag operation to take down our grid. The stage is set to steal the election for Clinton or declare it null and void. Within the next few weeks, the future of the United States will be decided…with or without the consent of the governed.
- What Does It Take To Bring Hillary Clinton To Justice?
Authored by Pepe Escobar, originally posted op-ed via RT.com,
Virtually the whole planet holds its collective breath at the prospect of Hillary Clinton possibly becoming the next President of the United States (POTUS).
How’s that humanly possible, as the (daily) Bonfire of The Scandals – relentlessly fed by WikiLeaks revelations and now converging FBI investigations – can now be seen from interstellar space?
It’s possible because Hillary Clinton, slouching through a paroxysm of manufactured hysteria, is supported by virtually the whole US establishment, a consensual neocon/neoliberalcon War Party/Wall Street/corporate media axis.
But History has a tendency to show us there’s always a straw that breaks the camel’s back.
This could be it – as revealed by WikiLeaks; March 2, 2015, the day when John Podesta wrote, “we are going to have to dump all those emails.”
That happened to be the exact same day it was revealed Hillary Clinton had used a personal email server as Secretary of State.
Yet this reveals only part of the puzzle. There’s got to be a response to Podesta’s email – which WikiLeaks may, or may not, leak in the next few days before the election. If the back and forth clearly shows intent (to mislead), then we’ve got a 100 percent smoking gun: the whole Clinton (cash) machine narrative – according to which Hillary just deleted "personal" emails – crumbles like the ultimate House of Cards.
Moreover, that would unveil what was from the start the privileged Clinton machine strategy: to thwart the subsequent internal State Dept. and FBI investigations.
As far as the Clinton machine is concerned, an interlocking influence peddling pile up is the norm. John Podesta also happens to be the founder of the Center for American Progress – a George Soros operation and prime recruiting ground for Obama administration officials, including US Treasury operatives who decided which elite Too Big To Fail (TBTF) financial giants would be spared after the 2008 crisis. DCLeaks.com, for its part, has connected Soros Open Society foundations to global funding rackets directly leading to subversion of governments and outright regime change (obviously sparing Clinton Foundation donors.)
Exceptional bananas, anyone?
The perfectly timed slow drip of WikiLeaks revelations, for the Clinton machine, feels like a sophisticated form of Chinese torture. To alleviate the pain, the relentless standard spin has been to change the subject, blame the messenger, and attribute it all to “evil” Russian hacking when the real source for the leaks might have come straight from the belly of the (Washington) beast.
At the Valdai discussion club last week, it took President Putin only a few sentences to debunk the whole Clinton machine narrative with a bang:
“Another mythical and imaginary problem is what I can only call the hysteria the USA has whipped up over supposed Russian meddling in the American presidential election. The United States has plenty of genuinely urgent problems, it would seem, from the colossal public debt to the increase in firearms violence and cases of arbitrary action by the police. You would think that the election debates would concentrate on these and other unresolved problems, but the elite has nothing with which to reassure society, it seems, and therefore attempt to distract public attention by pointing instead to supposed Russian hackers, spies, agents of influence and so forth.
I have to ask myself and ask you too: Does anyone seriously imagine that Russia can somehow influence the American people’s choice? America is not some kind of ‘banana republic’, after all, but is a great power. Do correct me if I am wrong.”
Reality, though, continues to insist on offering multiple, overlapping banana republic instances, configuring a giant black hole of transparency.
Anthropologist Janine Wedel has been one of the few in Clinton-linked US mainstream media acknowledging how Bill Clinton, while Hillary was Secretary of State, perfected his version of “philantro-capitalism” (actually a money laundering “pay to play” racket), a practice “by no means confined to the Clintons”.
And the racket prospered with inbuilt nuggets, such as Hillary being perfectly aware that prime Clinton Foundation donors Qatar and Saudi Arabia were also financing ISIS/ISIL/Daesh.
Huma, the Fall Princess
Now, less than a week before the election, we have come to the crucial juncture where the WikiLeaks revelations are merging with the FBI investigations – all three of them.
Exhibit A is this WikiLeaks bombshell; Peter Kadzik, who’s now in charge of the Department of Justice (DOJ) probe into the 650,000 emails found on the laptop shared by Clinton’s right-hand woman Huma Abedin and her estranged, pervert husband Anthony Wiener, is a Clinton asset.
Not only Kadzik was an attorney for Marc Rich when he was pardoned by Bill Clinton; Podesta – as also revealed by WikiLeaks – thanked Kadzik for keeping him “out of jail”; and it was Kadzik who gave Podesta a secret heads up on the Clinton email investigation.
The Clinton machine, starring a self-described virtuous Madonna, is actually a pretty nasty business. Huma and her family’s close connections to Saudi Arabia – and the Muslim Brotherhood – are legendary (that includes her brother Hassan, who works for Sheikh Yusuf al-Qaradawi). Podesta, by the way, is a handsomely remunerated lobbyist for Saudi Arabia in Washington; that’s part of the Clinton Foundation connection.
Yet now, with Huma in the spotlight – still maintaining she didn’t know all those emails were in her and Wiener’s laptop – it’s no wonder Hillary has instantly downgraded her, publicly, to “one of my aides”. She used to be Hillary’s ersatz “daughter”; now she’s being framed as The Fall Princess.
And that brings us to the intersection of those three FBI investigations; on Hillary’s Subterranean Email Server (in theory closed by FBI’s Comey last summer); on the Clinton Foundation; and on Wiener’s sexting of minors. The FBI has been investigating the Clinton Foundation for over a year now. Let’s try to cut a long story short.
Follow the evidence
Last July, the DOJ – under Clinton/Obama asset Loretta Lynch – decided not to prosecute anyone on Emailgate. And yet FBI director Comey – who nonetheless stressed Hillary’s “extreme carelessness” – turbo-charged his no-denial mode on another investigation, as in the FBI “sought to refocus the Clinton Foundation probe.”
Soon we had Clinton Foundation FBI investigators trying to get access to all the emails turned over in the Emailgate investigation. The East District of New York refused it. Very important point; up to 2015, guess who was the US attorney at the East District; Clinton/Obama asset Lynch.
Enter an extra layer of legalese. Less than two months ago, the Clinton Foundation FBI investigators discovered they could not have access to any Emailgate material that was connected to immunity agreements.
But then, roughly a month ago, another FBI team captured the by now famous laptop shared by Huma and Wiener – using a warrant allowing only a probe on Weiner’s sexting of a 15-year-old girl. Subsequently they found Huma Abedin emails at all her accounts – from Humaabedin@yahoo.com to the crucial huma@clintonemail.com. This meant not only that Huma was forwarding State Dept. emails to her private accounts, but also that Hillary was sending emails from the “secret” clintonemail.com to Huma at yahoo.com.
No one knew for sure, but some of these emails might be duplicates of those the Clinton Foundation FBI investigators could not access because of the pesky immunity agreements.
What’s established by now is that the metadata in the Huma/Wiener laptop was duly examined. Now picture both teams of FBI investigators – Clinton Foundation and pervert Wiener – comparing notes. And then they decide Huma’s emails are “relevant”.
Key questions apply; and the most pressing is how the emails were deemed “relevant” if the investigators could only examine the metadata. What matters is that Comey certainly was made aware of the content of the emails – a potential game-changer. That’s why one of my sources insists his decision to go public came from above.
The other key question now is whether the DOJ – via Kadzik? – will once again thwart another investigation, this time on the Clinton Foundation. Senior, serious FBI agents won’t take that – massive euphemism – kindly.
The FBI has been on the Clinton Foundation for over a year. Now, arguably, they are loaded with evidence – and they won’t quit. Winning the presidency now seems to be the least of Hillary Clinton’s Bonfire of Scandals’ problems.
- Turkish Police Raid Opposition Headquarters, Arrest Pro-Kurdish Party Leaders
Back in May, just two months before the Turkish “coup”, we reported that the puppet parliament of Turkish president Erodgan agreed to strip its members of immunity, a move which we predicted would “be used by Erdogan to prosecute members of the pro-Kurdish HDP, parliament’s third-biggest party, as well as anyone else he choose to take down.“
Six months, and one fake coup which concentrated virtually all domestic political power in Erdogan’s hands later, we were proven right, when overnight two co-leaders of Turkey’s pro-Kurdish, People’s Democratic Party (HDP) and at least 11 more MPs were detained overnight as police raided homes in Ankara and eastern Kurdish-majority areas. Local media reported that other than in Ankara and Diyarbakir, the arrests have been made in the eastern and southeastern Turkish cities of Hakkari, Mardin and Batman. The arrests are linked to “terrorist propaganda” cases, Reuters said.
The raids took place on Thursday night in several Turkish citiesTurkish police raided the Ankara house of co-leader Selahattin Demirtas and the house of co-leader Figen Yuksekdag in Diyarbakir, the largest city in Turkey’s mainly Kurdish southeast, the party’s lawyers told Reuters. “HDP call international community to react against Erdogan Regime’s coup,” the party said on Twitter, referring to President Tayyip Erdogan.
Selahattin Demirtas was detained at his home in DiyarbakirPolice also raided and searched the party’s head office in central Ankara. Television images showed party officials quarreling with police during the raid, and a Reuters witness said many police cars and armed vehicles had closed the entrances to the street of the HDP headquarters.
Police raid HDP headquarters in Ankara, detain 11 deputies around country https://t.co/F9AtNXaCch pic.twitter.com/3FP2wakTWu
— Turkish Minute (@TurkishMinuteTM) November 4, 2016
Selahattin Demirtas and Figen Yuksekdag were detained at their respective homes as part of a “counter-terrorism inquiry”, security sources quoted by Anadolu news agency said. At least nine other HDP MPs were also taken into custody.
The lawmakers were detained after “failing to appear for a summons to testify as part of a counter-terrorism investigation,” Anadolu state news agency reported.
At 4am local, I make 14 HDP MPs in custody, although two are unconfirmed. See the full list here: https://t.co/fjfV1C1LZS pic.twitter.com/skRtBlC1oW
— JamesInTurkey.com (@jamesinturkey) November 4, 2016
The testimonies are connected to “terrorist propaganda” probes related to the Kurdish militant group PKK, and to the pro-Kurdish protests with violent clashes of October 2014, which HDP co-chair Demirtas is accused of inciting. The MPs were required to show up for testimonies after their parliamentary immunity was lifted thanks to the abovementioned law passed earlier this year. The two HDP leaders reportedly vowed not to testify.
Police broke into the home of HPD co-leader Figen Yüksekda? in Diyarbakir and detained her early Friday, while Selahattin Demirtas was detained in his Ankara house
The party’s lawyers told Reuters that 11 other HDP parliamentarians were also arrested in the raids, with two more wanted for arrest. Local media reported that other than in Ankara and Diyarbakir, the arrests have been made in the eastern and southeastern Turkish cities of Hakkari, Mardin and Batman.
Those detained included HDP’s deputy speaker in the Turkish parliament, RIA Novosti reported. “Deputy speaker of parliament Pervin Buldan has also been detained in Ankara,” the HDP representative was quoted as saying.
Policemen breaking into home of HDP Co-chair @FigenYuksekdag and detain her @HDPgenelmerkezi pic.twitter.com/47mSpEdsWE
— Mutlu Civiroglu (@mutludc) November 3, 2016
The HDP, which is in strong opposition to President Recep Tayyip Erdogan’s government and supports the Kurdish- and other minorities, has been accused of having links to PKK, which Ankara considers a terrorist organization.
Meanwhile social networks could not be accessed from inside Turkey. Twitter, Facebook, YouTube and Whatsapp were inaccessible, even when users tried to circumvent restrictions using a virtual private network (VPN).
Mr Demirtas had tweeted about his arrest before the sites were restricted. Another MP from the party who is currently abroad, Ertugrul Kurkcu, told the BBC that the detentions were “totally unlawful”. He said: “This crackdown tonight is nothing to do with procedural law, criminal law, any law whatsoever or the constitution. This is an unlawful hijacking of HDP parliamentarians.
“The Turkish government is heading towards a dictatorship of Nazi style [sic].
“Will the Turkish government abide by the internationally accepted standards of parliamentary democracy? This is the basic question.”
Turkey claims that the HDP has links to the Kurdistan Workers’ Party (PKK), a militant group, but the party strongly denies this. The PKK is deemed a terrorist organisation by the US, the European Union and Turkey.
Turkey remains under a state of emergency that was imposed after a failed coup in July. The emergency allows President Recep Tayyip Erdogan and his cabinet to bypass parliament when drafting new laws and to restrict or suspend rights and freedoms. About 100,000 public sector employees with alleged links to the coup’s alleged mastermind were subsequently purged from their jobs.
The HDP entered the Turkish parliament for the first time last year, when it won 59 seats and became the country’s third-largest party. It had done so after at least two people died in explosions at one of its rallies. But just three months later, against a backdrop of rising violence between Turkish forces and the PKK, a crowd attacked the HDP’s offices in Ankara.
The next day, Mr Demirtas accused the ruling party of orchestrating nationalist attacks. Turkish politicians normally have immunity from prosecution, but this was removed from the HDP earlier this year.
The take home message: after cracking down on the rank and file, the police, army, the state workers in the aftermath of July’s “failed coup”, Erdogan has now gone after the third largest political party in Turkey, and his on his way to becoming a full-fledged dictator, and all thoughout the humanitarian,democratic western powers sit back and pretend not to see Turkey’s collapse into a dictatorial power.
- The October Payrolls Report: What Wall Street Expects
While the October payrolls report, due out at 8:30am on Friday, has taken on a secondary importance in light of the market’s near certainty that the Fed will hike rates in December (absent a Trump victory and/or a market crash), analysts and traders will surely be concerned any prominent outlier prints that deviate too far from the consensus estimate of 175K. So, in preview of tomorrow’s biggest economic update, here is a snapshot of what Wall Street expects.
According to consensus, while estimates point to a pick up in payrolls growth for October, but jobless claims and ADP report have sent mixed signals ahead of NFP release; still, the number should be strong enough to prompt the Fed to raise rates in December, strategists say.
- The average Nonfarm payrolls estimate stands at 175k, up modestly from September’s +156k
- The Unemployment rate seen at 4.9% vs 5.0%
- Average weekly hours exp. at 34.4
- Average hourly earnings exp. +0.3% m/m, vs +0.2% in September
This is what the latest ADP report said:
“Job growth remains strong although the pace of growth appears to be slowing,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in a statement. Moody’s produces the figures with ADP. “Behind the slowdown is businesses’ difficulty filling open positions. However, there is some weakness in construction, education and mining.”
The Nov. 2, FOMC statement was optimistic:
“The labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid”
Summary Analyst Views:
Deutsche Bank (Joe Lavorgna)
- Headline and private payrolls are expected to rise 150k, slowing moderately
from their three-month trailing averages of 192k and 177k, respectively - A similar reading to the ADP report for today’s employment report from the BLS
will certainly keep the Fed on track to hike in December. - “The October employment report should
strengthen the Fed’s resolve to raise rates next month…. the bar is fairly low with respect to
what the Fed needs to see from the October labor data.”
FTN (Jim Vogel, in note)
- Current market expectations are in line with December rate hike; only a figure of 125k or less could push market-implied Fed hike odds below 65%
- Payrolls of 150-200k would see UST 5Y yield between 1.27-1.32%, UST 10Y yield between 1.79-1.84%
Barclays (Michael Gapen, in note)
- Recent data on jobless claims “supportive of further improvement in labor market conditions this year”
- “However, over the past few months, the relationship between claims and employment seems to have weakened somewhat and we have chosen to take less signal from the ongoing declines than we have in the past”
BMO (Ian Lyngen, in note)
- ADP miss suggests “marginal downward skew” in NFP report
- Notes relevant correlation between the two measures that has held up 9 times in last 12 months
Morgan Stanley (Ted Wieseman, in note)
- Lowers payrolls forecast to 185k from 205k
- ADP miss points to weakness ahead of NFP report; overall figure of +147k was “far enough below” MS estimate of 197k to prompt a downward adjustment to payrolls prediction
* * *
One notable point brought up by Joe Lavorgna, and the reason why going forward, he is “less sanguine on the labor market.” is that as the chart below indicates, “the year-over-year change in temporary hiring leads that of the overall labor market by two quarters. Temp hiring has been trending noticeably lower as of late. If temp hiring began declining outright on an annual basis, the risk of a more concerning slowdown in hiring would increase.”
* * *
According to Southbay Research, today’s Challenger Layoffs, and seasonal retail hiring holds the key to the October Payrolls report, as retailers are scrambling for workers.
Retail stores Are Hiring Earlier
Thanks to Amazon, big box stores continue to cut store fronts.
This year brought another wave of big-box store closings (Walmart, JC Penny, Macy’s, etc). On top of that is the bankruptcy of Sports Authority.No drop in hiring despite fewer store fronts
With hundreds of fewer brick-and-mortar stores, we should expect fewer retail seasonal workers.
In fact, the opposite is the case: (per Challenger Gray) announced seasonal retail hiring will slightly exceed last year’s. The reason: more online shopping is driving more logistical/inventory/shipping support.
Early Hiring?
Seasonal hiring kicks off in October: last year 194K people were hired (not seasonally adjusted).
More importantly, the trend over the last few years is towards earlier October hiring.
Is that the case this year?Per Challenger Gray, October job cut announcements were (-1K), much lower than last year’s (-5K).
That could be a sign that retailers are staffing up early.One possible driver: Halloween spending.
Per the National Retail Federation, spending this year was up 10% over last year.
* * *
Finally, here is Goldman’s comprehensive preview of what to expect:
Payrolls Preview
We forecast an increase of 185k in nonfarm payroll employment for October, slightly above consensus expectations. An expected rebound in employment growth for state and local governments, as well as education- and health care-related industries, is a key reason for the acceleration from a 156k gain in payrolls in September.
We look for a decline in the unemployment rate to 4.9%, which is now unusually high compared with continuing jobless claims. Favorable calendar effects as well as strengthening underlying wage tends likely boosted average hourly earnings by 0.3% month-over-month.
We forecast that nonfarm payroll employment increased by 185k in October, slightly more than expected by consensus estimates (+175k). Although payroll growth edged down to 156k in September, much of the slowing was concentrated in state and local government employment and (private) education and health care employment. In September these industries added just 14k jobs, compared with an average monthly increase over the prior twelve months of 61k (Exhibit 1). A partial rebound in these sectors—with other industries steady—would be enough to lift payroll growth into the high-100k range.
Expecting a Rebound in Government, Education and Health Employment
Arguing for a stronger report:
- Jobless claims: Initial claims for unemployment insurance benefits have continued to trend down, with the four-week moving average falling to 252k in the October survey week from 258k in the September survey week. The decline would have been even larger except for a rise in claims in the Southeast due to Hurricane Matthew (see below) and an unusually large increase in claims in Kentucky (which we believe was related to a temporary auto plant shutdown). In general, the level of initial claims looks consistent with very low layoff activity in the economy.
- Manufacturing surveys: The majority of the employment components of the various monthly manufacturing surveys improved in October. The ISM manufacturing (+3.2pt to 52.9), Philly Fed (+1.3pt to -4.0), Kansas City Fed (+10 to +7), and Richmond Fed (+16pt to +3) measures all rose, while the Dallas Fed employment index declined (-2.1pt to +0.2). Manufacturing employment fell by 13k in September, and has declined by 5k on average over the last six months.
- Seasonals: Seasonal factors are mildly positive for payroll growth this month, in our view. Since the 2008-9 recession, October payroll growth has surprised consensus expectations to the upside two-thirds of the time, with an average surprise of 45k. Moreover, October has often featured favorable revisions: the average two-month revision in the October employment report has been 67k since 2010, 37k since 2005, and 42k since 2000 (Exhibit 2).
October Employment Reports Often Feature Upward Revisions
Arguing for a weaker report:
- Job availability: The Conference Board’s labor differential—the difference between the share of households saying that jobs are plentiful and the share saying they are hard to get—declined 3.1 points to +2.2. Despite the pullback, the labor differential remains near a post-crisis high.
- ADP: ADP reported a 147k gain in private payroll employment in October, below a revised +202k increase in September. The ADP report introduced methodological changes this month, and will now offer more details by sector. Our preliminary analysis suggests that the forecast performance of the ADP series should be similar under the new methodology.
- Hurricane Matthew: Hurricane Matthew struck the Southeastern US in early October, and may have weighed on payroll employment growth in some states. Initial jobless claims in the region were cumulatively about 10k above their pre-hurricane trend during the middle weeks of last month (with most of the effects in North Carolina). We therefore expect a modest drag from the hurricane of 5-10k on October payroll employment growth (see here for more details).
Neutral factors:
- Service sector surveys: The employment components of some service sector surveys deteriorated in October, but most appear consistent with healthy payroll gains. In particular, the ISM non-manufacturing report’s employment index declined to 53.1 following a record monthly increase to 57.2 in September. Aside from the September value, however, the index is at its highest level of this year. Among the regional surveys, the NY Fed index rose slightly (+1.6pt to +9.7, not seasonally adjusted) and the Richmond Fed measure was unchanged (at +6), although the Philly Fed index (-10.8pt to +8.5) and Dallas Fed index (-1.7pt to +2.7) declined. Service sector employment rose 157k last month, and has increased 163k on average over the last six months.
- Job cuts: Announced layoffs reported by Challenger, Gray & Christmas were little changed at 31k for October. Announced job cuts have remained within a narrow range over the last six months and, like initial jobless claims, appear consistent with generally low layoff activity.
We expect that the unemployment rate declined to 4.9% in October from an unrounded 4.965% previously. On a rounded basis, the headline U3 unemployment rate edged up by one-tenth in September, and is now up three-tenths from a cyclical low of 4.7% in May. A further increase in the U3 unemployment rate would be surprising in light of the continued decline in the number of unemployment insurance benefit recipients (Exhibit 3). The U3 and U6 measures of labor utilization may take on heightened importance this month, given Fed officials’ focus on the degree of slack remaining in the labor market.
Unemployment Rate High Compared to Continuing Claims
We forecast that average hourly earnings for all workers rose by 0.3% (mom) in October, in large part reflecting favorable calendar effects. We expect the year-on-year rate to remain at 2.6%. The broader wage data remain encouraging: our wage tracker—which aggregates four measures of wage growth—also stands at 2.6% year-on-year, a sign that diminishing slack is boosting wage growth.
- Donald Trump & The Passion Of The Christ
Authored by Antonius Quinas via AntoniusAquinas.com,
If Donald Trump can somehow defeat the Wicked Witch of Chappaqua despite vote rigging, outlandish media bias, backstabbing by his own party’s elites, and opposition of Wall Street, his victory may be the most serious setback for The Establishment since, perhaps, the release of Mel Gibson’s blockbuster movie, The Passion of the Christ.
Both Gibson and Trump faced seemingly impossible odds at the start of their quests and were viciously attacked and undermined by the usual Establishment suspects, yet, in Gibson’s case, he was able to beat the bastards at their own game producing one of the most accurate and authentic Christian movies ever made which garnered over a half billion dollars and numerous cinematic awards!
Unfortunately, Mel Gibson did not parlay his enormous success and cause further aggravation for the Entertainment industry with additional non-cultural Marxist features, but fell prey to booze and the pleasures of the flesh. Moreover, Gibson, who was once a traditional Catholic who rejects the heretical changes brought about at the Vatican II Anti-council, could have been a force in a counter insurgency to rid the Church of its current horde of apostates including its head honcho.
If Trump wins he will have completed what earlier populists, most specifically Ross Perot and Pat Buchanan, had started, but were unable to complete. A real challenge to the two-party duopoly could have taken place had Perot and Buchanan stuck with the Reform Party and built it up as a legitimate alternative.
A Trump Presidency will, at the very least, put a temporary halt to the totalitarian liberal order’s relentless drive to render American sovereignty and create a multicultural society via mass controlled (and uncontrolled) immigration. There would be no return from such a demographic onslaught and political realignment, at least through the ballot box, with the only alternative being secession or the emergence of a strongman who would violently suppress the Left.
A Trump victory would not only be a blow against the entrenched political class, but like Gibson’s great movie, it would be a mighty and much needed knockdown of the mass media. No presidential candidate has ever dared to openly take on the mainstream media and expose it for what it truly is – the propaganda arm for the New World Order and the purveyors of degenerate cultural Marxism.
The protagonist in The Passion of the Christ has often been referred to as “The Prince of Peace,” which is somewhat of a misnomer. The Christ of the Scriptures is a fighter who spends a good portion of His ministry battling and upbraiding the corrupt Church officials and hierarchy of the day who were not properly shepherding His flock.
Similarly, Donald Trump has always considered himself a fighter (counter puncher) who has promised to get rid of the corruption and criminality that pervades the political establishment, especially the Clinton cartel. Trump is uniquely qualified for such a task because, unlike nearly every other politician, he is not beholding financially to anyone.
Most importantly, Trump will set a new course in US foreign policy which will lead to a de-escalation in tensions around the globe especially with Russia. High praise was attributed to the peacemakers by the Author of the Beatitudes who said: “Blessed are the peacemakers: for they shall be called children of God.”
Not only for America, but a Trump victory will have positive reverberations throughout the Western world which would surpass that of the surprising Brexit vote. European anti-immigration groups and organizations would undoubtedly become further emboldened both psychologically and financially in their struggle to stem the tide of massive unwanted and society-wrecking immigration. There is no telling what the effect would be when the chief executive of the world’s dominant power would be in sympathy with those who have courageously sought to preserve their families, heritage and way of life from the wicked designs of the New World Order.
While Mel Gibson self destructed after the phenomenal success of the The Passion of the Christ, his movie still stands not only as an inspirational and moving cinematic masterpiece, but as a glorious blow against the Establishment. A Trump victory could mean an even greater strike against our globalist masters.
- FBI Agents: Hillary Is The "Antichrist Personified"
Having exposed the mutinous divide between The FBI and The Department of Justice, it appears the drip-drip-drip leaky bucket has turned into a spigot as The Guardian cites several seriously pissed off agents describe the FBI as "Trumplandia."
As The Hill details, in a report published Thursday, multiple sources within the FBI say that deep antipathy toward Democratic presidential nominee Hillary Clinton and anger that FBI Director James Comey did not bring charges against her this summer have motivated leaks that could damage her presidential campaign.
One agent told The Guardian that many at the bureau view Clinton as the “antichrist” and are supportive of Trump.
The currently serving FBI agent said Clinton is “the antichrist personified to a large swath of FBI personnel,” and that “the reason why they’re leaking is they’re pro-Trump.”
“The FBI is Trumpland,” said one current agent.
But another FBI source disputed the level of support Trump has within the bureau, according to The Guardian.
“There are lots of people who don’t think Trump is qualified, but also believe Clinton is corrupt,” the source said. “What you hear a lot is that it’s a bad choice, between an incompetent and a corrupt politician.”
According to the report, the tensions boiled over in July when Comey declined to recommend charges against the Democratic presidential nominee for possibly mishandling classified information through her use of a private email server to conduct government business, according to the FBI agent.
“Many FBI agents were upset at the director, not because he didn’t [recommend to] indict, but they believe he threw the FBI under the bus by taking the heat away from DoJ [Department of Justice],” the former bureau official said.
As The Hill concludes, there have been further leaks about internal fights within the FBI and other possible investigations since the Comey news broke, all of which has suggested an agency in a public war with itself.
- Voter Fraud Allegations Surface In California As Man Discovers 83 Live Ballots At His Doorstep
For the past couple of days we’ve been writing about a police investigation underway in Delaware County, PA related to a potentially illegal scheme to fraudulently register voters. As it turns out, the left coast may be experiencing some voter fraud of their own…shocking.
According Fox News, San Pedro, CA resident Jerry Mosna got a bit of a surprise on Saturday morning when he discovered 83 actual live 2016 ballots on his doorstep. All 83 of the ballots were addressed to his neighbor but each had a different name. Given that his neighbor is an 89-year old lady, who lives alone in her two bedroom apartment, Mosna was fairly confident that the ballots were not intended for her and reported them to his county registrar.
The 83 ballots, each unused, were addressed to different people, all supposedly living in his elderly neighbor’s two-bedroom apartment.
“I think this is spooky,” Mosna said. “All the different names, none we recognize, all at one address.”
His wife, Madalena Mosna, noted their 89-year-old neighbor lives by herself, and, “Eighty people can’t fit in that apartment.”
They took the ballots to the Los Angeles Police Department, but were directed to the post office. They felt little comfort there would be an investigation, and called another neighbor, John Cracchiolo – who contacted the Los Angeles County Registrar’s office.
A spokeswoman for the Registrar said the office will investigate. Both Cracchiolo and Jerry Mosna told FoxNews.com they think they stumbled upon a case of fraud.
Of course, just like in Pennsylvania, California officials are warning people not to jump to conclusions because this is all likely just a simple mistake. In this particular case, apparently we’re to believe that extra live ballots were randomly printed with the names of 83 different people on them and then sent to the same address because of a “system error.” We assume the “system error” has been linked back to Russia by 784 distinct U.S. intelligence agencies but we’re awaiting official confirmation on that.
In a statement, the office of the Registrar said, “We are carefully reviewing our records and gathering information to fully identify what took place. Our preliminary assessment is that this appears to be an isolated situation related to a system error that occurred causing duplicate ballots to be issued to an address entered for a single voter. We are working directly with the system vendor to ensure the issue is addressed and to identify any similar occurrences.”
And we’ll end with this summary just one more time:
Of course there is large scale voter fraud happening on and before election day. Why do Republican leaders deny what is going on? So naive!
— Donald J. Trump (@realDonaldTrump) October 17, 2016
- AP To Clinton Campaign: We Are Preparing To Report FBI Has Thumb Drive, But Can Be Steered Away
Moments ago, after teasing its twitter followers to “stay tuned for our FBI-DoJ #PodestaEmail special circa 4pm EST” Wikileaks released what appears to be part 28 of its Podesta dump, dubbed the “DoJ/FBI/Huma special” and includes some 1,308 emails, bringing the total to 45,526 in total emails released.
RELEASE: The Podesta Emails Part 28 – DoJ/FBI/Huma special #PodestaEmails https://t.co/tIw3T6L6se
More: https://t.co/v8OnMJnWsS
— WikiLeaks (@wikileaks) November 3, 2016
We assume the batch will be heavily focused on the DOJ, FBI and Huma, and will present readers with any relevant emails as we find them.
* * *
In an email from June 10, 2011 from now-campaign communication manager Jenn Palmieri to John Podesta and Neera Tanden, Palmieri writes – regarding Huma Abedin following the first Anthony Weiner scandal – that it is…
“Time to get in the haz mat suits… Bust in that house and get Huma the hell out of there.”
Tanden responds “Lord have mercy.”
We assume this was a reference to one of the early Anthony Weiner scandals, and a harbinger of things to come regarding Huma’s husband. In retrospect, they should have followed their rhetorical advice.
* * *
On August 27, 2015, an email from Lanny Davis, special counsel to President Bill Clinton, and spokesperson for the President and the White House on matters concerning campaign-finance investigations and other legal issues, appears to suggest that both Fox news and Megyn Kelly were part of the campaign’s pre-coordination with journalists. Davis tells Jen Palmieri the following “personal” thoughts, which suggest getting a guarantee from Megyn Kelly that she won’t be “tough on Hillary” in a proposed interview – which could be a “ratings and media bonanza” – meant to explain why Hillary “wiped” her server.
Dear Jen,
I know what I’m about to propose is very risky and will be instinctively viewed negatively on the first reaction. But because of the high advantages that I see, perfectly aware of the risks, I think this proposal should be considered.
I propose that the Secretary be on the Megyn Kelly File show for at least 30 minutes. I believe I can reduce the risks, since I know Megyn and Roger Ailes very well, by ensuring that the Secretary will have an opportunity to answer tough questions on emails and other issues without interruption.
In fact, I believe it is in the interest of Secretary Clinton as well as Fox for the questions to be tough, something we should not fear as long as she has an opportunity to answer. I know she will do well with adequate preparation, and especially after yesterday’s excellent statement taking full responsibility for mixing personal an official business on a single email device.
I still believe the issue of the wiping out of uthe private server still needs to be dealt with – e.g., simply stating that was done primarily to protect personal privacy on personal emails but she made the mistake of mixing personal with official on the server because she was using a single device, and she should have been more transparent shortly after she left office.
This interview has the potential to be a ratings and media bonanza. I have confidence she would hit a political home run and have a massive audience to deliver her message without a filter.
Of course there is a risk that Megan will try to show how tough she can be, even tougher than on Trump. I am assuming the worst case on that risk. But if we have a guarantee, which I believe We will get, that she will have an uninterrupted chance to respond to every question, and we have time to prepare, I think this could be a major plus and even a game changer in the various negative narratives about the Secretary being largely inaccessible and sometimes testy with the media.
It would be so much better to be able to talk to you on the phone about this and discuss the pros and cons. If you are willing and available, what would be the best time in the best telephone number?
With warmest regards, and thanks as always for your consideration of my ideas,
Lanny
He follows up four days later with the following:
Would love a chance to talk on phone – a few additional background points re conversation I had with Roger Ailes and Megyn some time ago on the subject of HRC pre – announcement.
It is unclear what was the ultimate fate of the “personal” proposal.
* * *
In an email dated 8/11/15, Hillary’s lawyer David Kendall expressed some notable concern about information related the AP preparing to report that the FBI has taken possession of Hillary’s thumb drive, a story which the campaign has vocally denied. Which may also explain why as AP journalist Eric Tucker notes, “If you wanted to steer us away and say that we are misinformed, then I would gladly accept that as well.”
Recall that on a previous occasion, Kendall made it clear that the official talking point was to deny that the thumb drive had been handed over to the FBI:
I can see why you might not want to say who the turnover was to, but it seems to me omitting this may be misinterpreted and certainly will trigger another round of questioning. This may defeat the whole point of the exercise. The statement could be read to imply we turned over the thumb drive and server to the State Department—which we didn’t (“There they go again—misleading, devious, non-transparent, tricky etc.”). I would recommend saying “to the Department of Justice.”
Curiously, over a year later, we learned that the thumb drive had in fact been turned over to the FBI, however as the FBI reported two months ago, it was somehow “lost” in the process.
A laptop containing a copy, or “archive,” of the emails on Hillary Clinton’s private server was apparently lost—in the postal mail—according to an FBI report released Friday. Along with it, a thumb drive that also contained an archive of Clinton’s emails has been lost and is not in the FBI’s possession.
The thumb drive containing the second copy of the archive also was never found.
“Neither Hanley nor [the Platte River employee] could identify the current whereabouts of the Archive Laptop or the thumb drive containing the archive, and the FBI does not have either item in its possession,” the FBI report stated.
Full exchange below:
Hi David,
We have been told, and we are preparing to report, that the FBI has taken possession of the thumb drive that was once in your possession. This is what we have been informed, and we wanted to see whether there was any sort of comment that could be provided. If you wanted to steer us away and say that we are misinformed, then I would gladly accept that as well. But we have solid reason to believe this. We’d welcome any comment you can offer. Thanks very much.
Eric
- Government Pension Plans Are Headed For Disaster
Submitted by Robert Fellner via The Mises Institute,
The combined debt held by U.S. public pension plans will top $1.7 trillion next year, according to a just-released report from Moody’s Investors Services.
This “pension tsunami” has already forced towns like Stockton, California and Detroit, Michigan into bankruptcy. Perhaps no government mismanaged their pension as badly as Puerto Rico, where a $43 billion pension debt forced the commonwealth to seek protection from the federal government after having defaulted on its obligations to bondholders — a default which is expected to spread to retirees in the form of benefit cuts.
While the disastrous outcome of Puerto Rico’s pension plan — which is projected to completely run out of assets by 2019 — represents the worst-case scenario, the same series of events that led to its demise can be found in most public pension plans nationwide.
There are three primary culprits that can be found in nearly every state suffering from a public pension crisis:
- The use of accounting gimmicks that are designed to shift costs onto future generations — an approach outlawed for private pension plans and rejected by both public and private plans in Canada and Europe.
- Lawmakers, acting in their political self-interest, who have catered to the past demands of government unions to enrich their members’ benefits while passing the costs onto future generations.
- A broken governance structure where public pension board members are actually penalized in tangible ways for acting responsibly, and are rewarded by choosing to delay the day of reckoning.
Perhaps the most concise assessment of public pensions came from the former chief actuary for the nation’s largest public pension fund — CalPERS — who noted simply that: “Politics and pensions just don’t mix.”
And it’s not just "liberal" states like California who have succumbed to the siren call of public pensions. My home state of Nevada — historically thought to be a bastion of limited government thought — is in a proportionally deeper hole than our California neighbors!
The Trouble in Nevada
While most financial experts are warning of future teacher shortages, decaying roads, higher taxes and cuts to public safety, the Public Employees’ Retirement System of Nevada (PERS) is confident they can avoid all that by doing one simple thing: produce investment returns higher than what even Warren Buffett expects to get!
Because PERS has failed to hit its investment targets over the past 5-, 10-, 15-, 20- and 25-year periods, government workers’ retirement costs have soared to today’s record-high 28 percent of pay (40.5 percent for police and fire officers) — which now consumes more than 12 percent of all Nevada state and local government tax revenue combined.
And as more money is sent to PERS, less is available for salaries, like the only $34,684 offered to new Clark County school teachers last year — almost certainly a driving factor behind the district’s perennial teacher shortages.
What’s worse, over 40 percent of what all government workers — excluding police and fire officers — pay towards PERS is spent on the system’s previously accrued debt, rather than on financing the employee’s future benefits.
Consequently, all new hires are expected to be net losers under PERS — receiving a benefit worth less than its total cost — which, unsurprisingly, will “negatively affect current teacher quality and retention,” according to scholars at the Bureau of Labor and Statistics.
Retirement costs for police and fire officers are even higher: Paying PERS an amount equal to 40.5 percent of their salary means fewer cops on the street.
The Las Vegas Metropolitan Police Department, for example, has sat on roughly $100 million in funds explicitly designated for hiring new cops for over a decade now — likely anticipating the future explosion in retirement costs to come. In fact, despite the surplus, Metro is pushing for yet another tax hike, citing their ever-increasing personnel costs.
But that was just the tip of the iceberg.
PERS debt is projected to explode over the next decade, rising from roughly $11.4 billion to over $38 billion if the average 5.85 percent annual investment return forecast of the consultant hired by PERS — Wilshire Associates — is accurate:
To put that in perspective, in 2013 Nevada spent less than $3 billion on police, highways, and fire protection combined.
Servicing a debt of this size would require similarly massive increases in contribution rates, inevitably requiring lower wages for government workers, cuts to vital services, and higher taxes.
At that point, it’s likely that there would simply not be enough taxes to hike and services to cut to make PERS solvent — leaving no other choice but to cut the benefits promised to retirees.
In order to avoid that fate, and save PERS, Nevada lawmakers must act with the urgency that this situation demands.
How We Got Here
PERS is different from retirement accounts in the private sector, where workers’ contributions are deposited directly into individually owned accounts.
In PERS, workers’ retirement contributions are all pooled together in one large fund, with members promised a fixed future benefit based on salary and work experience — similar to how Social Security works.
Consequently, PERS must make a series of projections to determine how much workers must contribute in order to ensure their promised, future benefit is fully funded. One of the most significant projections PERS makes is its assumed 8 percent annual investment return.
In other words, PERS would consider a $10 payment due in 30 years as fully funded with only $1 today — as the expected gains from investing that $1 would bridge that $9 gap over time.
Unfortunately, if PERS investments underperform that target, taxpayers and government workers must bail them out via higher contribution rates.
But using expected investment returns to discount guaranteed future benefits amounts to serious malpractice, which is why such an approach is rejected by private US pension plans, public and private plans in Canada and Europe, and 98 percent of financial economists. US public pension plans are the only dissenters from this consensus.
The easiest way to see why this is wrong is to look at what happens by raising that rate. Imagine if the governor and the legislature uniformly demanded the PERS board must immediately pay down the approximately $11 billion unfunded liability it currently reports.
That sounds like an impossible task, right?
But because of the flawed PERS accounting methodology, the board could appear to pay off that entire amount in an instant. All that would be needed is for the PERS investment advisor to claim that instead of an 8 percent annual return, he now believes PERS can return 10.5 percent.
Presto! PERS would have eliminated their entire $11 billion debt, and would actually enjoy a slight surplus to boot!
Of course, their actual unfunded liability — over $50 billion using correct accounting — hasn’t changed.
If that approach sounds fishy to you, you’re in good company.
But given that this is the approach PERS board members employ, they should be extremely vigilant in ensuring their assumed investment return is one that they can confidently expect to hit.
Instead, they ignore both their poor past performance, as well as the projections of their own, hand-picked consultants who are warning that the board’s assumed annual rate of return is far too high.
After a careful selection process, PERS last year commissioned a second-opinion review by Wilshire Associates, which, on August 20, 2015, informed the Board that it was most likely to realize only an average annual return of 5.85 percent over the next decade — not the 8 percent minimum PERS must hit to avoid falling further into debt.
Wilshire’s assessment of lower expected future returns is shared by virtually all major industry experts.
The McKinsey Global Institute, for example, warned that, “After an era of stellar performance, investment returns are likely to come back down to earth over the next 20 years.” Based on McKinsey’s projections, PERS can expect a 20-year return ranging from as low as 4.6 percent under a “slow-growth” recovery to as high as 7.4 percent under a “growth-recovery” scenario.
Even investing guru Warren Buffett uses a mere 6.5 percent assumed long-term rate of return for Berkshire Hathaway’s pension plan.
Because of this, most US public pension plans are now lowering their investment targets. For example, the nation’s largest public pension plan — CalPERS — implemented a plan last year to gradually drop their 7.5 target to 6.5 percent over the next several years.
A Broken Governance Structure
So why does PERS — in defiance of its peers, experts, and its own consultants — continue to employ an 8 percent assumed rate of return?
Political self-interest.
After PERS investment advisor Ken Lambert offered a few half-hearted reasons to justify dismissing the Wilshire report — the Board asked for a precise calculation of what lowering its rate to 7 percent would entail.
Such a move would increase the non-safety contribution rate from 28 to 38 percent of pay, at which point, according to Lambert, “We’ll all go home” — apparently predicting massive rebellion by public employees that would drive the current board and its staff out of office.
PERS here illustrates the core error built into the governance structure of US public pension plans: Short-term board members, with no skin in the game, face a set of incentives where they are actually punished for doing the right thing, and benefit from pushing costs off onto future generations.
Given that understanding, it’s easy to see why PERS characterized the Wilshire report as meriting “no rush, no real urgency” and containing “nothing [that] is actionable,” when Nevada State Education Association president Ruben Murillo repeatedly, and correctly, pressed the board for answers.
PERS now finds itself in a Catch-22 situation: Because board members have for so long failed to face reality, costs will skyrocket if they should now adopt correct assumptions. Yet, failing to do so will only compound their initial mistake — and the resultant carnage — when the day of reckoning finally arrives.
Significantly, because PERS only has about 72 cents of every dollar of promised benefits on hand, the system actually needs to outperform its 8 percent investment target. Only then would the system have enough money to make good on its promises.
Making matters worse is the fact that PERS is now cash-flow negative — paying out more in benefits than it collects in taxpayer and employee contributions.
If this trend persists and Wilshire’s projected investment returns are realized, PERS could easily find itself approaching a funded ratio of only 50 percent — which is considered a “crisis-point” that is “very difficult to climb out of,” by CalPERS Chief Investment Officer Ted Eliopoulos.
Even though the call for reform enjoys widespread, bipartisan support and includes at least one former PERS board member, Warren Buffett’s assessment of public pensions still rings sadly true in Nevada:
There probably is more managerial ignorance on pension costs than any other cost item of remotely similar magnitude. And, as will become so expensively clear to citizens in future decades, there has been even greater electorate ignorance of governmental pension costs.
Thankfully, there is still time left to save PERS, but the particulars of reform are much less important than acknowledging the fundamental problems. As officials with Oregon’s pension plan stated of their similar crisis: “This is becoming a moral issue. We can’t just talk about numbers anymore.”
Conclusion
In theory, government is ostensibly designed to override the allegedly short-sighted, greedy nature of individual actors with policies that are long-term oriented and designed to maximize the general welfare.
Yet, as the case of public pensions (not to mention infrastructure spending, the national debt, entitlements, etc.) reveals, the political process actually does the exact opposite: it actually rewards those who underfund the present and defray costs onto future generations.
Thus, asking for lawmakers to “be more responsible” or “think about the future” misses the point. We are all self-interested actors. Instead of wishing this wasn’t so, it would be vastly more effective to embrace this reality and restrict the role of government to only those areas that it is well-equipped to provide.
As Ron Seeling said, “Politics and pensions just don’t mix. That’s all there is to it.”
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