In an interview with the Mayor of Detroit, he commented that there were 100 more cities in the same shape as Detroit. There are many counties in the same predicament. Historic assumptions for pension funds are no longer valid. Interest rate increases are sure to damage the bond market which is a notable portion of the pension fund strategy. What option does the Fed have but to continue the Quantitative Easing unless they want to burst the “pension” bubble as well. There is not a plausible alternative without damaging “value” whether it be the U.S. Dollar, real estate perceived equity, stock market, bond market, etc. The Fed hopes to allow slow inflation i.e. depreciation of the Dollar to fix the problem. Holders of the Dollar may not let that happen. Just how much more can the Fed create out of thin air before the market finally says “no more”?
The following graph provides perspective on cities that have shrinking populations:
Cities and counties base their revenue projections on perpetual growth. Oops!