- Nov 7, 2007
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The operating expenses are payed out, but the insurance and retirement expenses can be invested and grown in order to protect against losses from inflation. What happened here and in all of these countries is that these pools of money were siphoned off when their managers were sold AAA derivatives that were in reality junk. When the hedge funds naked short sold their own products, they crashed the value, cashed in on the insurance policies, terrorized the government to bailout the insurance wings of the banks, and left gaping holes in the accounts that were supposed to take care of workers benefits.
You are zeroing in on the recent financial swap scandals as the primary cause for the weakness of pension funds, retirement plans, sovereign solvency, etc. This can't be further from the truth.
It's been well known that all of those entities were already in financial difficulty even before the current recession hit. Aging subscribers/citizens simply consume more and more health services as they age and obviously they're eligible for whatever social net payments exist such as Social Security or whatever the local European equivalent is called. The total sum of expected payout obligations exceeded the revenue coming in. All this has been expected even without the financial scenanigans you harp on.
In terms of real money, what this looks like for the HI DOE budget is that out of 2.4 billion, one billion now goes to service the debt that was created by this financial fraud. All of these government agencies are in the same boat because they did the same things, the money was there to pay for these benefits and then it was gone.
What are Hawaii's demographics? I had understood they pretty much follow the same California/NY recipe of overly generous benefits without the financial strength to back them up, especially in times of recession and exacerbated by the state's aging populace. Under those situations it would be no surprise that they are in trouble today without blaming it on the investment banks.
You only have to look at the Keiki Care debacle for a microcosm of what happens when you offer a free lunch. People tend to take you up on it, and SURPRISE! you tend to run out of money.