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November 15, 2005
The next bubble is not housing, it is pensions
What is the #1 potential bomb waiting to explode in the US economy? The popular press would have you believe it is the housing bubble. It is not, it is our underfunded pension liability. The Pension Benefit Guaranty Corporation just released their 2005 financial statements: PBGC Releases Fiscal Year 2005 Financial Results Guess what? The recent bankruptcies of United and other old world industries have shifted tens of billions of dollars of pension liabilities from the private sector to the quasi public sector. How does the PBGC meet it's underfunded liabilities? You guessed it tax payers. Nice game huh? Shift liability from the shareholder to the taxpayer? I can give you a very long list of private debts I would like to make public debts. A large reason we are in this mess is that lax accounting rules have allowed corporations to pump up earnings by not funding their pensions. GM's debt was recently downgraded to junk status and the stock crashed when they were forced to make a $13B restatement of earnings to reflect their underfuned pension liability. If you looked at the three major car companies they basically don't make any money and only exist to pay their pensions for retired employees.
What does all this have to do with entrepreneurship and startups? Everything. If you can start a company today in an industry with a heavy pension burden, you may be able to get a competitive position out of the gate due to your lower fixed cost liabilities. I think it is time to start a car company.
Posted by Martin at November 15, 2005 7:43 PM
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Comments
Hi Martin. My name is Aaron Asbury. I am an economics student at the University of Alaska, Anchorage. I have a few questions regarding the telecommunications bubble, (more in detail) and relationships with venture firms post dot com era. here is my email. Please let me know if you would have time for an interview. Thanks
Aaron
asbury907@hotmail.com
Posted by: aaron asbury 
at November 16, 2005 6:29 PM
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