Shervin Pishevar has been one of the staunchest critics of fiscal irresponsibility and reckless policies of the Federal Reserve throughout all of Silicon Valley. As the operator of one of the most-followed Twitter accounts in the world of technology, Shervin Pishevar has been a voice of reason and sanity in an economy that is increasingly becoming unhinged from reality.
One of the most pressing concerns that Shervin Pishevar sees on the imminent horizon is the immense pain and suffering that will likely result from financially weak cities and towns across the United States being swept up by current market trends. One of the most pernicious aspects of the Federal Reserve’s expansionist monetary policies has been the severe oppression of interest rates. For the last ten years, finding adequate yields in safe-haven investments, in particular, bonds and other forms of debt instruments, has become nearly impossible. As a result, many towns, cities and states, especially their pension funds, have began searching for yield in risk assets. The bad news, says Shervin Pishevar, is how well this has worked. Now, he says, pension funds across the country have become addicted to risk-asset allocations that would have made more prudent pension fund managers from times past turn pale with terror.
Pishevar says that this has put all pension funds at risk. But there are a large number of funds that are in such dire condition that the policies of the Fed will almost certainly lead directly to municipal bankruptcies. One example that Pishevar uses is Chicago, Illinois. That city has seen its unfunded liabilities increase by more than 1,000 percent over the last decade. At the same time, the city’s revenues have only modestly grown. But that isn’t even the real problem.
The most serious concern surrounding Chicago’s fiscal situation is that the city, like so many others around the country, has had to allocate a great deal of its pension funds into equities. Shervin Pishevar estimates that if the stock market loses just a couple percent of its value for two or more consecutive years, the City of Chicago will be forced into bankruptcy.