Not that it isn’t their job, because it is, but the Falls Church City Council was toying around with an awful lot of taxpayer dollars at its meeting Tuesday night. First, there is the $20.5 million in the cash component of the sale of the City’s water system to Fairfax County that was culminated earlier this year. Then there is another $1.7 million of surplus dollars the City has at its disposal because it wasn’t spent as expected during the last fiscal year. (See two stories on the front page of this edition).
This is a big portion of the City’s annual $82 million general fund budget, and in terms of the annual budget, it takes the Council the better part of a year to sort out priorities and options to craft it as best as they can.
This $22 million is being deployed with far less vetting, and what makes it really bad is the severe indeterminacy that accompanies the plan to invest $10 million of the sales money into the City’s pension fund.
Here’s some things to give pause to that idea: 1. the City doesn’t really need to add more to its pension fund. It’s doing OK now; 2. The allure of the fund option to the Council is money, money, money because over time, the fund’s yield for the amount the City would add would should average out to $700,00 or so annually.
However, insofar as the pension fund is invested in the markets, it is subject to the ebbs and flows of the markets, and right now the markets are exhibiting an enormous amount of insecurity and anxiety.
This is a rare era in the history of the stock market in that its valuations simply have no correlation with the real economy, and that’s because of the extraordinary action of the Federal Reserve since the crash of 2007 to artificially prop up those markets with a huge intervention to keep interest rates at record lows.
It’s something that simply cannot continue indefinitely, especially as real world events like ISIS, Ebola and Russian military aggression shake things up. This week, the low interest regimen began to take on a life of its own when the yield on 30 year bonds fell below 2.2 percent. It has triggered a panic at the Fed where now the risk of deflation is everyone’s worst nightmare.
It should come as no surprise, given that for 99 percent of the U.S. population, real spending power has been permanently savaged in the aftermath of 2007. It takes only so long until the real economy, a consumer based economy, feels the effect of this.
So, OK, if they don’t believe the markets are about to plunge back to the 6,400 level of the Dow in 2008, the City Council should at least be more cautious in this volatile environment than it has been so far.
They should not be the last passengers to board the Titanic.
Editorial: No Time to Throw $ at the Markets
Not that it isn’t their job, because it is, but the Falls Church City Council was toying around with an awful lot of taxpayer dollars at its meeting Tuesday night. First, there is the $20.5 million in the cash component of the sale of the City’s water system to Fairfax County that was culminated earlier this year. Then there is another $1.7 million of surplus dollars the City has at its disposal because it wasn’t spent as expected during the last fiscal year. (See two stories on the front page of this edition).
This is a big portion of the City’s annual $82 million general fund budget, and in terms of the annual budget, it takes the Council the better part of a year to sort out priorities and options to craft it as best as they can.
This $22 million is being deployed with far less vetting, and what makes it really bad is the severe indeterminacy that accompanies the plan to invest $10 million of the sales money into the City’s pension fund.
Here’s some things to give pause to that idea: 1. the City doesn’t really need to add more to its pension fund. It’s doing OK now; 2. The allure of the fund option to the Council is money, money, money because over time, the fund’s yield for the amount the City would add would should average out to $700,00 or so annually.
However, insofar as the pension fund is invested in the markets, it is subject to the ebbs and flows of the markets, and right now the markets are exhibiting an enormous amount of insecurity and anxiety.
This is a rare era in the history of the stock market in that its valuations simply have no correlation with the real economy, and that’s because of the extraordinary action of the Federal Reserve since the crash of 2007 to artificially prop up those markets with a huge intervention to keep interest rates at record lows.
It’s something that simply cannot continue indefinitely, especially as real world events like ISIS, Ebola and Russian military aggression shake things up. This week, the low interest regimen began to take on a life of its own when the yield on 30 year bonds fell below 2.2 percent. It has triggered a panic at the Fed where now the risk of deflation is everyone’s worst nightmare.
It should come as no surprise, given that for 99 percent of the U.S. population, real spending power has been permanently savaged in the aftermath of 2007. It takes only so long until the real economy, a consumer based economy, feels the effect of this.
So, OK, if they don’t believe the markets are about to plunge back to the 6,400 level of the Dow in 2008, the City Council should at least be more cautious in this volatile environment than it has been so far.
They should not be the last passengers to board the Titanic.
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