The present value of public pension benefits in the United States that have been promised but not yet paid for -- such as Social Security and federal employee pensions -- is nearly $10 trillion. The unfunded liabilities of these pensions in the developed world amount to $30 trillion, estimates former Commerce Secretary Pete Peterson.

Thus $30 trillion is the amount that would have to be set aside today to generate enough income to pay benefits in the future. According to the Organization for Economic Cooperation and Development,

• These liabilities range from a low of 113 percent of gross domestic product in the U.S. to a high of 242 percent in Italy.

• For all OECD countries combined, Peterson says these liabilities are roughly 145 percent of their combined GDP, or $30 trillion.

But since governments don't prefund these liabilities -- they pay as they go -- future taxpayers will pay these future benefits.

Unless the system is changed, Peterson says that government borrowing to finance the widening pension deficits of industrial countries will equal more than a quarter of all savings in the industrial world by the 2020s and over half by the 2030s. For instance,

• In 2010 there will be three workers in the U.S. supporting each retiree.

• But in Japan, plunging birth rates and increasing longevity may have pushed the ratio of workers to retirees down to one to one.

• By 2005, Japan's pension deficit could be equivalent to 7 percent of its net national savings; by 2015 it could be 21 percent and 32 percent by 2025.

• In the U.S., pension deficits could amount to over 90 percent of net national savings by the 2030s.

Thus, unless taxes are raised or benefits are cut, says Peterson, governments will have to borrow these savings to pay retirees. This will raise interest rates, and could trigger a crisis in global financial markets.

Source: Peter G. Peterson, "Global Pension Crisis," remarks to the Council on Foreign Relations, November 15, 1996.