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Private Resources Pilfering Pensions?

Leo Kolivakis's picture

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Sun, 07/17/2011 - 15:05 | 1464177 TheMonetaryRed
TheMonetaryRed's picture

Ultimately, this is not a hard problem exactly because the numbers are so bad.

The highly industrialized (and then de-industrialized) nations all have the same demographic and financial problem: huge pension systems that have been allowed to fall into massive, actuarial default.

All the governments of these nations are on the hook for the shortfall, one way or another. Because these shortfalls are so massive, the governments have two choices: deflationary pressure from pension default or inflationary pressure from pension bailout with newly-printed money.

At the end of the day, it's really just that simple, in my view. And the most reasonable choice is to bail out the pensions with new money. It will cause problems, but it will cause fewer problems than a massively-deflationary default.

To take one example, look at the healthcare industry. Healthcare should be changing its model from emphasis on developing treatments for relatively wealthy, very sick, very old people that they can presently afford (on paper) but don't really need to developing efficient delivery systems for treatments of highly-treatable and chronic illness in youth and midlife. But you don't fund such a transformation by de-funding the industry on a fatal scale through massive pension bankruptcy and deflation.




Sun, 07/17/2011 - 14:08 | 1464035 anarchitect
anarchitect's picture

What do you recommend, Leo? Although I often disagree with your conclusions, I usually find your articles informative. This one isn't; it's mostly whining. Fine, the private sector is drooling. So what. To me the question is, who manages your pension assets? That's the option that needs to be put on the table. There are those of us who don't want to delegate this to groupthink boards and company plans that feature "balanced funds" and other such effing, non-transparent BS. One of the best things that ever happened to me was to get laid off by an infamous Canadian tech firm almost 10 years ago. It allowed me to get all my retirement assets under my direct control, which was an important factor in being able to retire two years later. How else would I have gotten significant exposure to the precious metals sector? Those with the misfortune to survive eventually found that the pension fund wasn't even actuarially sound, despite bonuses having been paid to the morons who were "managing" the business. And that's in the private sector! The return on Social Security and the CPP will be even worse.

Sun, 07/17/2011 - 13:52 | 1463980 lolmao500
lolmao500's picture

Once the US implodes, forget Canadian pensions.

Sun, 07/17/2011 - 13:39 | 1463949 The Architect
The Architect's picture

"And forget about defined or guraranteed benefits in retirement: This plan is based on defined contributions with the ultimate benefits tied to market performance"


What could possibly go wrong! </sarc>

Sun, 07/17/2011 - 13:21 | 1463900 Gromit
Gromit's picture

Retirement funds are designed to generate fees for managers not to pay pensions.


Sun, 07/17/2011 - 19:36 | 1463828 Zero Govt
Zero Govt's picture

"The private sector continues to rape employees with exorbitant fees.."

Yeah but they've nothing on public sector tax rape/robbery of the private sector ..do the maths sometime

"PRPPs are a big giveaway to banks, insurance companies, mutual funds,  pension consultants and the entire private sector..."

It's a Parasite Club orgyfest, what a surprise?!! ...isn't that Govts primary/sole job in society Leo? ...you're going to work it out one day!

"Everything else you read in mainstream media is private sector garbage."

The private sector can hardly get a word in edge ways what with all the public sector garbage filling the airspace... everything from false wars here, there and everywhere, bankrupt Govts here, there and everywhere, failing healthcare systems, rotting property, bankrupt zombie banks propped up by Govt... the world would be a far more peaceful, ordered and solvent place without the shithole of society/humanity (Govt) hogging centre stage like a drunken bloated Diva

"I  ..will continue to expose the charlatans who claim to know what's best for our retirement."

This list wouldn't include you in there would it?

Do NOT follow this link or you will be banned from the site!