Greece Shows What Happens When The Welfare Ponzi Ends

Tyler Durden's picture




 

When no more money flows in, to fund outflows, then the jig is up for the pension fund ponzi. This, as evidenced by the 'punching, kicking, and tearing at clothes' that a Greek pension fund manager endured recently, is exactly what has begun in Greece. As Reuters reports, the fund manager "enraged" here audience when she asked the Greek journalists to 'double their contributions' to their social security fund, and spent the night in hospital for her efforts to keep the ponzi alive. It was a brutal sign of the fury many Greeks feel at the way the country's debt crisis has dashed hopes of a comfortable old age. As New Democracy's leader noted: "From July 2010 it was obvious that a debt restructuring would be inevitable. While foreign banks were unloading their Greek government bonds, no one moved to tell Greek pension funds to do something, that a haircut was coming." Under a law passed in 1997 and refined in 2007, pension funds have to place 77% of any surplus cash in a pool of 'common capital' which must be invested only in Greek government bonds or Treasury bills (T-bills). So the PSI saved German and French banks but crushed Greek pensioners...

 

Via Reuters:

...

 

For hours the leader of the Greek journalists' social security fund had been chairing a meeting about disastrous losses on retirement savings caused by the country's economic collapse. "She tried to present herself as the fund's savior and asked (members) to double contributions to 6 percent of salaries," said one of those present that night at the Titania hotel. Spanopoulou, 58, did not succeed.

 

When she rose to leave around midnight, enraged fund members first swore, then waded in punching, kicking and tearing at her clothes, according to witnesses. A bodyguard managed to bustle her out of the room, but another group caught her just outside the hotel and gave her a second beating. She spent the night in hospital.

 

It was a brutal sign of the fury many Greeks feel at the way the country's debt crisis has dashed hopes of a comfortable old age. Greece's pension funds - patchily run in the first place, say unionists and some politicians - have been savaged by austerity and the terms of the international bailout keeping the country afloat.

 

...

 

Many savers blame the debacle on the Bank of Greece, the country's central bank, which administers three-quarters of pension funds' surplus cash.

 

...

 

Prokopis Pavlopoulos, a lawmaker in the ruling coalition's conservative New Democracy party and former interior minister, said: "From July 2010 it was obvious that a debt restructuring would be inevitable. While foreign banks were unloading their Greek government bonds, no one moved to tell Greek pension funds to do something, that a haircut was coming."

 

...

 

The losses compound the woes of Greek pensioners, many of whom have seen their income fall; further cuts are expected as part of the latest austerity package voted through parliament in November.

 

The Bank of Greece rejects the criticism, arguing its room for maneuver was limited. ...

 

... "The government ... knew it was heading for a haircut and did nothing for these people, which I find hard to stomach."

 

HOW THE SYSTEM WORKS

 

...

 

Under a law passed in 1997 and refined in 2007, pension funds have to place 77 percent of any surplus cash in a pool of "common capital" managed by the Bank of Greece. The law requires the common capital to be invested only in Greek government bonds or Treasury bills (T-bills). The remaining 23 percent of funds can be invested in other assets, such as mutual funds, shares and real estate.

 

The aim of the measures, officials said, was to ensure that most of the money was safely tucked away for a steady return. In the good times, this worked. But it was to have disastrous consequences when the credit crunch that began in 2007 led to a crisis in sovereign debt.

 

...

 

Amid the wrangling over exactly who bought what when, one thing is clear: when the financial storm struck, the pension funds remained heavily exposed.

 

...

 

In the end, however, the pension funds appear to have suffered an even bigger loss.

 

...

 

Former Labour Minister George Koutroumanis told Reuters the losses were unavoidable. "How could we have asked to protect our own pension funds and let all the others take the blow, it could not have worked that way," said Koutroumanis, whose former department is in charge of the pension system. "The billions of euros that pension funds lost because of the PSI was a significant hit. But it has to be weighed against the need to ensure the viability of the country in the euro and the system's continued funding."

 

...

 

... Konstantinos Amoutzias, president of the bank's employee union. "We have asked the Bank of Greece since the summer to provide us with data on the investment of our funds and they haven't answered us yet."

 

A senior Bank of Greece official, who declined to be named, said: "Any fund which has asked for data on transactions and market prices has received it." He added that, for reasons of legal confidentiality, the central bank could not reveal full details, such as the names of the banks from which it had bought government bonds in the secondary market.

 

Vaso Voyatzoglou, secretary general of insurance at the bank employees' union OTOE, said: "Eventually all pension funds will end up suing the Bank of Greece in order to find out what exactly happened and how they lost their money."

 

THE HUMAN COST

 

...

 

"We should not have illusions that our pension fund will recoup what it lost from the haircut on its government bond holdings," he said. "It's very hard to get by as a pensioner the way things are going."

 

...

 

Many pensioners have to get by on less, including Yorgos Vagelakos, a 75-year-old former factory worker, and his wife, who live in Keratsini, a working-class district near Athens. "We can barely afford to buy our grandchildren anything, not even a colorful notepad. When they ask us for one, we change the subject and then we cry," Vagelakos said in the tiny yard of his house.

 

His pension of 650 euros a month supports himself, his wife Anna and, when possible, the family of his 42-year old-son, who is unemployed. "Thankfully my younger son and his wife have a job," he said.

 

Tax increases and high prices have hit hard. "We have slashed everything by 50 percent. At night we keep the light off to save on our electricity bill. We have become vegetarians from cutting back. We can't take it anymore," Vagelakos said, talking while his wife cooked cauliflower and potatoes for lunch, a meal that would also feed the family of their elder son, who has two children.

 

...

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Fri, 11/30/2012 - 10:23 | 3023397 GetZeeGold
GetZeeGold's picture

 

 

One night I mixed some low-fat milk and some pasteurized milk, then I dipped my cookie in and the shit blew up - Richard Pryor

 

BOOM.....bitchez!

Fri, 11/30/2012 - 10:26 | 3023407 Enslavethechild...
EnslavethechildrenforBen's picture

Fiat currency is a welfare state for the elite, wealth flows from the poor to the rich.

Fri, 11/30/2012 - 10:31 | 3023431 jekyll island
jekyll island's picture

The sheeple do not see this coming.  My in-laws have a VA pension and a state government pension.  They are concerned but seem to miss the point that the US is going to be like Greece, they are in denial.  Multiply this by 50 million and we will get....

Fri, 11/30/2012 - 10:42 | 3023474 Stackers
Stackers's picture

Just wait until they pass a bill in the U.S. requiring pension funds and 401k's to be "invested" in U.S. T-bills.

Fri, 11/30/2012 - 10:46 | 3023489 Dr. Richard Head
Dr. Richard Head's picture

How long ago was Greece's debt/GDP at 102%?  Where is the US now?  Just like Greece, the US has a whole slew of "off-the-books" debts, as well as upcoming liabilities in ponzie security and medicare.  How many pensions fund in the US are required to invest in US shit debt?  Promises, promises.

Fri, 11/30/2012 - 12:54 | 3023987 economics9698
economics9698's picture

Table 7-1 you can see the gross debt, 7th colum over, internal debt, 8th over, and private debt, 9th column.

http://www.whitehouse.gov/omb/budget/Historicals

Fri, 11/30/2012 - 10:48 | 3023499 Looney
Looney's picture

What a brutality! ONE PERSON's clothes were torn apart and a few minor scratches since the Lehman Weekend on both sides of the pond! More people lost their lives trying to unpack a roll of toilet paper since then...

When people suffer - they use pitchforks and until then... let's happily count that lady's hospital visit and a new set of clothes into Greece's GDP.

Broken fucking windows, anyone? ;-)

Looney

Fri, 11/30/2012 - 12:37 | 3023924 caconhma
caconhma's picture

Everybody somehow forgot G-Pap, a good Jewish-American boy, and the paradise he has promised and created in Greece and the rest of EU.

Stupid/naive common people love promises of FREE everything taken from somebody else but it only works for a while and then come the retribution. After all, Greece does not have a military to have/maintain colonies and a fiat-reserve currency to print.

As for the good old USA, almost everybody in the world is pissed off by America and its out of control printed US$ reserve currency.

Finally, Zionist Banking Mafia controlling America does not recognize yet that they just have elected a President with his own agenda and not too much brains of how to run the country. The Zionist Mafia does not thinks or behaves any different than their ideology friends in the former Soviet Union.

 

Fri, 11/30/2012 - 12:51 | 3023971 economics9698
economics9698's picture

There will be a hellashias blowback when government worker pensioner figures out ZOG fucked him. Germany 1920s = Hitler 1930s.

Fri, 11/30/2012 - 16:36 | 3024826 Cap Matifou
Cap Matifou's picture

This is already in the making, i read about it a few days ago

USA: Forced conversion of private pension funds in U.S. bonds

Sat, 12/01/2012 - 07:20 | 3026150 Urban Redneck
Urban Redneck's picture

There are ZEROFACTS in your ZEROHEDGE post (or in the linked "article").

The plan has been progressing for YEARS.  The changes, however, will come in two varieties statutory and regulatory, and you can find the current state of play at the links below.  For example the September 2011 "meetings" in the Senate HELP-less committee or the September 2010 EBSA public "hearings".  

http://www.dol.gov/ebsa/aboutebsa/main.html

http://www.help.senate.gov/

Fri, 11/30/2012 - 10:43 | 3023477 TrumpXVI
TrumpXVI's picture

You got that totally right, jekyll.

I've tried to point this out time after time.  I'm looked at like I'm freakin' looney; or worse.  I've got one guy, a retired teacher who's response is, "There won't be any problems as long as we keep the damn Republicans out."

My sister, nephew and in-laws all think I'm just a dope on this subject.  Hey, and guess what?  Almost ALL of these folks work in the public sector!

I could fucking just puke.

Fri, 11/30/2012 - 10:52 | 3023519 Looney
Looney's picture

. I'm looked at like I'm freakin' looney; or worse.

Hey-hey-hey! What's wrong with LOONEY?  ;-)

Looney

Fri, 11/30/2012 - 11:07 | 3023568 Debt-Penitent
Debt-Penitent's picture

This is my fantasy exactly! Just once, happen in the USA!

When she rose to leave around midnight, enraged fund members first swore, then waded in punching, kicking and tearing at her clothes, according to witnesses. A bodyguard managed to bustle her out of the room, but another group caught her just outside the hotel and gave her a second beating. She spent the night in hospital.

Fri, 11/30/2012 - 11:27 | 3023643 jekyll island
jekyll island's picture

What was it Mark Twain said about advice?  "Wise men don't need it, fools wont' heed it" or something like that?  

Fri, 11/30/2012 - 11:44 | 3023697 overmedicatedun...
overmedicatedundersexed's picture

we sit back and see what greece is showing us, but do any of us think it can happen soon here..no I thought not.

normalcy bias works until the ship has sunk..suicide is painless and many will take that option.

Fri, 11/30/2012 - 12:11 | 3023785 Zap Powerz
Zap Powerz's picture

"suicide is painless and many will take that option."

I hope you are right.  The more of them that shoot themselves the fewer there will be that I will have to shoot when they come looting for food.

Fri, 11/30/2012 - 11:58 | 3023748 marathonman
marathonman's picture

Yep, Mom is in upper 70's is on SS and Medicare, sister is on SS disability, brother works for government contractors 'rebuilding' Iraq and Afganistan for the last 10 years, niece and husband are in the Army.  That's just my family in a relatively conservative leaning area.  Very few adding to productive society.  Most leaning on government and make-work jobs.  There are going to be a lot of hungry and pissed off people when the dollar Ponzi goes south.

Fri, 11/30/2012 - 12:24 | 3023842 dogbreath
dogbreath's picture

tell them to buy APPL

Fri, 11/30/2012 - 12:31 | 3023892 Helvetico
Helvetico's picture

They live in a relatively conservative leaning area? Does this mean they have a problem with big government...except for the checks they get from it. I know my folks do.

Fri, 11/30/2012 - 10:56 | 3023534 Central Bankster
Central Bankster's picture

I can't say I blame the pensioners for their anger or response. 

 

1) the pension fund manager got what she deserved for her role in the ponzi (intentions not withstanding)

2) the pensioners get what they deserve for believing the ponzi was legitimate savings (never trust the government or its servants).

Fri, 11/30/2012 - 16:35 | 3024818 Zaydac
Zaydac's picture

Call me old fashioned but I don't think any man should ever beat up a woman. For some things there are no excuses, and (probably) a slim chance of redemption.

Fri, 11/30/2012 - 11:08 | 3023572 midtowng
midtowng's picture

It's interesting how everyone can read that article and their only take-away is that the pensioners were somehow at fault.

How come no one sees how the Greek government basically said, "we decided not to protect our pensioners because SOMEONE had to take a loss, and it wasn't going to be rich foreign investors"?

Fri, 11/30/2012 - 11:32 | 3023655 shovelhead
shovelhead's picture

Greece found it wise not to anger the guys holding onto the iron lung plug.

Fri, 11/30/2012 - 12:48 | 3023961 Essential Nexus
Essential Nexus's picture

Well, the pensioners probably voted for what caused the result.  Ultimately, determining which group of sheep acted badly to another group of sheep isn't going to matter.  They're all getting fleeced soon anyway.

Fri, 11/30/2012 - 11:19 | 3023608 Doubleguns
Doubleguns's picture

Jekyll, Remember this it was here on Zero hedge. This is 2010 numbers so the debt load is much higher meaning the haircuts will be much larger than 35%. IMF working paper. Our Greece is already being discussed and prepared for.

"We find that the U.S. fiscal and generational imbalances are large under plausible parametric assumptions, and, while not much affected by the financial crisis, they have not improved much  by the passing of the Final  Healthcare Legislation. We find that, under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly."

 

http://www.scribd.com/doc/52245782/IMF-Working-Paper-US

 

Fri, 11/30/2012 - 11:26 | 3023637 jekyll island
jekyll island's picture

Very nice, thanks for the link.  I will read this today.  

Fri, 11/30/2012 - 11:41 | 3023683 10mm
10mm's picture

I been telling co workers in state whats going on and get ready,at least mental level,and low and behold Penna Gov just laid out his plan.Fuckin dim wits think their untouchable.Now Wash gearing up for those juicy 401k's and IRA's.Like Carlin said"THEY WANT IT ALL" and they will fucking get it.

Fri, 11/30/2012 - 13:07 | 3024021 Renewable Life
Renewable Life's picture

"If them wanting it all" is going to be a war, stealing people's 401k and pensions will be like drone warfare, easy as Sunday morning and nice and clean!! But coming for each persons gold and silver and the land they own, that gonna be like clearing the Casbah or for you younger folks, clearing Falluja! Nasty, deadly, hand to hand combat times millions of people!

I like our odds in holding physical cash and precious metals better, get the hell out of Wall Street and every time one of those nice checks come from the Gov or the like, cash that shit in, and buy PM's and hold physical cash, and start stocking the pantry!!

Fri, 11/30/2012 - 19:34 | 3025416 kchrisc
kchrisc's picture

That was my dad until the budget/"dog and pony show" thing last year.

I showed my dad how they were using "funds" from his mil. and civil-service pensions, by not rolling over the bonds, to keep operating.

He got religion--God, gold, guns and grub that is.

Fri, 11/30/2012 - 11:05 | 3023560 OneTinSoldier66
OneTinSoldier66's picture

"Fiat currency is a welfare state for the elite, wealth flows from the poor to the rich."

 

Couldn't have said it any better myself. Whatever excuse that is needed by the state to keep the ponzi going will be put forth as the solution. Apparently the 'solutions' are starting to be rejected. And apprently Spanopoulou failed to realize she had been sucked into offering a solution on behalf of what has become a melding of the economy and state. Or rather, a takeover of the economy by the state.

Fri, 11/30/2012 - 12:22 | 3023827 prains
prains's picture

Greece is the sand box / petri dish the 1% are practicing their suppression technics on before it's unleashed on the rest of us. Practice makes perfect.

If they can subdue the Greeks then Ohioan house fraus won't be problem.

Fri, 11/30/2012 - 14:42 | 3024344 11b40
11b40's picture

Greece hardly has a military, and the masses do not own guns in large quantities.  Here, it is different.

Fri, 11/30/2012 - 10:32 | 3023432 saturn
saturn's picture

There will likely be consequences outside of Greece, for the inhabitants of Europe will be mad at their politicians that they did not stop the Greece farce amfitheatre much, much sooner, when they were expected to do so.

Sat, 12/01/2012 - 01:05 | 3025952 Freddie
Freddie's picture

...fury many Greeks feel at the way the country's debt crisis has dashed hopes of a comfortable old age...

Loads of American baby boomers and seniors voted for the muslim twice.  LOL!

Sat, 12/01/2012 - 13:23 | 3026465 11b40
11b40's picture

If you think that's funny, how about this.  Bush the lesser was voted in for a second term!  Can you believe how stupid the American voters are?

Fri, 11/30/2012 - 10:24 | 3023403 buzzsaw99
buzzsaw99's picture

When no more money flows in, after years of the maggot billionaires and execs skimming pension fund contributions and then the pensions want their money back out, the jig is up for the usa stock market ponzi.

Fri, 11/30/2012 - 10:27 | 3023420 Enslavethechild...
EnslavethechildrenforBen's picture

oh the money will flow in all right, ever seen a Zimbabwe Dollar?

Fri, 11/30/2012 - 10:32 | 3023430 buzzsaw99
buzzsaw99's picture

the benefit of hyperinflation to a stock market is very fleeting. Prices go up at first but then everyone wants to sell and buy something real while they still can. 200% inflation coupled with a 50% rise in the stock market is still a losing proposition so everyone heads for the exits.

 

Fri, 11/30/2012 - 10:42 | 3023470 youngman
youngman's picture

I have been thinking a little about this...a six pack more or less....now Detroit needs as much cash as they will send them.....millions...but Fargo ND does not need anything.....how is that going to work out......and we are talking trillions...or is it going to be a redistribution......a pure Socialist trick

Fri, 11/30/2012 - 10:57 | 3023541 MachoMan
MachoMan's picture

Well...  fargo will get the shit taxed out of it until it grows a pair...  and, even then, will probably get the shit taxed out of it.

Fri, 11/30/2012 - 10:26 | 3023408 ShortTheUS
ShortTheUS's picture

They showed that pension fund manager what they think of austerity:

"You take away my pension, I'm taking you down Golden Dawn-style!!"

Fri, 11/30/2012 - 12:23 | 3023832 Zap Powerz
Zap Powerz's picture

The thin veneer of civil society will be ripped away to reveal the darker, more violent side of human nature.

I cannot say this anymore plainly than:

When shit hits the fan, there will be many people that are going to want to kill you and your family and take what they think you might have.  Perhaps you are one of the hordes that has not prepared for upcoming events and perhaps you will be one of those starving people looking for someone to kill so you can take what they have.

In the near future, all the sheep will be eaten by the wolves and then the wolves will have to eat each other to survive.

You have been warned. Plan accordingly.

Fri, 11/30/2012 - 14:22 | 3024277 zapdude
zapdude's picture

Word.  From one Zap to another.

I'm not sure my family will last on the rough ride to the bottom, but I will not yield for lack of shooting back.  After hundred of rounds of skeet shooting and target practice over the last 2 years, I'm replenishing my cache with 00 Buckshot and hollow points.  One day there will no longer be practice, only survival.

And take Hedgeless Horseman's advice -- get in shape now!  Who knows when or how often you'll literally have to run for your life.

Fri, 11/30/2012 - 10:27 | 3023417 I am Jobe
I am Jobe's picture

Coming soon to Amerika. Yeap, who will throw the first punch at Nazi Pelosi?

Fri, 11/30/2012 - 10:50 | 3023507 Dr. Richard Head
Dr. Richard Head's picture

I think the news about the Treasury stopping the minting of pennies and nickels, along with replacing the DOHllar with a coin show how this is coming to Amerika.  When the $500 and $1000 bill are reintroduced, we will then have direct confirmation on how this shit ends. 

Sat, 12/01/2012 - 01:16 | 3025960 Freddie
Freddie's picture

I hope Nazi Pelosi's Nor Cal vineyards get a daily dusting of Iodine 131 from Fukashima.  F her and her Dem scum vermin pals.

Fri, 11/30/2012 - 10:28 | 3023419 Samsonov
Samsonov's picture

If I was a banker there I'd be making plans for my getaway.

Fri, 11/30/2012 - 10:33 | 3023437 Cursive
Cursive's picture

@Samsonov

There's no where for these bankers to hide.  When public pensions in the U.S. are found to be basically zero (do an internet search for unfunded accrued liability), there will be a massive shit storm here.  You haven't seen angry until you've seen a bunch of teachers who just found out they've been duped.  Hell hath no fury like a governmental services union worker scorned.

Fri, 11/30/2012 - 11:25 | 3023629 Will To Live
Will To Live's picture

Never get between a Realtor and thier commisssion, a teacher and thier pension, a government worker and thier vacation, an attorney and thier padded bill, a politician and thier hooker, a banker and thier world domination.

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