Sunday, August 28, 2016
Capitalist Exploits comments on pension crisis
The fundamental problem with pensions is that you're saving for old age diapers, pot plants, and rocking chairs by handing those savings over to entities whose mandates force your capital into asset allocations that no longer make sense. Why, oh why would you buy a European government bond for a negative yield just because the rating agencies still class it AAA and your fund mandate says it's OK?
Every new election cycle, no matter where you live (unless perhaps it's Kabul), your government will promise you greater security at less cost and they'll promise to protect pensions.
Expecting your government to ring-fence pensions for protection is as silly as thinking your road tax goes on the roads. It doesn't. It's spent on a legion of new civil servants so that the government can live up to their other promise of job creation. "Look, we just created a gazillion new jobs right here and look at that increased GDP."
Many will label me a rich parasitic capitalist for saying this and they can eat sand because the truth is I expect to make a fortune over the coming decade from this folly and I sincerely hope you do too.
I have talked about the impending pension/retirement crisis ad nauseum on this blog. I am still amazed when I talk to people as I go about my daily business about how naive they really are about what is happening to our finances.
Not many people have any clue what is really happening. As I discussed in today's podcast, the failure to take our medicine in 1997, 2001, 2008 and let the economy reset has led to the worlds central banks boxing themselves into a corner of permanent low interest rates and continued even bigger levels of asset purchases.
Pension funds and retirement schemes will simply not be able to obtain a sufficient return in order to pay their obligations. If you plan on retiring soon you better get your budget out and go over it again because lower benefits are your future.
It seems to me that at some point that ends in tears for most people. In the meantime party, or as the former CEO of Citibank said, "You have to dance while the music is playing."