The United States potentially attacking Syria has dominated international headline news for weeks. However, many think the latest event coming out of Poland should also be garnering global attention.
Reuters initially reported last week that Polish Prime Minister Donald Tusk announced a plan that would transfer the government pension system and all bond investments in privately-owned pension funds within the state-guaranteed system to ZUS. At the time, private pensions will be permitted to keep equity investments in the government’s state-guaranteed pension system.
Essentially, this means that the government is confiscating or nationalizing bonds held in private retirement accounts.
According to Finance Minister Jacek Rostowski, the purpose of the measure is to reduce Poland’s national debt by roughly eight percent of GDP, which would allow the country to generate a new round of debt by borrowing in international markets.
“The (current) system has turned out to be built in part on rising public debt and turned out to be a very costly system,” the prime minister told a news conference.”We believe that, apart from the positive consequence of this decision for public debt, pensions will also be safer.”
Unfortunately, Poland isn’t the first country to take part in similar actions. Dollar Vigilante noted that Ireland (2009), Hungary (2010), France (2010) and Bulgaria (2011) have taken money from their own pensions to fund their debt or bailouts, earmark money from the national pension reserve to fund short-term pension plan deficits and allocate funds from private pensions to public pension programs.
Of course, earlier this year, Cyprus took up to half of money held by private depositors in the country’s financial institutions. Now, Poland is performing these initiatives without any compensation at all.
Finance experts concur that the details are still a little bit sketchy and questions and concerns should be confirmed fully by the end of the year.
“The devil is in the detail and we don’t yet know a lot about the mechanism of these changes, what benchmarks will be use to evaluate our performance… (It) looks like pension funds will lose a lot of flexibility in what they can invest,” said a manager of a leading pension fund.
Can the same move happen in the U.S.? It’s possible, especially considering that our ponzi scheme is deeply in debt and is just filled with IOUs.