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Topic: Breaking news: Poland confiscates private pension funds - page 3. (Read 8094 times)

sr. member
Activity: 294
Merit: 250
You don't understand that assets wasn't private. If article says that, it isn't said it's true. Stay bullish, and argue from Nigeria or where you live about Polish econimics.

I don't want to be rude or anything but you're embarrassing yourself with such silly remarks. You clearly have a poor understanding of economics.
sr. member
Activity: 294
Merit: 250
The difference between theft from OFE and Cyprus bank robbery is huge.

- In Cyprus people logged into their banks and saw their money being confiscated. That caused MASSIVE panic.
- In Poland our pension founds are being stolen. No one will realize it until after 10-20 years. People won't care.

Also, knowing the media coverage in my awful country no one will know about it, except for the people that are interested in economy. Another huge contrast to logging into bank and seeing one zero less.

I vote: Event neutral for the price.

Actually private pension funds even if they are just a % of pension funds. Poland has hybrid system where certain % of pension was run by private pension funds and the other % was run by state.

Thing is people got reports from the banks running their pension funds, periodic reports are sent out on regular basis like on a stock brokerage account where people can keep track of how their private pension invested money is doing.

Trust me, lots of people will be aware about it and pissed.
legendary
Activity: 1190
Merit: 1001
WTF, this is getting crazy.
newbie
Activity: 45
Merit: 0
You don't understand that assets wasn't private. If article says that, it isn't said it's true. Stay bullish, and argue from Nigeria or where you live about Polish econimics.
sr. member
Activity: 294
Merit: 250
Nationalization of assets is confiscation actually. It's exactly what they did.
I ment it wasn't private money. No nationalization here, sorry. Prove (sorry, it's only in Polish):
http://static.e-prawnik.pl/pdf/orzeczenia/3_II_UK_08_12.pdf

It's all there in the article. Of course that money in those private pensions is private money. This is theft basically. State ran out of money and started stealing money from private pension fund accounts. This is the story here. Got it? Take some time to actually read the article before posting stuff like "fake".
newbie
Activity: 45
Merit: 0
Nationalization of assets is confiscation actually. It's exactly what they did.
I ment it wasn't private money. No nationalization here, sorry. Prove (sorry, it's only in Polish):
http://static.e-prawnik.pl/pdf/orzeczenia/3_II_UK_08_12.pdf
sr. member
Activity: 294
Merit: 250
You've wrote first "fake" then edited with new text.
I misinterpreted. I was thinking they confiskated private money, while it wasn't.

Nationalization of assets is confiscation actually. It's exactly what they did.
newbie
Activity: 45
Merit: 0
You've wrote first "fake" then edited with new text.
I misinterpreted. I was thinking they confiskated private money, while it wasn't.

That's difference between Cyprus.
sr. member
Activity: 294
Merit: 250
Too much drama. This isn't bullish.

You've wrote first "fake" then edited with new text.

Of course it's bullish for Bitcoin price. It's a repeat of what happened in Cyprus to some extent.

It's also an event announcing further bank bail-ins. Expect those soon after the German elections.
sr. member
Activity: 294
Merit: 250
newbie
Activity: 45
Merit: 0
Too much drama. This isn't bullish. I'm from Poland. That cash was lost anyway coz of fuc*ing obligatory social insurance contributions and non-entrepreneurs officials. None here believe in pension after 67 years of working.
sr. member
Activity: 294
Merit: 250
This is huge news and greatly alarming development! Potential to be very bullish for Bitcoin though.  Shocked

Quote
Poland Confiscates Half Of Private Pension Funds To Cut Sovereign Debt Load

Submitted by Tyler Durden on 09/06/2013 14:50 -0400

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.

By way of background, Poland has a hybrid pension system: as Reuters explains, mandatory contributions are made into both the state pension vehicle, known as ZUS, and the private funds, which are collectively known by the Polish acronym OFE. Bonds make up roughly half the private funds' portfolios, with the rest company stocks.

And while a change to state-pension funds was long awaited - an overhaul if you will - nobody expected that this would entail a literal pillage of private sector assets.

On Wednesday, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings.  The funds would effectively be left with only the equities portions of their assets, even this would be depleted, and there will be uncertainty about the number of new savers joining.

But why is Poland engaging in behavior that will ultimately be disastrous to future capital allocation in non-public pension funds (the type that can at least on paper generate some returns as opposed to "public" funds which are guaranteed to lose)? After all, this is a last ditch step which no rational person would engage in unless there were no other option. Simple: there were no other option, and the driver is the same reason the world everywhere else is broke too - too much debt.

By shifting some assets from the private funds into ZUS, the government can book those assets on the state balance sheet to offset public debt, giving it more scope to borrow and spend. Finance Minister Jacek Rostowski said the changes will reduce public debt by about eight percent of GDP. This in turn, he said, would allow the lowering of two thresholds that deter the government from allowing debt to raise over 50 percent, and then 55 percent, of GDP. Public debt last year stood at 52.7 percent of GDP, according to the government's own calculations.

To summarize:

    Government has too much debt to issue more debt
    Government nationalizes private pension funds making their debt holdings an "asset" and commingles with other public assets
    New confiscated assets net out sovereign debt liability, lowering the debt/GDP ratio
    Debt/GDP drops below threshold, government can issue more sovereign debt

And of course, once Poland borrows like a drunken sailor using the new window of opportunity, and maxes out its new and improved limits, it will have no choice but to confiscate more assets, and to make its balance sheet appear better, until one day, there is nothing left in the private sector to confiscate. At that point the limit itself will have to be legislated away, and Poland will simply continue borrowing until one day there are no foreign lenders willing to take the same risk as the nation's private pensioners. At that point, Poland, which is in the EU but still has the Zloty, can just go ahead and monetize its own debt by printing unlimited amounts of its currency.

Of course, we all know how that story ends.

The response to the confiscation was, naturally, one of shock:

    The reform is "a decimation of the ...(private pension fund) system to open up fiscal space for an easier life now for the government," said Peter Attard Montalto of Nomura. "The government has an odd definition of private property given it claims this is not nationalisation."

    

    "This is worse than many on the markets had feared," a manager at one of the leading pension funds, who asked not to be identified, told Reuters.

    "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."

Catastrophic consequences for fund flows aside, the Polish prime minister had a prompt canned response:

    Tusk said people joining the pension system in the future would not be obliged to pay into the private part of the system. Depending on the finer points, this could mean still fewer assets in the private funds.

    

    "The (current) system has turned out to be built in part on rising public debt and turned out to be a very costly system," Tusk told a news conference.

    

    "We believe that, apart from the positive consequence of this decision for public debt, pensions will also be safer."

You see, he is from the government, and he is confiscating the pensions to make them safer. Confiscation is Safety and all that...

    Polish officials have tried to reassure investors, saying the overhaul avoids the more radical options of taking both bond and equity assets away from the private funds outright.

    

    They say the old system effectively made Polish public debt appear higher than it really is.

Well, once you nationalize private assets, the public debt will lindeed appear lower than it was before confiscation: we give them that much.

End result: "The Polish pension funds' organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.... This may lead to the private pension systems shutting down," said Rafal Benecki of ING Bank Slaski."

Unconstitutional? What's that. But whatever it is, it's ok - after all the public pension system is still around. At least until that too is plundered. But in the meantime, all such pensions will be "safer", guaranteed.

But best of all, in the aftermath of Cyprus, we now know what the two most recent European blueprints for preserving the myth of solvency are: bail-ins, which confiscate deposits, and pension fund "overhauls", which confiscate, well, pension funds.

And now, back to the global recovery soap opera.
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