Retirement of bad investments

Should "private savings" be mandatory for retirement? A potential government proposal for pension reform counts on this. However, that duty is a great proof that politicians, bureaucrats and, possibly, 'experts' from various commissions simply believe that they are smarter than we are.

photo: Shutterstock
photo: Shutterstock

Let's ask ourselves a simple question: what is the difference between obligatory by transfer to the state interim system and obligatory by donation to a private fund?

The answer is simple: in principle none. And the yield will probably not be much difference either.

The fact that the state commands us from the position of its power is in itself proof that to us the state does not intend to return part of our own freedom and responsibility and prefers to "take it on." Definitely for uslike mom or dad. De facto it is an addition obligatory pillars only by deducting tax revenue out of state. The state lends its power to pension funds, which thus begin to participate in the state monopoly for our old age.

Our age will still belong to the state, not us. Nothing changes, it's just going to be all called a little different.

In essence, the funds do not care if the state regulates their investment portfolios in any way. They will definitely not mind regulation - by law guaranteed subsidy billion crowns from our pockets is a huge attraction that no one can reject, as we have recently seen, for example, in photovoltaics.

However, in the case of mandatory savings, the potential investment portfolio of funds is usually heavily regulated: pension funds can invest strongly conservatively and in government bonds. A government bond is a security with which the state borrows money from someone for its operation. In other words, it is guaranteed future tax revenues that they repay present loan. So that future productive will apply today's expenses state.

If a portfolio of private mandatory savings is built on bond yields, this means that future productive they will pay a pension future retirees. So that productive they will pay a pension through taxes unproductive.

And I ask - what is the fundamental difference between the ongoing state system and this compulsory system? It is nothing more than a foggy running system, in which, in addition to the state, it also participates special caste private sector.

Mandatory savings have another interesting effect - by regulating the portfolio, the state ensures "automatic demand" for its own bonds. It is a source of "cheap money" that will pay for a possible hole in the budget.

If we have cheap money, there are bad ones investments. The principle is simple, the same as for inflation. Then, even if the private sector is made up of the best and most responsible, there will still be one that is bad investments paid "cheap money" from funds sows a bed of bad investment. It's funny that's just bad investment of cheap money are one of the decisive factors causing the economic crisis, which usually makes states even more indebted. They issue bonds that are bought by subsidized pension funds. Cheap money continues to flow and the state "supports the economy" with massive indebtedness.

The circle of the bad investment it closes, the boom and bust come again, the cycle spins.

By no means do I oppose private savings. On the contrary, I fully support him. In my opinion, however, the whole thing should look a little different.

If we really want the state not to make us a daddy, if we really want us to the state has returned our old age, the solution should be such that the state itself reduces the amount of money that it is obliged to collect for our pensions and leaves to our own decisionwhat pension we secure.

It would be ideal to get rid of "social insurance" and transform it into a "social tax". So for starters, we should start calling things by their real names.

Paying social tax would entitle us to receive a state pension. However, it would be in a uniform absolute amount for all at the artificial border (eg twice the subsistence level), it should be the minimum necessary amount so that any social tax is the same minimum.

Sure, the system is not fair. But the state is never fair, the state is a redistributive mole, a monopoly of power that, unfortunately, can do de facto what it wants. If we want the state to take little and, if possible, not go into debt, this is perhaps the only way.


  1. Lukáš, as always, great, but I have one problem, maybe my mistake, I can't post it on Facebook, just a link and that's not enough

  2. I have a short comment on what it is and how the government bond is used on my Facebook page

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