Collapse of Socialism – End of Pensions

by Martin Armstrong Economics, Armstrong Economics:

I have been warning that we are in the midst of (1) collapse in democracy as the bureaucracy attempts to ensure they get their’s, (2) the collapse of socialism, which is the implosion of social programs, and (3) the collapse of pensions set in motion by the artificially low-interest rates for the past 10 years.

Once we entered this Private Wave in 1985, we have begun the Crisis in Democracy where career politicians are the hallmark of how empires, nations, and city-states come to a dramatic end.

With each passing day, we read about another pension crisis in some municipal government or system. Now across the UK teacher/lectures began a month of student disruptions over the proposed changes in their pensions plans. The strikes have even produced refund claims by students over missing tuition time. This is the collapse not of Capitalism, but Socialism as all the promised benefits cannot be provided.

The pension system has a £6bn deficit and thus there is no choice but to cut. Some 61 universities are being affected with many teachers/lecturers simply walking-out leaving the students with no education. The teachers/lecturers voted to strike and now it has gone on for some two weeks. The assumed they would strike and the money would fall from heaven. That has not been the case.

Individually, universities pay into a pool called the Universities Superannuation Scheme. That fund is then managed by a professional Fund Management team that produces a return annually. The investment returns, future contributions, and management costs should then be calculated and projections given at every management meeting between the two (Fund Managers and the administrators of the USS).

I have written many times how the central banks were setting the stage for the next crisis. In truth, with low-interest rates and pensions being invested “conservatively” into bonds, the warnings have been discussed many times in the past but everyone has assumed it would get better. They never counted on the European Central Bank keeping the rate low to negative for almost 10 years.

I have continually warned that the policies of low-interest rates would be the next crisis the destroys the pension system. I have warned that this is the paradox of solution whereby every solution to cure the immediate crisis merely create the very next crisis.

Sure, everyone can blame the fund manager. However, that is like blaming the weather-person on TV because it rained. Returns have been exceptionally low because of the Quantitative Easing (QE) undertaken by central banks after the 2008 financial crisis. In this instant case, surely the fund management company would have taken action long before now to head off a default. Had they simply invested in stock markets they would have been far better off, but the screams since 2009 that the market is always at some record new high kept many fund managers away for equities and buying bonds.

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