What Happens When You Nationalize Private Pensions

Posted: October 25, 2008 in Economy, World

Consider this the second part of the post “Big Rocks For Sale“.

Kirchner’s Move on Pensions Hits Argentine Markets

BUENOS AIRES — A year ago, when leftist Cristina Kirchner was elected to succeed her husband Nestor as president, many Argentines hoped she’d follow a more conciliatory path than her mercurial spouse, who almost seemed to relish making enemies.

But with gambits like Tuesday’s proposal to nationalize private pension funds, the 55-year-old former senator has shown a combativeness that is every bit the equal of her husband’s. Mrs. Kirchner justified the proposed seizure of $30 billion in pension assets by accusing the funds of having instrumented “policies of plunder.” She said Argentina was setting an example of how to deal with the global financial crisis.

For Mrs. Kirchner, the fallout from the move is just beginning. The 10 pension funds, and many depositors, are threatening lawsuits. The Argentine stock market fell 10% Wednesday, on top of Tuesday’s 10% decline. Because the private pensions are big investors in local capital markets, the proposed nationalization has raised worries the government intends to tap new pension contributions for its own needs rather than invest the money in local stocks and bonds. For fragile local markets, the move compounded the impact of the global financial crisis.

The damage was even worse in Argentina’s local debt markets. Trading volume for a key local bond market, Argentina’s Open Electronic Market, was practically zero on Wednesday compared with a normal day’s turnover of about $1 billion. (more…)

  1. Jason Spalding says:

    Karl Marx said, “from each according to his abilities, to each according to his needs.” What Happens When You Nationalize Private Pensions? For my part it means that I don’t need to put money aside for retirement because the government is going to save me. If I stop paying my mortgage, the government is going to use the courts to lower the principle on my home. Does this sound right?


    Isn’t Robin Hood fictional?

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