Central Banks: Bailed Out Markets To Protect Pension Funds


Zero Hedge: The Organization for Economic Co-operation and Development (OECD) recently published a report showing how pension funds in OECD countries recorded a massive loss of approximately $2.5 trillion during the stock market meltdown in February through late March. Shortly, after that, central banks intervened with monetary cannons to rescue stock markets and other financial assets to avoid pension returns from going negative.

The spread of COVID-19 worldwide and its knock-on effects on financial markets during the first quarter of 2020 are likely to have reversed some of these gains. Early estimates suggest that pension fund assets at the end of Q1 2020 could have dropped to USD 29.8 trillion, down 8% compared to end-2019 [or about a $2.5 trillion loss].

The drop in pension fund assets is forecast to stem from the decline in equity markets in the first quarter of 2020. Returns, inclusive of dividends and price appreciation, were negative on the MSCI World Index in the first quarter of 2020 (-20%), and between -11% and -24% on the MSCI Index for Australia, Canada, Japan, the Netherlands, Switzerland, the United Kingdom, the United States. Read More

Opinion: Central banks bailed out markets, but who will bail out pension plans if/when markets crash again:

Heritage Foundation post September 12, 2019

Pension Bailout Bill Would Only Worsen the Underfunding Crisis

“On July 24, the House of Representatives passed H.R. 397, the Rehabilitation for Multiemployer Pensions Act.

The bill by itself would cost taxpayers more than $100 billion, according to the Congressional Budget Office.

This is a terrible deal for taxpayers, and it’s no good for pensioners—particularly younger ones—who will still end up with insolvent pension plans.

Pensions are the only savings tens of millions of the world’s workers have. They were promised a secure retirement that in so many cases was too good to be true based on ridiculous assumptions of 7-8% yearly return on investment.

Without government/taxpayer bailouts, and more central bank stimulus (QE), the disparity between rich and poor will grow to dangerous levels as the children of the elderly are forced to support their parents.

The takeaway once again is stimulus in the form of quantitative easing for as far as the eye can see. With US debt projected to top $30 trillion in 2020, any notion of getting back to a pre-2008 economy is long out of reach.

Third rail - Wikipedia

No government official will dare touch the 3rd rail of economic sanity: Austerity.

See our paper: 1% and Revelation: Do Not Harm the Oil and Wine here