Argentina Stock Market Dives On News That The Government Will Nationalize Pensions -- The US Is Next

By David Hinz - Posted on October 25th, 2008

On Tuesday, Argentina rolled out a plan to nationalize private pension funds. The Merval index fell more than 10% both Tuesday and Wednesday and by Friday the Market had dropped by 28%.

Quote:

BUENOS AIRES -- Hemmed in by the global financial squeeze and commodities slump, Argentina's leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation's private pension system.

The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade.

In defense of this government plunder of private investment:

Quote:

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.

And the practical response from the marketplace?

Quote:

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.

Please re-read that last passage. The practical result of the government raiding the private investments of its citizens is zero financial activity. Does it occur to anyone in this country that this government intervention is, perhaps, a bad idea?

Apparently not.

Democrats in the US House of Representative are lining up behind a proposal to eliminate private 401k's and replace them with a mandatory government run pension plan.

Quote:

House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

--snip--

Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.

As a practical matter, an Obama Presidency with a Democrat majority in both the Senate and the House of Representatives will result in the government taking control of the retirement of every US citizen. The Social Security Administration -- DID YOU READ THAT -- the Social Security Administration WHICH IS BROKEN will take control of YOUR money and dole it out to you at retirement.

If this does not frighten the American voter even more than Bill Ayers or Rev Wright, all hope is lost.