What do governments in fiscal crisis do? They indulge in all sorts of financial repression.
In the UK so far this has been limited things such as to keeping real interest rates well below inflation, forcing pension funds to hold far too many government bonds for the good of their clients, and the like.
But the odds are this is only the beginning of the effort to get us to hand control and/or ownership of our cash to the state.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Those wondering where we may end up might look to Poland. There, pension reform' is being discussed. The most likely outcome, according to Lombard St Research, is the "full transfer of the private arm of the pension funds to the state."
The pension system in Poland has three tiers to it a voluntary bit, a state managed bit, and a mandatory private bit. The last is the one of interest at the moment. Thanks to the fact that workers are obliged to contribute to it, it has huge assets under management - 280bn zlotys, the equivalent of over 17% of Polish GDP.
Nationalising this could push Polish national debt down to 37% of GDP (as the government bonds held in the pension funds would simply be cancelled). That would be nice, given that it is currently on the verge of heading over 55%, a level that under Polish law "means the government would have to step up its spending cuts and balance the budget for next year".
Clearly, this is all only a short-term fix, given that if it nicks the assets now, the state also takes on the future liabilities of the private pension funds. But right now governments aren't thinking much about the long term they are thinking about how to transform as many private assets into state assets as possible as fast as possible. And this is a very effective way to do just that.
Note that Poland is hardly the first to think of it. Hungary did it a few years back telling its furious citizens that they could either hand their pension funds over to the state or lose them altogether.
And earlier this year Kazakhstan did the same, something the analysts at Strafor say was particularly disappointing given that it had been "a standout success when it came to putting into place sensible and successful financial reforms."
I can't yet see the UK government getting away with anything quite this explicit, but the constant shifting of the regulatory environment around our own pensions system makes it clear that they really wish they could.
See this week's magazine out on Friday for more on this.If you're not already a subscriber, subscribe to MoneyWeek magazine.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
