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Are all existing financial institutions just financial pyramids?

My claim is that even the state sanctioned financial institutions like pension funds, all sorts of insurance schemes, banks etc. being closely interlinked are nothing but gigantic financial piramids different from the likes of Profit Clicking or Just Been Paid in that they enjoy the support of national governments. They all operate on the one basic principle: pay now and be rewarded handsomely later. Who in their right mind can resist the lure? Hence their popularity Being financial piramids, the life span of all these financial institutions is limited. Basically when all available, free ranging capital (cash kept in people's pockets and stashed under floor boards) is sucked up or tied up by the piramid, it starts to crumble down onto itself. It is a dynamically unstable construct much like a baloon with lots of holes in it. Once you stop pumping air to maitain the inner pressure, the whole thing disintegrates. We happen to be the witnesses of the financial institutions' demise. That's what the CRISIS is all about. The obvious symptoms are clearly seen. We were promised to start receiving our pensions at the age of 60 (women) and 65 (men). Now the pension age is on the move. The carrot changes its position. Who do you blame for this mess? The 1%? No, we are all responsible. I agree that some of us may be more greedy than others, but greedy we all arel! The only way out of the hole is the good old ... war. That's how it has always been. The wheel of history reaches recurrently its familiar stages. There is no stopping the wheel of history.

  • Jan 14 2013: Pension funds are not pyramid schemes, they can definitely be sustainable (as in not collapse completely whenever demographics change). However pension funds are something of a scam in that they make you think you are setting aside your own pension. You're not doing that, every pension system is essentially a pay-as-you go system where you pay for current pensioners and future generations pay for your pension, the only thing investment schemes add are the ability to force future generations to pay a larger or smaller share of their income to your pension if the percentage of pensioners in the population goes up or down in the future. Also, the higher than inflation interest rate a pension fund collects is the result of corporations making a profit off the labors of you and I, it's not free money, it's your own money.
  • Jan 14 2013: Can you provide a single example where/when individual pension pay outs were higher because of the advantageous demogaphics at that particular period? That would be the proof of what you say how the pension funds work. Individual pension pay outs should occasionally "overtake" the rate of inflation. As far as I know in my country (Poland) the actual pension pay outs (both collective and individual) are in no way tied up to the current level of revenue. They are just a whim of the government which balances between losing its popular vote and the bankruptcy of the pension fund budget. Therefore in my country showing that pensions are higher because of the higher current pension budget revenue is quite impossible. Is it possible in yours? Or perhaps rather than increasing pension pay outs, governments balance the pension budgets by lowering the fiscal burden on the current working population at times when relatively more people work than are retired? Have you heard of this latter situation ever taking place?
    • Jan 14 2013: "Can you provide a single example where/when individual pension pay outs were higher because of the advantageous demogaphics at that particular period?"

      You have to take inflation and economic growth into account, but yeah, pensions have increased as a percentage of GDP in some countries as a result of the population aging. A 40 year old Japanese worker would definitely have more purchasing power if Japan's population was younger. The process is often not noticeable because of economic growth (if that's high enough a worker's absolute income won't go down even though a greater percentage of GDP goes to pensions) and because privatized pension schemes collect revenue from stocks (people don't pay higher taxes but get lower wages than they could have otherwise and/or the shareholders get less dividend). Once you look at wealth as a collection of labor and physical matter instead of currency it's easy to see why pensions must be pay-as-you-go. After all, you don't store food and clothing, let alone the services of the plumber when you pay your pension premium: when you are retired everything you consume must be made by people who work right now. If the percentage of pensioners grows either the pensions must go down or the working people must receive less payment per unit of work (and before people start yelling "what about economic growth", everything I said here is relative to a hypothetical situation in the same year but with a smaller percentage of pensioners).
  • Jan 14 2013: Maybe some are, but not all are.