Spain Raids Social Security Fund. Is Portugal Next?

August 29,2014

By: Gordon Haave, Managing Director at Agora Trust, Ltd.

spain portugalIn my article last week, “Cypriot-Style Bail-in: Be Ready”, I discussed last year’s confiscation of a portion of depositors’ accounts in Cyprus.

It hasn’t gotten that bad yet in Spain, but Using Google Translate on the Spanish website El Economista we learn that:

“The Government of Mariano Rajoy has released EUR 24,651,000 Reserve Fund Social Security, in less than two years. Such an amount represents nearly 37% of the total EUR 66,815,000 mechanism that had accumulated in 2011. That figure marks the highest cumulative call pensions piggy bank in its history, following its commissioning in 2000 and after eleven years in which successive governments did not need to dip into it… ‘To continue at this rate, in a period of four years or so we would finish with the Fund.’”

Conditions were worse last year when Poland confiscated half of PRIVATE pension funds to lower its own Debt – to – GDP levels. Why? So it could borrow more.

No doubt this is where Paul Krugman would chime in to say that somehow this raid on the future to continue borrowing and spending in the present represents “Austerity”. This terms was amusingly defined by Clifford Asness recently as “spending way more than we have but less than Krugman wants us to”.

The Polish and Spanish events both have in common the state using assets to bail itself out, as opposed to Cyprus where the bank “bail-in” served the purpose of bailing out the country’s banks and their Russian depositors.

In Portugal we see the likelihood of either or both options being implemented in the future.

With its economy faltering and its second largest bank collapsing amidst fraud and accounting scandals, Portugal is likely the next major country to perform a raid on the nation’s wealth. Then again, GWP called it back in April of 2013 that “Cyprus is the Template on How to Fail”.

I doubt many readers of this newsletter have significant assets in Portugal, but those that do should consider getting them out. For the rest of the readers the broader global macroeconomic picture suggests that there is really nowhere to hide.

Market Bull’s are heralding this week’s strong durable goods orders, but neglect to mention that the strong numbers are solely the result of a few large Boeing orders. Non-Transport Durable Goods orders were actually down. Now, the Boeing orders are a good thing, but it is telling that the rest of the economy continues to falter.

This is the case almost everywhere around the world, including Western Europe and the BRICS.

After the few obvious ones such as Portugal it is nearly impossible to predict which country will go after its citizens’ savings next. Diversification is the only answer.

Contact Gordon Haave if you are interested in learning how a trust can help you protect your hard-earned assets.

 

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