Five western countries will be particularly affected by the collapse of the capital-based pension system


- Excerpt GEAB N°23 (March 2008) -



Five western countries will be particularly affected by the collapse of the capital-based pension system
If you were a subscriber to the GEAB, you would have read what will follow as early as March 16, 2008:

In the case of hedge funds, at least was it only about the most “risky” investments! But pension funds did not expect at all that stock and housing assets would collapse the way they have in the past few months throughout the world. These categories of assets are losing between 30 and 70 percent of their value from 2007 to 2009, knowing that there is no alternative to financial markets for such big amounts. For instance, the 300 largest pension funds reached a cumulated value of 10,000 USD in September 2007 (1). If it is certain that commodities, energy, gold… prices are rising precisely because these pension funds are now desperately seeking profitable assets, nevertheless, collectively speaking, this quest is vain. The truth is simple: these funds are losing a lot of money (1,500 billion USD lost in January 2008 (2)) and they will lose a lot more in the months and years to come. We estimate that, despite the protection measures taken by these pension funds - when for instance they get rid of the most exposed investments, they will collectively lose at least another 3,000 billion USD in 2008 and their profits will drop down to 5 percent (inflation deducted) in the best case.

Meanwhile, dozens of millions of newly retired « baby-boomers » are beginning to call upon payback from these funds. According to our team, it is likely that, by the end of 2008, this crisis will be the dominant aspect of the current global financial crisis. It will also provoke a social crisis affecting pensioners, in particular in the US (45 percent of pension funds’ total assets in the world), in Japan (18 percent) and in various European countries depending heavily on capital-based pension systems, i.e. UK (7 percent), Sweden (1 percent), Denmark (1 percent) and above all, in the Eurozone, the Netherlands (6 percent of pension funds’ total assets in the world). Canada too, which represents 5 percent of these assets, will be affected (3). In the rest of the world, only accounting for 11 percent of these assets, pensioners will not be affected so much.

According to this list, pensioners in the US, Japan, UK, Netherlands and Canada, who counted on regular capital-based pension revenues, will find themselves in a difficult situation. At the end of 2008, as the global systemic crisis unfolds in the economic and financial sphere, LEAP/E2020 estimates that half of those pension funds will be confronted to a drastic decrease in their revenues and to a shrinking value of their capital. Regulators in the various concerned countries should rapidly take on this issue which is about to have dramatic consequences for millions of American, Japanese, Dutch and Canadian pensioners.

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Notes:

(1) Source: Pension&Investments, 09/03/2007

(2) Source: Reuters, 01/30/2008

(3) Distribution of pension fund shares of global assets, provided by Watson&Wyatt.

Jeudi 7 Août 2008

GEAB N°61 - Contents

- Published on January 16, 2012 -

Global systemic crisis - 2012: The year of the world’s great geopolitical swing
This GEAB issue makes it six years that the LEAP/ E2020 team have shared their anticipations with their subscribers and readers of their public briefing on the development of the global systemic crisis each month. And, for the first time, in the January issue which presents a summary of our anticipations for the year to come, our team anticipates a year which will not result solely in a worsening of the world crisis but which will also be characterized by the emergence of the first constructive elements of the “world after the crisis”… (page 2)
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USA 2012: on the way towards the tragedy of QE3
Today, US financial policy is confronted by the sovereign debt crisis of which it will be the ultimate victim in 2012. As LEAP/E2020 anticipated, the 2011 European debt detonator has truly ignited the 2012 American sovereign debt bomb, even if the media coverage desperately tries to make us believe the opposite. The massive sale of US Treasury Bills by the planet’s major central banks in the second half-year 2011 perfectly illustrates this situation incidentally… (page 7)
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ANTICIPATIONS 2012 - ‘20-UP AND 15-DOWN’, THIRTY FIVE KEY TRENDS FOR 2012
Up or Down? The United States' political paralysis; The City and Wall Street ; The rise in interest rates; The forfeiting of value to Wall Street and the City; The value of Chinese reserves; The Pound Sterling (and Gilts); Euroland as new European sovereign; The USA-China “little cold war”; Italy; The importance of the US Dollar in world trade transactions; Rating agencies; The “great European public borrowing” (GEPB); MerkHollMont; Ron Paul; The number, size and influence of Western banks; The continuation of gold’s return in the international monetary system; Recessflation; Sarkozy, Cameron, Netanyahu and Medvedev; The BRICS maturing as a pro-active world player; Turkey’s exit from the Western camp; The Tobin Eurotax; Secular and pro-Western forces in the Muslim world; Growth; The usefulness of the G20; Lawsuits against those managing banks and hedge funds; The splitting of the world monetary system into three zones: Dollar, Euro, Yuan; The widespread downgrade of Western public debt; Peoples' anger; The Euro crisis; The EU as the principal incarnation of Europe; QE3 as the ultimate weapon for saving the US economy; The US’ capacity for military intervention; The West as a community of relevance and values; Scottish independence; Le détroit d'Ormuz et un nouveau contexte de crise au Moyen-Orient ; L'indépendance de l'Ecosse; The Straits of Hormuz and a new context of the Middle East crisis (page 19) (page 19)
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The GlobalEurometre - Results & Analyses
We are seeing a strengthening in the majority considering that common European solutions to the crisis are more effective than national ones (80% in January versus 77% in December)… (page 33)
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