Saving the Western Pension Funds

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

This is the second of the two parts

NEW YORK ( TheStreet) -- In the first part to this commentary, I pointed out to readers that the current "Western pension crisis" threatening the economies of the Western industrialized world has two primary drivers.

First, with nearly one-fourth of the GDP of these various economies consumed in paying interest (in one form or another), these economies can never generate the same average level of return we experienced when our economies were in relative health. Greatly exacerbating this problem is the propensity for pension fund managers to buy the worst investments in the marketplace.

As I previously explained, most of the blame for this second problem lies in the fact that these pension fund administrators have allowed their decisions to be "heavily influenced" by multinational bankers.

Obviously the first step back on the long, painful road towards solvency for these pension funds is to totally divorce these funds from any connection to these bankers. Don't buy any shares in the bankers' hopelessly insolvent operations. Don't buy any of their fraud-saturated "financial products," and don't listen to anything they say about markets or the economy -- since the percentage of time these banksters are either wrong or simply lying exceeds any accurate information they distribute by at least a factor of ten.

There is another more fundamental problem here, however, which I refer to as "other peoples' money syndrome". This is a very common, human failure where otherwise responsible individuals will show markedly less concern and diligence when handling other peoples' money than when handling their own.

While this syndrome occurs in nothing less than "epidemic" proportions in the world of investment management, it is also rampant in any other context where people are put in charge of other peoples' money. Labor negotiations used to be another prime example. Back when we had actual "equilibrium" in our labor markets (i.e. before our governments allowed massive, structural unemployment to take root); in contract negotiations labor would kick the crap out of management time after time after time.

This problem reached its peak in the 1970's when unions had the audacity to demand that management raise their wages as fast as the bankers were destroying their purchasing power with their rampant currency-dilution (i.e. inflation) -- and were successful in doing so. The "solution" to this problem in the eyes of North American governments was a 40-year "genocide" campaign against unions, while allowing structural unemployment to get so bad that tens of millions of North Americans are no longer allowed to work. It was only when the deck was hopelessly "stacked" against labor that management was able to hold its own in negotiations.

We immediately see the first requirement in pension reform: require pension fund administrators to invest in the same financial products they are purchasing for pension beneficiaries -- at least in their own pension accounts. There can be no argument here.

A pension-fund manager who complains that he doesn't want to personally hold assets as risky as what he has purchased for the fund is obviously being too reckless. Conversely, there is an obvious rebuttal for any pension fund manager who complains that he or she "can't get a high enough return" by mimicking fund investments. Tell them to accept one of the other, cushy, six-figure job offers which are being dangled in front of them.

Forcing fund managers to personally hold what they buy can be considered a certain means of getting these administrators to be much more "focused" and "motivated" in administering assets -- and less likely to jump at the first "investment" recommended to them by sleazy fraudsters.

We obviously need fund administrators with some minimal level of competence in macroeconomics. Those individuals possessing such insight are aware that we are still in the early stages of the most-massive global economic boom in history: the simultaneous industrialization of more than half of the world's population. The previous greatest economic boom was post-World War II, and the rebuilding of (primarily) Europe. Yet that "boom" only involved about 10% as many people.

Once we have competent people in charge of our pension funds, then they will obviously gravitate en masse to the world of commodities: the building-blocks of the global economy. It is the simplest of observations that the world's largest economic boom (by a factor of 10) is going to involve much more "building" than at any other time in our history. Parallel to that is the increasing demand on "soft commodities" (i.e. food), as the combination of rapidly rising incomes and steadily increasing populations guarantees extreme pressure on global food supplies.

Here the bankers would retort that "commodities are too volatile for pension funds." The response to that is to point out how these same banksters have turned all markets into wild, rollercoaster rides - with most of those rollercoasters moving steadily "downhill."

The other obvious rebuttal to such banker nonsense is to point out that the "volatile" holdings in commodities can be "anchored" with the world's most-stable financial assets: gold and silver.

Indeed, we have recently seen one U.S. pension fund: making the news for doing precisely what I am suggesting. Here we will have to listen to more banker propaganda. They will point to the "massive volatility" in gold and silver markets over the last three decades (i.e. three decades of relentless banker-manipulation), and claim that gold and silver are even less-stable than a basket of commodities.

The facts are as follows. For 5,000 years gold and silver have perfectly preserved their value in our societies -- that is the real "long term." By contrast, three decades are a mere blink of an eye. Beyond that, the charts are unequivocal. For two decades we experienced the most extreme market-manipulation with gold and silver ever witnessed in human commerce. While the price of gold was pushed to a mere fraction of its real value, the price of silver was manipulated all the way down to a 600-year low (in real dollars).

Over the past decade gold and silver have simply re-asserted themselves. The prices have marched relentlessly higher in spite of the implacable opposition of the most powerful (and corrupt) cabal of bankers in economic history. Now those are the sorts of "assets" I would want in my own pension fund -- especially when these two precious metals have only begun to catch-up to their actual value.

The last ingredient necessary to begin to restore solvency to our pension systems is to establish a "rescue fund" to prop-up some of these institutional pension funds which have already been too severely damaged by corruption and incompetence. Here we have an obvious source for the revenues we would need for such a fund: the multinational banks themselves.

As the sole culprits for the destruction of our pension systems, they are both morally and factually responsible for this crisis. Of equal importance, they also have an ideal revenue stream to tap into to top-up such a rescue fund: the infinite, exorbitant "fees" they charge for various electronic transactions.

Given that the transaction-costs for the banks for such electronic processing are near-zero, these excessive bank fees represent nothing less than "windfall profits" in the hands of these career-criminals. Obviously taxing windfall profits is the least harmful means of raising revenues in any economy.

Better still, we already have a decade of experience of watching what these banksters do with any/all "windfall profits" which come their way: they pillage every penny of it out of their corporate coffers and call it "performance bonuses." Thus, when it comes to a choice of either wasting all of these "windfall profits" (in bankster bonuses) or using them (productively) to protect the pensions of tens of millions of people, the "justice" here is undeniable.

The days when Western pension fund administrators could draw fat salaries for serial-failure are over. Allowing these pseudo-professionals to remain on their present course will result in nothing less than mass-bankruptcies throughout our pension systems (shortly followed by riots in the streets).

Our pension funds now require competent (honest) individuals, with rational and viable strategies for producing optimal long-term returns on these assets. Unqualified applicants need not apply.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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