![\"\"](\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2011\/10\/pyramid-scheme-2.gif\" "\\"Pyramid-Scheme\\"")
![\"\"](\"http:\/\/www.pgm-blog.com\/wp-content\/uploads\/2011\/11\/pension_reform.jpg\" "\\"Pension_Reform\\"")
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Dear PGM CAPITAL<\/strong> Blog readers,<\/p>\n In March 2009, Madoff pleaded guilty to 11\u00a0federal\u00a0felonies\u00a0and admitted to turning his\u00a0wealth management\u00a0business into a massive Ponzi scheme, which he started in early 1990,<\/strong>\u00a0which defrauded thousands of investors of billions of dollars.<\/p>\n On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed.<\/p>\n The main reason\u00a0why\u00a0Madoff\u00a0managed\u00a0<\/strong>to keep\u00a0this scheme going\u00a0for so long was, that he worked on the greed in people by showing\u00a0them high and stable\u00a0returns that\u00a0always\u00a0beat\u00a0the stock market.<\/p>\n What his clients and prospect clients didn\u2019t realize, until it was too late,<\/strong>\u00a0that these high returns were an illusion and\u00a0were\u00a0realized by using (some) of\u00a0his customers’\u00a0money\u00a0to\u00a0pay out <\/strong>these\u00a0bogus\u00a0profits.<\/p>\n In the industrialized world, hundreds of millions of\u00a0working people\u00a0today contribute every month\u00a0a large proportion of their income\u00a0to a\u00a0<\/strong>Defined Benefit\u00a0pension fund, in exchange for\u00a0a promise\u00a0to\u00a0retire at\u00a0a certain age\u00a0and\u00a0then\u00a0live comfortably and warmly\u00a0with\u00a0decent\u00a0medical care, just as\u00a0they\u2019ve\u00a0seen\u00a0their\u00a0parents doing.<\/p>\n Similar to Madoff\u2019s investors,<\/strong>\u00a0they don\u2019t realize until it\u2019s too\u00a0late that the Defined Benefit pension fund, initially worked fine, but isn\u2019t sustainable in the longer run.<\/p>\n When Otto\u00a0von\u00a0Bismarck\u00a0in 1889 introduced the\u00a0world’s first\u00a0Defined Benefit pension\u00a0system\u00a0in Germany the retirement age\u00a0was stipulated at\u00a065 and it\u00a0was based on\u00a0the fact that the life expectancy of\u00a0a\u00a0German man\u00a0at that time\u00a0was 66\u00a0years.<\/p>\n Today, due to improving living circumstances, better (preventive) care and medication, the\u00a0average life expectancy\u00a0in Europe\u00a0and most Industrial countries is much higher and in many countries\u00a0it is over 80 years.<\/p>\n That’s\u00a0the good news.\u00a0The bad\u00a0news\u00a0<\/strong>is that\u00a0the equation\u00a0on which the pension fund and premium are calculated is getting out of equilibrium,\u00a0because the comfortable retirement of those retirees will be paid by a portion of the premium of those who are currently contributing to the fund. This has turned the Defined Benefit pension fund into a pyramid game for which the year 2011 may be the turning point.<\/p>\n Statistics\u00a0show\u00a0that in 2011, for the first time, the number of\u00a0people in Europe who\u00a0are between 15\u00a0and 64\u00a0will fall,\u00a0while\u00a0we\u2019ll see an\u00a0increasing\u00a0the number\u00a0of people\u00a0of 65\u00a0and\u00a0above.<\/p>\n This means that\u00a0the income that\u00a0accrues\u00a0by the pension funds\u00a0will\u00a0not be sufficient to\u00a0fulfill the\u00a0promises of\u00a0pensions and\u00a0health care to retirees.<\/p>\n The Economist Jagadeesh\u00a0Gokhale PhD,<\/a> an internationally recognized expert on entitlement reform, labor productivity and compensation estimated\u00a0in a report\u00a0two years ago\u00a0that this difference between\u00a0promises\u00a0and reality\u00a0implies the adoption of\u00a0a sum\u00a0equivalent to\u00a0over\u00a0four times the gross\u00a0domestic product\u00a0for\u00a0the average\u00a0country in Europe.\u00a0Or\u00a0the\u00a0roughly\u00a048,000\u00a0billion Euros for the\u00a0entire EU.<\/p>\n For the United States\u00a0he estimated\u00a0that the hole\u00a0in the social security\u00a0amounts\u00a066,000\u00a0billion Dollars<\/strong>.<\/p>\n To even\u00a0come close to\u00a0balancing the necessary changes\u00a0is such a\u00a0radical enterprise, that it is not\u00a0surprising that politicians are\u00a0reluctant to\u00a0roll up our sleeves.<\/p>\n Goldman\u00a0Sachs\u00a0estimated\u00a0in a recent report that the retirement age\u00a0in Europe\u00a0must\u00a0be increased by\u00a0an average of ten\u00a0years to close this gap.<\/p>\n An alternative solution might be to start importing\u00a0young workers\u00a0at a rate\u00a0of\u00a0between\u00a0three\u00a0and five\u00a0percent of the population\u00a0annually.<\/p>\n In the USA as a part of the Employee Retirement Income Security Act<\/a>\u00a0of 1974 (ERISA), The\u00a0Pension Benefit Guaranty Corporation\u00a0(PBGC)<\/a> was created as an independent federal company, to encourage the continuation and maintenance of voluntary private defined benefit\u00a0pension\u00a0plans, provided timely and uninterrupted payment of pension benefits, and keep pension\u00a0insurance premiums\u00a0at the lowest level necessary to carry out its operation.<\/p>\n The PBGC currently guarantees basic pension benefits for about 44 million U.S. workers and retirees taking part in nearly 30,000 defined benefit pension plans. In fiscal 2010 its deficit rose to an all time high of $23 billion<\/strong>.<\/p>\n During fiscal 2010, the PBGC took over 147 plans from financially ailing or failed employers, up from 144 the prior year. Since 1974, the PBGC has taken over 4,150 plans. In fiscal 2010, the agency paid $5.67 billion<\/strong> to participants in failed single-employer plans, up from $4.48 billion<\/strong> in 2009.<\/p>\n The above give a clear picture in which direction the Defined Benefit Pension plans are going. We believe that current Flat-World and Knowledge Age, Employees must create their own self sustainable retirement arc and that relying on a government or corporation Define Benefit plan might be an obsolete way of thinking.<\/p>\n Last be but not least, before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that in accordance with former FED Chairman Mr. Alan Greenspan PhD, we are currently living in the age of\u00a0turbulence and due to this markets can behave un-realistic in the short term\u00a0and that sharp corrections might happen in the short term.<\/p>\n Yours sincerely<\/p>\n Eric Panneflek Dear PGM CAPITAL Blog readers, In March 2009, Madoff pleaded guilty to 11\u00a0federal\u00a0felonies\u00a0and admitted to turning his\u00a0wealth management\u00a0business into a massive Ponzi scheme, which he started in early 1990,\u00a0which defrauded thousands of investors of billions of dollars. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed. The main reason\u00a0why\u00a0Madoff\u00a0managed\u00a0to[…]<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,10,11,14,42,35,15,1,18],"tags":[],"class_list":["post-5466","post","type-post","status-publish","format-standard","hentry","category-debt-crisis","category-eric-panneflek","category-euro","category-pension-crisis","category-pension-fund","category-pgm-academy","category-pgm-capital","category-uncategorized","category-world-economic-outlook"],"_links":{"self":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/5466","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/comments?post=5466"}],"version-history":[{"count":0,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/5466\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/media?parent=5466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/categories?post=5466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/tags?post=5466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nChairman<\/p>\n","protected":false},"excerpt":{"rendered":"