The Chilean pension system is in disaster – Marginal REVOLUTION

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Chile’s celebrated $200bn non-public pensions system has served as a mannequin for dozens of rising markets because it was launched within the Nineteen Eighties. Now, it faces an existential disaster as public help for the mannequin fades and populist politicians enable savers to withdraw funds in the course of the coronavirus disaster.

The decrease home of congress voted to permit Chileans to withdraw one other 10 per cent of their pension funds final week, following an identical measure in July that noticed withdrawals of some $17bn.

Congress might but approve a 3rd withdrawal subsequent yr, placing in danger a pool of financial savings that has pushed the expansion of Chile’s capital markets and jeopardising future returns.

That’s from Benedict Mander and Michael Stott at the FT.  In fact you possibly can say “Ah, they shouldn’t try this!”  And they need to not.  Nonetheless, on the finish of the day in the event you go away surpluses sitting round to be grabbed or handed out, don’t be shocked if they’re grabbed or handed out.  Arguably the famed Chilean scheme has been proven to be time-inconsistent.  It was, nonetheless, good whereas it lasted.