- Long-term real interest rates do not reflect monetary policy.
- In the recent past, monetary policy has contributed to lower fixed-income interest rates but also to higher returns on other asset classes.
- Complaining about low rates but not adjusting one’s portfolio makes little sense; there is no “financial repression.”
- If politicians want to subsidize pension funds they should contribute funds from the government budget rather than asking the central bank to contribute.
- Larger and earlier SNB dividend payouts to the government may not be in the government’s interest.
In the NZZ, Werner Enz reports that the insurance company AXA will stop offering “Vollversicherungen.” One motivation relates to the fact that the second pillar in the Swiss pension system is increasingly abused, with redistribution undermining supposedly “individual” accounts.
Information from the Swiss Federal Social Insurance Office on the social insurance system in Switzerland:
On Project Syndicate, Andres Velasco argues that one of the sources of the current problems with the Chilean pension system are the high fees charged by fund managers:
A government-appointed commission recently concluded that managers have generated high gross real returns on investments: from 1981 to 2013, the annual average was 8.6%; but high fees cut net returns to savers to around 3% per year over that period.
The commission’s report.
Graeme Wearden in The Guardian summarizes the results of the Euro summit that ended with no Grexit:
An agreement has finally been reached in Brussels after almost 17 hours of talks, Europe’s longest-ever summit. A deal on the new bailout for Greece has still to be thrashed out, however. Here are the key points:
Greek assets transfer
Up to €50bn (£35bn) worth of Greek assets will be transferred to a new fund, which will contribute to the recapitalisation of Greek banks. The fund will be based in Athens, not Luxembourg as the Germans had originally demanded.
The location of the fund was a key sticking point in the marathon overnight talks. Transferring the assets out of Greece would have meant “liquidity asphyxiation”, said the Greek prime minister, Alexis Tsipras.
Talks will begin immediately on bridging finance to avert the collapse of Greece’s banking system and help cover its debt repayments this summer. Greece must repay more than €7bn to the ECB in July and August, before any bailout cash can be handed over.
Greece has been promised discussions on restructuring its debts. The German chancellor, Angela Merkel, said the Eurogroup was ready to consider extending the maturity on Greek loans. There is now no need for a Plan B, she added.
The Greek parliament must approve the deal before the German bundestag votes. It must also start passing legislation straight away to implement the agreed measures.
Creditors have insisted on immediate action on:
- Streamlining VAT
- Broadening the tax base
- Making further reforms to the pension system
- Adopt a code of civil procedure
- Safeguarding of legal independence for Greece ELSTAT — the statistic office
- Full implementation of automatic spending cuts
- Meet bank recovery and resolution directive
Tsipras pledged to implement radical reforms to ensure that the Greek oligarchy finally makes a fair contribution. The agreement thrashed out overnight would allow Greece to “stand on our feet again”.
Implementation of reforms would be tough, the Greek prime minister said, but: “We fought hard abroad, we must now fight at home against vested interests.”
He added: “The measures are recessionary, but we hope that putting Grexit to bed means inward investment can begin to flow, negating them.”
Updates and additional links
The official Euro summit statement.