We live in an era in which extractive governments deceive citizens into believing that they will receive more money out of nowhere. This week we have experienced the flip side of the coin of the false state promise.
In Argentina, a huge controversy was created because Milei vetoed a “rise” in pensions approved by two thirds of Congress. Who has been accused of being unsupportive and evil? MileiThis shameful “increase” in pensions would be paid for by printing more money and, as happened with Peronism, sinking the purchasing power of pensions and all salaries.
How easy it is to promise to pay in a currency that you print and that is worth less and less! It is the best deception that destructive statism has created. Then they blame the rise in prices, that is, the destruction of the purchasing power of the currency, on companies. What nerve.
Milei has not vetoed an increase in pensions. He has vetoed another reduction in real terms of the purchasing power of Argentines.
“Raising” pensions in an increasingly devalued currency means lowering them. Some Argentine extractive politicians have said that this increase must be financed by taxes. Argentina already has confiscatory taxation, and history has shown that by raising taxes, they continue to accumulate deficits and print money, thus impoverishing citizens.
This brings us to the fallacy that we live in Spain. Sánchez does not raise pensions: he puts them into debt.
Social Security debt has soared by 9.4% to 116 billion. Sánchez has tripled Social Security debt, and that despite the fact that he has raised our taxes, including the fallacious mechanism of intergenerational solidarity which means that you pay much more and will receive much less in real terms. It is much worse. The unfunded liabilities, that is, debt committed but not issued, of the Spanish pension system reach 500% of GDP, according to Eurostat. That is, the country with the highest unfunded liabilities in the entire EU and the OECD. Sánchez has “raised” pensions by lowering all future ones and making the system even more unsustainable.
The State does not have the unlimited capacity to create money. If it tries, it destroys purchasing power.
How does the government deceive you with the distribution system as it is configured today?
First, they tell you that the system is sustainable because they can raise taxes. Then it is not a pay-as-you-go system and it is not sustainable, since it needs to be bailed out several times annually.
Second, they tell you that the system is sustainable because the State can cover payment needs via transfers and that Social Security expenses can be transferred to the Budget. But the State is in deficit, 3.6% of GDP, and very indebted, 108.2% of GDP. In other words, they acknowledge that the system is not sustainable and needs to be rescued by a State that is in even greater debt.
Third, they tell you that the system is sustainable because money can be created in an unlimited way by states and central banks. And what is creating money in an unlimited way? Giving you a pension of 1,000 euros where 1,000 euros have no purchasing power. The same deception of Peronism in Argentina: printing constantly devalued currency to give subsidies that have less and less purchasing power. In other words, they tell you that the system is unsustainable and that these enormous liabilities are going to be paid in a currency whose value vanishes when it is printed without control. And you believe that they are going to print money but that it will maintain its purchasing power. Hilarious.
The pension system will never be sustainable by using taxes and deficits.
The State does not have the unlimited capacity to create money And when it tries to do so, it destroys the purchasing power of the currency it issues and the world loses confidence in that state, because issuing currency without control is the equivalent of an implicit default.
The State has two very clear limits when it comes to creating money: a fiscal limit, since issuing money is issuing credit and the loss of credit confidence in the issuer destroys the currency, and an inflationary limit, which is equivalent to the fiscal limit. Inflation, which is the destruction of the purchasing power of the currency, is the manifestation of this State limit on the creation of money. But of course, thieving governments come along and blame supermarkets for the inflation they create and then present themselves as the solution by “raising” pensions in a depreciated currency. That is, lowering it.
Until people understand that only capitalisation is a sustainable and fair system, and that the State will never make the pay-as-you-go pension system sustainable by using taxes and deficits, retirees will be condemned to see their pension disappear in real terms. “Sustainable.”