12 
employees and their employers and settled benefits for the 
retirees. If there is a short term gap the government directly or 
indirectly has to fill it fl there—is—»e-other-' j way? In the long run 
any disequilibrium has to be dealt with by changing contributions 
or benefits. Thus the pensions are financed by a shift of income 
from one part of the population to the other and time does not 
enter in any relevant sense. The old peoples bread is not 
accumulated for them over a life time, it is delivered to them 
fresh from the baker. There is no capital and no interest. (Since 
the Social Security Law 1983 which changed from pay as you go to 
£ m/Is—• 
accumulation this is not true any more and there is a yearly 
excess of security taxes over benefits, in 1989 $ 52 billion). Why 
has it been necessary to supplement this system by another one 
with 2.6 trillion dollar financial assets ( one and a half for the 
private pension funds alone ) which has had a profound influence 
on the whole economy? 
While the accumulation has been going on, in the build-up period, 
. . . 
there had to be a corresponding amount of saving which has meant a *- 
The effect of this has been described in 
my earlier paper on household saving (1982). It depressed the 
national product and in this way produced the budget deficits 
which indirectly were financed by the pension funds. This effect 
was particularly undesirable in the seventies, when the growth 
rate had slowed down. 
A second effect occurred in the financial sphere. The funds gained 
an enormous importance there. Since they moved great amount^ of 
1U. <ypt44, 
assets they frequently engaged in block trading off the floor of 
the stock exchange. They also contributed very much to the 
introduction of options and index trading.^“he managers of the 
'jJtL 
funds gained a great influence also on the take-overs. The funds 
O'M, iCOCCV , j C t 
W j-u/ 0