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The national pensions scheme (in France, at least, and no doubt elsewhere) runs on contributions raised on salaries. These are nominative and confer rights to a future pension (subject to rules on number of contributions).

The contributions received by the scheme are paid out to present pensioners. The state is only called on to make good the deficit, when there is one (there usually is, but a small percentage).

The pension fund's income can thus be said to consist (for the most part) in deferred salaries, earned by work. The outgoings, (pension rights acquired by previous work), go almost immediately to consumption.

Legal tender is used to denominate these flows, but in what sense is it created ex nihilo?

If it can be argued that it is, how can this be the most clearly and persuasively explained to Dummies?

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Oct 22nd, 2010 at 08:35:40 AM EST

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