According to the latest statistics from the Executive Yuan’s Directorate-General of Budget, Accounting and Statistics, as of the end of June this year, both central and local governments have recorded new highs in hidden debts, highlighting a heavy burden on the next generation and bringing the topic of labor insurance bankruptcy back to the forefront… Could embracing Bitcoin provide a breakthrough for the government?
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– New highs in hidden debts of central and local governments
– Status of labor insurance fund utilization
– Would allowing investment in Bitcoin be better?
The Ministry of Labor conducts actuarial evaluations of labor insurance finances every three years. According to the 2021 actuarial report, the hidden liabilities of labor insurance (future potential payment obligations) are estimated to have expanded to 10.29 trillion NTD over the next 50 years. After the government injected 72 billion NTD as a lifeline, the bankruptcy timeline for the labor insurance fund has now been extended to 2028.
According to a report this week by the Economic Daily News, the labor insurance bureau has outsourced actuarial services, with December 31, 2023, set as the measurement date, and results expected to be released in early 2025. Regarding the financial performance of labor insurance, due to significant government supplementation in recent years, coupled with the benefits from the global financial market’s upward trend over the past two years, the performance of labor insurance has improved. The market anticipates that the bankruptcy timeline for labor insurance will be extended again by several years from 2028.
As for the hidden liabilities of labor insurance, the number of individuals receiving labor insurance old-age pensions continues to rise with the aging population. According to the latest statistics from the Directorate-General of Budget, Accounting and Statistics, as of the end of June this year, the total hidden debts of central and local governments (future potential payment obligations) have reached 18.7753 trillion NTD, with labor insurance hidden liabilities alone amounting to 11.8628 trillion NTD, both marking new highs and highlighting the heavy burden on the next generation.
Data released by the Labor Fund Utilization Bureau of the Ministry of Labor indicates that as of the end of August 2024, the scale of the “Labor Insurance Fund” stands at approximately 1.949 trillion NTD, with its utilization including both self-management and entrusted management:
Self-management: deposits in financial institutions, government bonds, short-term bills, real estate, stocks and beneficiary certificates, loans to insured persons, loans to government or public enterprises, foreign investments (fixed income, equity securities, and alternative investments),
Entrusted management: domestic entrusted management, foreign entrusted management (fixed income, equity securities, and alternative investments).
Additionally, data shows that as of the end of August this year, the performance of the labor insurance fund was 15.41%, higher than Taiwan’s 10-year government bond yield and Bloomberg’s global bond index, but lower than the weighted index of the Taiwan stock market and the MSCI global stock index.
It is expected that the future labor population will inevitably decrease, making the question of how to stabilize the development of labor insurance one of the government’s most pressing issues.
In light of Bitcoin’s recent surge to historic highs, this article proposes a thought experiment: if Taiwan were to allow the labor insurance fund to invest in Bitcoin, could it extend the bankruptcy timeline for labor insurance?
The author compares the performance of Bitcoin investments over the past six years with the yield of the labor insurance fund (focusing on annual performance):
In 2019, the yield was 90% for Bitcoin and 13.3% for the labor insurance fund.
In 2020, the yield was 254% for Bitcoin and 8.83% for the labor insurance fund.
In 2021, the yield was 45.1% for Bitcoin and 9.71% for the labor insurance fund.
In 2022, the yield was -64% for Bitcoin and -7.45% for the labor insurance fund.
In 2023, the yield was 150% for Bitcoin and 14.44% for the labor insurance fund.
As of August 2024, the yield was 40% for Bitcoin and 15.41% for the labor insurance fund.
It can be seen that Bitcoin outperformed the labor insurance fund in five out of these six years, although the drop in 2022 was nine times greater than that of the labor insurance fund, indicating higher volatility.
On the other hand, there are examples of government funds purchasing Bitcoin, such as El Salvador, which regularly buys Bitcoin and has acquired 5,918 coins worth approximately 426 million USD, currently yielding significant profits after weathering the bear market.
Additionally, the Wisconsin Investment Board (SWIB), regarded as one of the most financially stable retirement funds in the United States, has revealed its investment in Bitcoin spot ETFs in its holdings report submitted this year.
Although there are successful examples of other governments or funds investing in Bitcoin, due to its volatility and market perceptions, the likelihood of the Taiwanese government opening the labor insurance fund for Bitcoin investment seems low, but… who knows what the future may hold?
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