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Spain Plunders 90% Of Social Security Fund To Buy Its Own Debt

Home - by - January 4, 2013 - 16:00 America/New_York - 11 Comments

Zero Hedge

With Spanish 10Y yields hovering at a ‘relatively’ healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the WSJ notesSpain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds – with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt. Of course, this is nothing new, the US (and the Irish) have been using quasi-government entities to fund themselves in a mutually-destructive circle-jerk for years – the only difference being there are other buyers in the Treasury market, whereas in Spain the marginal buyer is critical to support the sinking ship. The Spanish defend the use of pension funds to buy bonds as sustainable as long as it can issue bonds – and yet the only way it can actually get the bonds off in the public markets is through using the pension fund assets. The pensioners sum it up perfectly “We are very worried about this, we just don’t know who’s going to pay for the pensions of those who are younger now,” or those who are older we would add.

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» 11 Comments

  1. Tim

    January 4th, 2013

    Isn’t this sorta like the guy during the siege of Leningrad who cut strips of flesh off his own ass, and ate them, in order not to starve?

    Guess how that ended?

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  2. Stirrin the B.S.

    January 4th, 2013

    Spain has 25% unemployment and an estimated 60% of the local businesses incurring losses, which means the well is drying up very quickly. I wouldn’t want to be a Spanish politician right now.

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  3. KF

    January 4th, 2013

    I was going to say it’s like a snake eating it’s own tail but Tims’ analogy blows that one right out of the water.

    Very appropriate for this

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  4. Stirrin the B.S.

    January 4th, 2013

    The sales of pitch forks and torches are at an all-time high.

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  5. I Luv Bacon

    January 4th, 2013

    Soetero’s economic model.
    We are soooo F’d

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  6. Stranded in Sonoma

    January 4th, 2013

    More proof that Social Security isn’t.

    It isn’t social because there’s nothing friendly or community oriented about it. And as for security… well, I think this story from Spain dispels any rumors about the possibility of the retirement money being free from danger, anxiety, or crime.

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  7. shakazulu

    January 4th, 2013

    Before you know it they’ll have the “Catching of the Bulls” with forks and knives in hand.

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  8. "That Guy"

    January 4th, 2013

    This is the same country that subsidized “green” energy so heavily, and so blindly, that a number of “solar” power stations were making a profit using diesel generators to generate power at night to sell to the grid.

    Thumb up +4

     
  9. Browns44

    January 4th, 2013

    Coming to a country near you soon!

    Thumb up +4

     
  10. Name Redacted™

    January 4th, 2013

    Quit giving Obama ideas.

    Thumb up +3

     
  11. Nutjob

    January 5th, 2013

    Guess they got that plundering of the social security from the democrats here, except with ours there is/was no sale of bonds….just a note that says IOU.

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