Spain is putting all its eggs into one basket...
The state pension fund...is buying Spanish sovereign debt at a vertiginous pace.
...the share of [the state pension fund's] total portfolio invested in Spanish government bonds rose from below 50pc in 2007 to 76pc in 2009.
The Social Security minister Octavio Granado said it will rise to 90pc by the end of this year.
It is clear from an analysis of the data that [the state pension fund] is not just investing fresh revenues in Spanish bonds, but also rotating out of Dutch, French, and German bonds into Spanish debt. The Spanish government is also funnelling 90pc of its sickness fund into state bonds.
Evidently, Spanish savers are underpinning Madrid’s Treasury auctions, whether they like or not. It is they who are mopping up the debt along with the European Central Bank as foreign creditors stay away. ...foreign demand for Spanish debt has “dried up” again after a brief recovery in July.
...Spain is not alone in tapping its pension fund. Half the world is doing it.
...Britain also plays the game. It uses pension rules to force its savers to buy Gilts. The US social security fund buys Treasuries. We all do it.
If there’s trillions of dollars difference
between publicly outstanding debt investors can buy and sell,
and non-marketable intragovernmental debt,
who is it owed to,
who has to pay how much and when,
how could those who know or should and don’t
let the country borrow trillions from itself,
and why are most Americans unaware?
We are building up a nasty inter-generational clash by plundering the savings of current workers to fund a bloated state and an aging bulge of pensioners who – through no fault on their own: many were even forced to retire before they wanted to – have become ruinously expensive for a shrivelled tax base.
...Let us call it the last roll of the dice."
Ambrose Evans-Pritchard
Telegraph
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