John Ward – Spanish Bond Scandal : Wall St Journal Now Only 3 Years Behind The Slog – 4 January 2012

PETEPAULCARTcropHow the Journal is behind the music on Spain’s social welfare embezzlement

The Murdoch-owned Wall Street Journal ran what it positioned as a ‘scoop’ yesterday on the Spanish bond Peter-to-pay-Paul thing involving the country’s social welfare funding. It was soon picked up by Tyler Durden at Zero Hedge:

‘As the WSJ notes, Spain 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. 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.’

In fact, the sum invested was already €56.5 billion in Spring 2010. The latest outbreak of fiscal cannibalism is relatively small by comparison.

On August 4th 2010, The Slog posted about Spain rogering itself with these words: ‘the Spanish fiscal system is virtually eating itself, as the Government there gambles away the pensions and health insurance of its own citizens in a bid to buy its own bonds and thus keep the otherwise terrified punters interested. I’m sad for the Spanish but delighted for the Slog’s reputation, as I rather fancy some were beginning to doubt my trusty source on that market. He’d told me two months ago that what he called “incestuous buggery” was taking place in the country’s financial mess; well, now I can see what he meant. ‘

So on the basis of that, they’ve probably been at it for nigh one three years by now. Last Spring, I posted (this time from published sources) to this effect:

‘In Spain, unpaid bills, public company debt, and Spanish sovereign bonds amount to €870 billion. More disturbing still – I’ve posted about this before many times – is the degree to which Spain’s social insurance budget is also deep in hock. The social security reserve fund is where the Spanish are supposed to be accumulating resources to help pay for their pensions. But this is the last thing they’re doing. According to this brand new report from the fund managers, at the end of 2010 the fund had assets valued at just under €65 billion under its charge. Of this sum, €56.5 billion billion (or over 5% of GDP)  were invested in Spanish government bonds…’.

My Madrid source confirmed yesterday early evening GMT that the new level of social security plundering to buy its own junk is about €62 billion. Rape of other vital budgets is in turn at thus far unrevealed (but high) levels. As it is in Greece and Ireland….and enormously so in Italy. Over to you, Signor Monti.

Stay tuned. Chances are, you’ll read it here first. /  link to original article

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