U.S. Government Debt Is THE Biggest Ponzi Scheme In History

First, let me just say up front that anyone who is worried that the U.S. will default on its Treasury obligations because of this grand Vegas stage-show going in DC is a complete idiot.  To begin with, I fully expect Boehner to cave in and come to an agreement that at least temporarily lifts the debt ceiling so that Jack Lew and Obama can continue spending our money at a far greater rate than the incoming revenues.  Second, for all you folks with your head in the sand about what has happened to our Constitution over the last 13 years, the Patriot Act/Homeland Security Acts give Obama the authority to unilaterally print the money needed to service the Government’s Treasury Ponzi scheme in case the stage actors don’t blink by October 17th – Jack “Yes I’m A Thief” Lew’s drop-dead date for cash in the Treasuries drawer.
Ultimately the debt ceiling will be raised by at least $1 trillion and Government spending will not be reduced.  But rest assured that the massive graft and kick-back payments that flow freely all around Capitol Hill will continue unabated.

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From Truth in Gold:

The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.  -Investopedia

The Treasury bond market is a Ponzi scheme because the amount of debt outstanding keeps growing pretty much at an accelerating rate:

(Treasury Debt Outstanding)

The reason this is a true Ponzi is because at every Treasury auction, held twice a month, the Government issues enough debt to repay the existing debt that is maturing and issues even more debt in order to fund Government overspending.  That is a Ponzi scheme in its essence.  In fact, Putin was wrong, this is an exceptional country because nature of the U.S. Government  Treasury Debt Ponzi scheme is truly exceptional.

Now that I think about it, The United States’ Treasury bond Ponzi scheme is not only the biggest in history but it’s the greatest in terms its ability to keep it going.  A typical Ponzi scheme, like Bernie Madoff’s, requires new investors putting more money in to the scheme in order to payout the existing investors.  In contrast, if the Chinese and Japanese decide they’d rather not keep putting an increasing amount of money into financing our Governmental spending juggernaut, the Fed can just print money under the orders of the President to keep the gerbil going on the wheel, as it were.  Madoff’s biggest problem is that he didn’t have his own U.S. dollar printing press.

Worried about the price of gold?  This chart below shows you why you don’t have to worry long term:

This chart shows the “exceptional” correlation between the price of gold and the level of the debt limit ceiling going back to 2000, the genesis of the current bull market in gold.  The drop in price since September 2011 shows the “exceptional” degree of Government/Federal Reserve intervention in the gold market – conducted by the Exchange Stabilization Fund as authorized by law and executed by JP Morgan – in order to deflect concern/fear about the increasing levels of Government spending and debt and the exceptionally increasing level of international distrust of the U.S. dollar.

The problem with Government interference in markets is that over time there are natural laws of economics and mathematics that come into play and that can not be avoided, by anyone.  The particular law of nature here is the “regression to the mean.”  At some point, sooner rather than later, the price of gold will “regress” back up to its mean level of correlation  with the imminently-to-be-raised Treasury debt limit ceiling.

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Comments

  1. You expect Boehner to cave?  You have it backwards.  Boehner’s just doing his job, playing his part in the Shock Doctrine Theater.  Sure, the GOP will raise the debt ceiling.  Anyone who knows anything knows this was a given.  But the (fake) threat of default will see the Democrats (also fake) caving to spending cuts.  And when we hear the GOP say spending cuts, we all know what that means.  Pay cuts to the American people for much needed retirement and healthcare benefits.  While corporate welfare such as ag subsidies, QE, and defense spending continue at record pace.
    F*ck ‘em all.

  2. It can be agreed that an ever increasing amount of capital is required to fund this great scam, but have you given any thought to the amount of idiots needed to continue this?

  3. This is another well thought out article on what might happen with this budget debat.
     
    The Possible Outcomes Of The Shutdown Theater

  4. What’s the point in callin’ shots? 
    This cue ain’t straight in line
     

  5. The US government is a group of liars both sides of the isles!

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