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Biggest ponzi scheme

Discussion in 'Off Topic Threads' started by Dougbbbb, Sep 21, 2013.

  1. Dougbbbb

    Dougbbbb TS Supporters TS Supporters

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    The “Bernie” Madoff name became famous while the stock market was falling during the credit and financial crisis. He was responsible for running one of the biggest Ponzi schemes in U.S. history—if I recall correctly, it was a $65.0-billion scheme. But as the scam got bigger, Madoff couldn’t go on. He was caught, prosecuted, and sentenced to more than 100 years in jail.

    What did we learn from the Madoff ordeal? At the very least, we learned Ponzi schemes eventually become impossible to hide, no matter how smart and cunning the perpetrator.

    Wednesday of this week, we learned that the Federal Reserve’s Ponzi scheme of printing paper money and giving it to the government via the purchase of U.S. Treasuries will go on.
    While the Fed says it wants to keep the “stimulus” going until the economy gets better, as I have written in these pages many times, the Fed cannot stop printing because if it did stop, three things would happen: 1) the stock market would collapse; 2) housing prices would fall; and 3) the government would have no real buyer for its debt (especially in light of China and Japan pulling back on buying U.S. Treasuries).


    Madoff’s $65.0-billion Ponzi scheme is nothing when I look at the U.S. national debt figures. While it looks like we are beyond the point of no return, our national debt level would have to double from $17.0 trillion to $34.0 trillion before our debt-to-gross domestic product (GDP) ratio matches that of Japan. (And don’t for a moment think that’s not going to happen!)

    In 2011, only two years ago, we heard Congress debate whether they should increase our national debt limit or not. The theater of a government shutdown was on for a while; it drove key stock indices lower and bond yields higher. Now we’re at square one again. Secretary of the Treasury Jack Lew sent a letter requesting an increase in our national debt limit by October, or the U.S. economy would face a risk of default.

    The bottom line, dear reader, is that the U.S. government is broke. To keep the government afloat from now until Congress passes a new national debt limit, the government has stopped investing into the pensions of federal government workers.
    I don’t for a second doubt that Congress won’t raise the national debt limit—it will; it has done just that 78 times since 1960. Why would this time be any different?

    What has happened so far—the massive printing of paper money—is just one part of the puzzle. The Ponzi scheme is complex and has many moving parts. The government’s failure to clamp down on spending is the main problem.

    In the 11 months of the fiscal 2013 year, the U.S. government has incurred a budget deficit of $755 billon, according to the Bureau of Fiscal Services. (So much for those estimates that said the U.S. government budget deficit would be below $700 billion this year!)

    The Congressional Budget Office (CBO) expects the U.S. government to continue posting budget deficits until 2015, when it says the annual budget deficit will equal two percent of the gross domestic product of the U.S. economy. (Source: Congressional Budget Office, September 17, 2013.) I don’t buy that prediction for a moment. Interest costs on the national debt alone could be a huge problem going forward.

    For the government’s fiscal year ending this September 30, the U.S. government expects to have incurred $414 billion in interest payments alone. Assuming a national debt of $16.7 trillion, this equates to an interest rate of about 2.5%. But interest rates are rising!

    And the more the national debt increases, the higher the interest payment. Think what will happen once interest rates in the U.S. economy start to climb higher, and when creditors start asking for higher returns due to our massive amount of national debt. Even if our national debt doesn’t change and interest rates go back to normal, the interest payments on the national debt would rise to over $900 billion a year!

    Bring Social Security liabilities into the picture, and the future looks even more gruesome. According to the Pew Research Center, every day 10,000 Americans reach retirement age. (Source: Pew Research Center, December 29, 2010.) With the financial crisis having placed pressure on retirement savings, retirees are now relying on Social Security more than ever.

    Right now we are seeing the government hoping investors will keep re-investing in U.S. bonds while the Fed picks up the slack. But what happens when they say, “We want our money back?” It will make Madoff’s Ponzi scheme look like a joke.
     
  2. otnot

    otnot Active Member

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    I'm glad to see a few people are waking up. The ponzi scheme has been going on for 100 years now. If you get a chance watch the video Money Masters.
     
  3. joe kuhn

    joe kuhn Furry Lives Matter TS Supporters

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    So how should the government be redesigned to prevent this?
     
  4. AEST BOSS

    AEST BOSS Member

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    How/why does Japan's debt stay afloat?
     
  5. bigbore613

    bigbore613 Active Member

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    Wait until the rest of the world has enough of thi bullshit and drops the US dollar as the go to world currency. You will need a pickup load of cash to buy a box of shells!!! Jeff
     
  6. otnot

    otnot Active Member

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    A good place to start is to end the FED since it isn't owned by or run by the government. Did you realize that we have to borrow the money from the Federal Reserve? Yes and pay interest! If we printed our own money we would save hundreds of billions a year in interest.
     
  7. Dougbbbb

    Dougbbbb TS Supporters TS Supporters

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    Where have we heard this before



    WASHINGTON (AP) — Treasury Secretary Jacob Lew said Wednesday the government will have exhausted its borrowing authority by Oct. 17, leaving the United States just $30 billion cash on hand to pay its bills.

    That's a slightly worse financial position than Treasury predicted last month and adds to the pressure on Congress to increase the government's borrowing cap soon to avert a first-ever U.S. default on its obligations.

    In a letter to top congressional leaders, Lew warned that a repeat of the debt brinksmanship of 2011 could inflict great harm on the economy and that "if the government should ultimately become unable to pay all of its bills, the results could be catastrophic."

    The government reached its $16.7 trillion debt limit in May. Since then, it has been using "extraordinary measures" such as suspending U.S. investments in federal employee trust funds to create about $300 billion in additional borrowing room.

    But on the 17th the government will be left with only its cash cushion and daily receipts to pay its bills. Lew warned that before long it would not be able to meet all of its obligations. Economists and financial market experts warn that the stock market could plummet and that investors would demand higher returns on Treasury notes, which could raise interest rates and harm the economy.

    ."
    Separately, the Congressional Budget Office estimated that the potential default date would come between Oct. 22 and the end of the month. On Nov. 1 the government faces $67 billion worth of payments, including Social Security benefits, pay for active-duty military, and pension payments to federal retirees.

    It's generally assumed that Treasury would make sure that the government wouldn't default on Treasury notes held by investors, including foreign countries like China, If it did default on such debt obligations it could be a catastrophe for the economy.

    A House-passed stopgap spending measure pending before the Senate contains a GOP-backed provision that would give Social Security recipients and bondholders priority in receiving payments from the government.

    Lew again rejected the idea.

    "The United States should never have to choose, for example, whether to pay Social Security to seniors, pay benefits to our veterans, or make payments to state and local jurisdictions and health care providers under Medicare and Medicaid," Mr. Lew said. "There is no way of knowing the damage any prioritization plan would have on our economy and financial markets. It would represent an irresponsible retreat from a core American value: We are a nation that honors all of its commitments."

    ."
    Lew again warned that President Barack Obama would not negotiate with Republicans over the debt limit.

    "The president remains willing to negotiate over the future direction of fiscal policy, but he will not negotiate over whether the United States will pay its bills for past commitments," Lew wrote. Extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has already approved."

    Republicans want to add budget cuts and other legislation like a one-year delay of "Obamacare." House leaders hope to bring a debt limit increase to the floor by the end of this week but they haven't released any details yet.
     
  8. CharlieAMA

    CharlieAMA TS Supporters TS Supporters

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    Just watch. They will pull the 'Blame Bush' card.