Gary North on the Global Debt Ponzi

Since I began writing about the state of global Ponzinomics in 2007 I have written a good number of articles and emails like the one to be found at the link below from Gary north.  But Gary has a way with words that I don’t and so I strongly recommend reading his take on the situation.  I can understand skepticism when you hear “Ponzi scheme” from someone like me, but Gary North has been a truth telling economist for many decades.  His views should carry weight with any reasonable person IMO.

http://www.garynorth.com/public/10521.cfm

Please keep in mind these following truths about all Ponzi schemes that ever happened:

• The Ponzi scheme is a type of pyramid scheme which itself is a form of confidence game (con job).  It cannot work if people don’t have confidence in it.  The very fact that one is present means there is great confidence in it at all levels. 

• The confidence stems not from mathematical analysis but rather from herd think.  The herd wants to hear good news.  The heard wants to hear sugar coated happy talk.  It doesn’t matter if the facts don’t add up because anyone who upsets the collective calm is met with hostility, incredulity or indifference.

•  The main aspect of faith behind a Ponzi is that it seems to have worked so far.  Thus, it must work forever.  Ponzi trees must grow to the sky.  This is a built in way of how most people’s brains are genetically wired.  The Ponzi scheme simply takes advantage of human nature by promising good things that cannot be delivered.

• There are always a few people who see them for what they are and who say something but the herd is unable to suspend disbelief in the system long enough to weigh the facts.  The Madoff case is famously documented with several hi quality (accounting firms) whistle blowers who went to the SEC about Madoff.  But their complaints were “investigated” and no wrongdoing was found even though the evidence of fraud would easily have been uncovered by a simple audit.  The SEC didn’t want to know.  They didn’t want to upset the apple cart.  They didn’t want to be the messenger.

•  Ponzis (or Pyramids) pay outgoing members from money collected from incoming members.  In order for this to work forever, the number of incoming greater fools must constantly increase.  Thus Ponzis break down when something happens to slow or stop new suckers from entering the scheme.  It generally happens because people either get wise to the scam or there simply are not enough people who are still outside the scam that can be brought in.  In other words, when everyone is already fully invested in the Ponzi, it must collapse as a result of its own success and popularity. 

The baby boomers provided a lot of new bodies for the global Debt Ponzi.  But now that boomers are leaving the workforce and taking money out of the system instead of putting money into it, the Federal Reserve has been making up the difference by piling bad debt onto its balance sheet.  Those “assets” now total 2.9 trillion and rising.  The fed is getting very nervous yet they know that pulling back stimulus will now open the deflationary floodgates and the Ponzi will deflate.  So they will do what they can until the breaking point and then they will try to stop.  This will cause panic at which point the government will take over the money supply as they recently did in Japan.  That will be the sign of the end for the dollar.  Government will destroy the currency in order to buy votes.

You will know the Global debt Ponzi is in free fall collapse when the government steps in and makes it impossible, under threat of laws (which means ultimately, threat of physical force) to exit the Ponzi.