Wow. I wondered how long it would take, but one of the most respected magazines in the financial world has finally come to agree with my long standing assessment of government debt:
“Rising government debt is a Ponzi scheme that requires an ever-growing population to assume the burden—unless some deus ex machina, such as a technological breakthrough, can boost growth.”
There it is folks, in black and white. The shorter paraphrased version I would suggest is:
“Rising government debt is a Ponzi scheme that requires an ever-growing population to assume the burden—unless some unexpected and unlikely magic happens.”
I will officially retire my tin foil hat because calling government debt a Ponzi is now apparently the accepted norm given how mainstream The Economist magazine is today. If that is the case then it follows easily that our debt fueled economy, including the stock markets and our housing markets are also Ponzi schemes because debt based government spending is propping up all of these.
The article also likens credit to the consumption of alcohol which is a drug. Drug addiction is another economic analogy that I have often used mainly to point out that drug dependent people will have withdrawal pains if they can’t get more of their drug. Deflation is withdrawal pain for the addiction to Keynesian credit gone wild.
Mish adds his own 2 cents which is again something I have written time and again:
“Keynesian fiscal stimulus is nothing but a Ponzi scheme and all Ponzi schemes come to an end.”
Suspend disbelief and take some time to think about what is likely to happen if the Ponzi finally collapses. It might be good to start by reviewing what happened to participants in the Madoff Ponzi. Nobody can predict the future with 100% certainty but historically what happens is that at some point the herd will just wake up and, over a relatively short period of time, everyone will figure out that the whole thing is a con job. They will run for the exits so as not to be the last one out and the last one out will be left holding an empty bag.
