Quantum Pranx

ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘Ponzi

Dear Ben, please print us more money

leave a comment »

by testosteronepit
Posted August 30, 2011 

DEAR BEN,
Please print us more money. We want you to prop up the stock market. Everybody knows it’s a Ponzi scheme that will collapse without your support. You don’t want us to end up like Bernie Madoff’s clients. No, Ben, we love Ponzi schemes. We get in early and get out before they collapse. That’s why we’re rich. The bad thing is that they sometimes collapse before we can get out. But you already bailed us out twice in the last couple of years through printing trillions of dollars. Why not a third time?

That will also keep the bond-market bubble inflated. We have to admit that you’ve done an excellent job there, hands down. Negative real yields all the way up the yield curve! Awesome. Now if you could just print a few trillions and buy up the sovereigns from the PIIGS. Euro crisis over. End of story. And we’d get richer because we’d sell them to you at face value though we bought them at fifty cents on the dollar.

And why not forever? Just keep printing. Because as soon as you stop, stock markets will crash again, and credit markets will seize, and then we’re back on this awful ride to hell.

Of course, it’ll cause inflation, which is good. You yourself said that. You stated many times that you want inflation. In fact, you said that one of the goals of the Fed, after propping up the markets, is to create inflation. So stick to it, Ben. Don’t slack off suddenly just because some cowboy threatened you.

Inflation, in conjunction with your near-zero yields, has all sorts of benefits. For example, it will eat up the Social Security trust fund, whose $2 trillion balance is invested in treasuries. Fixed-income investors, retirees, and everybody who has any savings will also be demolished. And homeowners. But don’t worry. They won’t figure it out. They don’t get a statement every month that shows how much inflation cost them. It’s a quiet way of stealing from them, and it’ll impoverish them over time, but it’ll make us, the recipients of the money you print, richer.

You see, Ben, we can charge higher prices for our goods and services. And even if we have to pay more for raw materials, we look good. Our inventories increase in value, and we can claim sales jumped 10% because we raised prices by 10%. Analysts dig that.

Recently, Ben, you’ve done a decent job on inflation. In July, we were running at an annual rate of 6%. Not bad. But you need to preempt any cooling off. So keep printing.

Now, we’re not talking about wage inflation. Oh no. We have to keep wages down. We need cheap labor, or else we’d have to send these jobs to China—which we’re doing anyway. And not just to assemble iPhones. Heck, our lawyers in India are doing the same work as our local lawyers for one-tenth the pay. So, if our local lawyers want to be competitive…. Just think how much more profit we could make if wages collapsed!

Real wages have been declining for ten years and fell another 1.7% since July 2010. But that’s not enough. So get with it, Ben. Print more. And don’t worry about the wusses out there who say that choking the middle class like that will put us into a permanent recession. Just get the banks to loan them lots of money so they can buy our stuff, and when the loans blow up, you buy them from the banks at face value. Full circle, Ben.

The trillions you’ve printed and handed to us, well, we put them to work, and we created jobs in China and Mexico and Germany, and we bought assets, and it inflated prices, and now we’re even richer. We’re proud of you, Ben. Think of the influence you have. And not just here. Around the world, Ben! Look at the Middle East and North Africa. See the food riots, rebellions, and civil wars it caused? Thousands of people died and entire governments were toppled…. Oh, wait. That’s a bad example.

And then there is Congress. We invested in them through campaign contributions and other mechanisms to get them to spend trillions of dollars every year on our products and services, and they even started a few wars, and it made us richer—without taxing our companies or us. It’s a wonderful system.

But the deficits have become so huge that they exceed what the Treasury can borrow. So we’re glad, Ben, that you stepped up to the plate and printed enough money to monetize the deficit. But Ben, you can’t just stop now! You’ve got to keep at it. Or else, the whole system will blow up. Well, it’ll blow up anyway, but we don’t want it to blow up now. So, Ben, you don’t have a choice. Otherwise, we’d lose a lot of money in our schemes, and nobody wants that.

Cowardly Old World

leave a comment »

by Doug Graham
Posted originally on Rick’s Picks, November 9, 2010

PRETTY WEIRD HAVING FRONT ROW SEATS TO THE DESTRUCTION OF THE DOLLAR, but here we are. The leaders keep claiming they have a strong-dollar policy, yet the price of nearly everything, excepting housing and perpetually deflating technology, is now rising. Every metal. Grains? Fuggeddaboutit. Energy? Well, Natgas kind of threw us a curve, but even it is double its price from ten years ago. We can argue the deflation debate forever, but the fact is your dollar buys you less of nearly every single commodity than it did in the Nineties. Some, as much as 80 percent less. You could not say this in the Eighties or the Nineties.

At the same time we have a government which evidently can do nothing but stimulate inflation, insisting on growing. It is widely stated that governments produce nothing. This is not entirely true. Other than dollars, they also can produce national security and they do provide some services such as moving mail around. In general, however, they do produce nothing. If they were a part of the human anatomy, they are more like the colon (my apologies to the colon, an effective and efficient organ) than the quadricep: vital for the whole to function, but not all that pleasant. And yet, the only significant job-growth sector of the economy in the last two years has been government.

So our currency is losing value, our tax obligations are increasing, and nearly every economic indicator shows the barometer dropping and bad weather continuing. I fear “The Beard”, and I’m not talking about S.F. Giants pitcher Brian Wilson. I fear BS Bernanke and his beard. He was the one who, a year-and-a-half ago, said “green shoots” were popping up everywhere. He was the one who said in 2006 that subprime was contained and housing, nationwide, would never go down. Fear the Beard!  The Beard who said this:  “The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost.” And this:  “Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation.”

Hang ‘Em High?
I believe the nasty stuff hasn’t even hit the fan yet. But it is coming, and nothing will stop it. And when it does, all wrongs will be righted. It will be an economic “Control-Alt-Delete,” power-on reset. The system will have to be completely rebuilt and re-booted. It is a mess. So obviously, we all recognize the mess and want to clean it up, right?  Throw the bums out? Renegotiate untenable pensions? Hang ‘em high? (See picture left.)

Will we correct what needs correcting? I doubt we grow a conscience and the will necessary – at least not until the allied forces overcome those benefiting from the fascism/ corporatism/ corrupitalism. Call it whatever you want, but if you are getting a lot more out of the system than you put in, you are a beneficiary, and you are the problem. This spans from CEOs (not all), and from the poor (not all)  gaming the welfare system, to public servants gaming their benefits (sometimes voluntarily, sometimes systemically), and likely a very varied list of others.

I heard a campaign ad before the election disparaging a candidate because he “wanted a smaller, responsible government” and that would be destructive to the local economy….sigh!

Read the rest of this entry »

The Dark Years are here

leave a comment »

by Egon von Greyerz – Matterhorn Asset Management
Originally posted July 14, 2009

“Paper money eventually returns to its intrinsic value ZERO” – Voltaire 1729

IN THIS NEWSLETTER WE WILL OUTLINE WHAT is likely to be the devastating effect of the credit bubbles, government money printing and of the disastrous actions that governments are taking. Starting in the next 6 months and culminating in 2011–12 the world will experience a series of tumultuous events which will be life changing for most people in the world. But 2011–12 will not be the beginning of an upturn in the world economy but instead the start of a long period of economic, political and social upheaval that could last for a couple of decades.

We will discuss the three areas that we for some time have argued will determine the fate of the world for the foreseeable future, namely the coming unemployment explosion, the next and much more serious phase in the credit markets and finally the likely hyperinflationary or just inflationary effect this will have on the world economy and investments.

EMPIRES ARE BUILT ON THEFT, PILLAGE, SLAVE LABOUR AND FINALLY MONEY PRINTING
Let us first go back in history and analyse what creates an empire and the prosperity that comes with it.

The British Empire started in the 17th century and reached its peak in the 19th century during Queen Victoria’s reign. By the end of the 19th century the British Empire included nearly 20% of the land surface of the world and 25% of the world’s population. So Britain which is less than 0.5% of the world’s land surface area controlled an empire which was more than 50 times greater. So by using slave labour and by stealing the resources of 20% of the world, it is no wonder that Britain was the wealthiest nation for several centuries. But like all empires, Britain carried the seeds of its own destruction. All empires – e.g. Mongolian, Roman, Ottoman or British etc. – eventually overstretch their resources both militarily and financially. This combined with decadence and illusions of grandeur eventually leads to the collapse of an empire.

The US empire was slightly different from the point of view that it never conquered the world although the US was itself a colony conquered from its original inhabitants. But the US has intervened in many areas (e.g. Korea, Vietnam, Afghanistan, Iraq etc.). Also, there are US military bases in 120 countries. Initially the US was an economic superpower based on an entrepreneurial spirit and a very strong production machine backed by fierce military power. But after the Vietnam war the US had overstretched its resources and by 1971 Richard Nixon abolished the gold standard in order to be able to start money printing in earnest. The money printing phase is normally the last stage of an empire before it collapses and this is where the US is now.

Read the rest of this entry »

Predicting Worse Ahead from America’s Economic Crisis

leave a comment »

Predicting Worse Ahead from America’s Economic Crisis
September 4th, 2009 7:46 AM
by Stephen Lendman
Austrian economist Ludwig von Mises (1881 – 1973) said: “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Under Alan Greenspan, Ben Bernanke and successive US Treasury Secretaries, America chose the latter path and now faces the consequences of their reckless, criminal behavior.
In early 2009, economist Michael Hudson said:
The (US) economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but (at) the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored,” only delayed to postpone a painful day of reckoning.
Economist Hyman Minsky (1919 – 1996) described a “Ponzi finance” system during prolonged expansions and economic booms. Speculative excesses create bubbles, triggering structural instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.
On December 29, 2008, the Wall Street Journal online headlined: “As if Things Weren’t Bad Enough, Russian Professor Predicts End of US,” then continued:
“For a decade, Russian academic (and former KGB analyst) Igor Panarin has been predicting the US will fall apart in 2010” to include an “economic and moral collapse, a civil war, and the eventual breakup of the country.” For years, no one took him seriously, but no longer. He’s invited to Kremlin receptions, gets interviewed twice a day, publishes books, is a frequent lecturer, and appears regularly in the media as an expert on US – Russia relations as well as the great interest in his predictions and new book titled, “The Crash of America.”
On March 25, 2009, RussiaToday.com headlined: “Is there anything Obama can do about the US Collapse?” No, according to Panarin, for these reasons:
— “the moral and psychological factor and the stress of the American population;”
— America’s deepening financial and economic crisis; and
— “the increase of anti-Americanism in the world,” the result of continued US belligerency.
Panarin sees America collapsing into six areas of foreign influence and perhaps disintegrating as a nation:
— depressed northern states close to Canada “in their mentality and economic development;”
— the Southwest “fuel and energy complex, the oil sector” close to Mexico;
— California and the Pacific Northwest falling under Chinese influence;
— the Northeast and Middle Atlantic regions under the EU;
— Alaska may be returned to Russia; and
— Hawaii may become a Japanese or Chinese protectorate.
Panarin sees 2010 as America’s tipping point and says no miracle rescues can save it. In addition, he cites French political scientist Emmanuel Todd’s 1976 prediction of the Soviet Union’s dissolution that got him laughed at and scorned at the time but proved right.
Todd now predicts a similar fate for the US in his 2002 book, “After the Empire: The Breakdown of the American Order.” He cites:
— unilateral militarism shows weakness, not strength;
— America is parasitic, relying on voluntary or extracted “tributes” from vassal states;
— global terrorism is a myth;
— many nations, including EU states, China and Russia, are beginning to resist US adventurism;
— terminal corruption and decay;
— economic weakness and decline;
— producing little, America’s “specialty is consumption (so) relies on foreign imports” to satisfy it;
— a declining middle class and growing poverty will curtail spending sharply;
— if capital inflows cease, the dollar will crash:
— a coming collapse of the stock market, financial institutions and the dollar;
— a ballooning trade deficit and shrinking manufacturing base;
— a predatory ruling class plundering the world with impunity, yet out of touch with its own people growing poorer, more desperate and angrier;
— America’s abandonment of universalism and egalitarianism;
— excess consumption trapping people in an ocean of debt and lowering their living standards;
— “the rest of the world….is on the verge of discovering that it can get along without America; America is realizing that it cannot get along without the rest of the world;”
— an emerging Eurasia will end US supremacy, then isolate and curtail its dominance; and
— “If America continues to endeavor to show its power, it will simply reveal (to) the world its impotence.”
For his part, Panarin compares America to the Titanic after hitting an iceberg when it was unclear whether the crew would try to save the ship or more importantly its passengers. Unfortunately, under Bush and Obama, they’re trying to save themselves at the expense of the ship and passengers.
After disintegration, Panarin sees three dominant influence areas emerging – the EU, Russia and China. After 11 years of monitoring US policies, he believes his prediction is largely confirmed and states the following:
America’s FY 2009 “budget deficit is 4.5 times the 2008 deficit, while firearms sales are up 40%. On October 1, the coupons that were given state workers are to be cashed out. When (they) realize that they are getting nothing for (them), they will take out their firearms and chaos will unfold.”
Further, on September 30, 2009, results will be published that are “destined to shock investors worldwide. After that, and (Japan and China’s) snubbing of the dollar….which will transfer 50% of (their) international operations to Yuan starting in 2010, the currency will then flow like a landslide out of style.” Already nations like China, Russia, Brazil, Argentina and others are trading in their own currencies or will do so shortly.
In Panarin’s view, “the probability of the US ceasing to exist (in its present form) by June 2010 exceeds 50%. At this point, the mission of all major international powers is to prevent chaos” because what hurts America also harms them.
A Multiple-Dip Depression
Economist John Williams publishes the shadowstats.com electronic newsletter with updated sample data on his site. He calls government figures corrupted and unreliable because manipulative changes rigged them for political and market purposes. To correct them, he reverse-engineers GDP, employment, inflation, and other key data for greater reliability to subscribers.
On August 1, Williams called the “Current Economic Downturn (the) Worst Since (the) Great Depression.” It began a year earlier than reported, triggered a systemic solvency crisis, and the effects of “a multiple-dip depression (are) far from over.”
The July 31, 2009 national income accounts “confirmed that the US economy is in its worst economic contraction since the first downleg of the Great Depression, which was a double-dip” one like today’s.
Intermittent upturns are common, like from spiked auto sales from the cash-for-clunkers program that borrowed future purchases for today’s. “Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly nonresponsive to traditional stimuli.”
The economy suffers from deep structural problems related to household income. Consumers are over-indebted, can’t borrow, and Washington’s policies aren’t helping them. Continued economic decline will follow. “The current depression is the second dip in a multiple-dip downturn that started in 1999 (and triggered) the systemic solvency crisis” that was visible by August 2007 but started in late 2006.
The worst lies ahead, the result of the “government’s long-range insolvency and (dollar debasing that risks) hyperinflation during the next five years,” and perhaps sooner in 2010. It will cause “a great depression of a magnitude never before seen in” America, disrupting all business and commerce and reverberating globally.
Williams defines deflation as a decrease in goods and services prices, generally from a money supply contraction. Inflation is the reverse. Hyperinflation debases the currency to near worthlessness. Officially, two or more consecutive declining quarters means recession, but better measures are protracted weakened production, employment, retail sales, construction, capital investment, and demand for durable goods among other factors.
A depression occurs when inflation-adjusted peak-to-trough contraction exceeds 10%, and a great depression when it’s 25% or worse.
Today’s economic downturn preceded the systemic solvency crisis after key data “hit cycle highs and began to weaken in late-2005 for housing and durable goods orders….early-2006 for nonfarm payrolls, (and) late-2006 for retail sales and industrial production, patterns more consistent with a late-2006” real recession onset. Gross Domestic Income (GDI) data confirms this analysis.
Its real growth peaked in Q 1 2006, and revised GDI data contracted in seven of the last nine quarters. “Revised GDP shows the sharpest annual decline in the history of the quarterly GDP series,” suggesting a much deeper and protracted downturn than previously reported.
July 2009 marked the 19th consecutive month of contraction, “the longest downturn since the first downleg of the Great Depression.” More recent GDP declines of 3.3% and 3.9% in Q 1 and Q 2 2009, “are the worst showings in the history of the quarterly GDP series” dating back to 1947-48. In 1946, a greater contraction occurred because of post-war production cutbacks, but it was short-term.
Today’s most reliable economic indicators show the downturn is deepening, not abating as deceptive media accounts report. “The SGS (Shadow Government Statistics) alternative measure of GDP suggests (a) 5.9% contraction….versus the official year-to-year” 3.9% figure.
The official estimated annualized Q 2 2009 decline was 1% compared to SGS’s figure “in excess of five-percent.” Its alternative data show “deeper and more protracted recessions” than officially reported, suggesting a deepening crisis ahead.
The CBO’s Grim Forecast
Even the conservative Congressional Budget Office sees a weaker economy ahead, contrary to most consensus views of a sustainable upturn. Its latest projections are as follows:
— 2010 U-3 unemployment at 10.2%, edging down to 8% by 2011 and 4.8% by 2014;
— in 2010, 12 million will be underemployed;
— for the next five years, economic weakness and lower demand will pressure workers with unemployment or underemployment;
— part-time work only will be available for millions wanting full-time jobs;
— low consumption will persist through 2014;
— unemployment benefits will be exhausted;
— households will be pressured to make mortgage payments, pay for health care, meet other obligations, and provide for their families at a time state and city budget crises force deep cuts in vital social services, not made up for by the federal government;
— tax revenues are down 17%, the sharpest decline since 1932;
— $600 billion in investment losses will result plus another $5.9 trillion in lost output through 2014; and
— the federal deficit will nearly double over the next 10 years to about $20 trillion.
In sum, CBO projects a more severe protracted downturn than it earlier forecast in January.
Troubled Times Ahead
On July 14, Egon von Greyerz, Founder and Managing Partner of Zurich-based Matterhorn Asset Management AG, specializing in precious metals and other investments, said “The Dark Years Are Here” and explained why.
Because of “the devastating effects of credit bubbles, government money printing (and) disastrous actions that governments are taking, (upcoming) tumultuous events will be life changing for most people in the world.” They’ll begin by year end, last for two to three years, then be followed by extended economic, political, and social upheaval, perhaps continuing for two decades.
Greyerz cites three main concerns:
— exploding unemployment and government deficits;
— trillions of unreported bank losses and worthless derivatives; and
— rising inflation, high interest rates, collapsed Treasury bond (and UK gilt) valuations resulting in more money creation, worthless paper, and a “perfect vicious circle (leading to) a hyperinflationary depression followed by the collapse of the dollar and British pound.
America is hemorrhaging financially and economically. Other countries now realize they hold “worthless” US dollars. Reckless money creation achieved short-term hope, benefitted Wall Street alone short-term, elevated world stock markets, and led some to believe the crisis was over when, in fact, it’s worsening.
Aside from expected short-lived upturns, “every single sector of the real economy is deteriorating whether it is production, unemployment, corporate profits, real estate, credit defaults, construction, federal deficits, local government and state deficits etc.”
In response, the Fed keeps printing money and destroying its value. “This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?”
We’re in “the first phase of this tragic saga.” Likely by year end, a second more serious one will start. Real unemployment now tops 20%. It hit 25% in the Great Depression with 35% of the nonfarm population out of work and desperate.
“It is our firm opinion that (US) non-farm unemployment levels will reach 35% at least….in the next few years” with all uncounted categories included.
Growing millions with no jobs, incomes, savings, or safety net protections will create “a disaster of unimaginable consequences that will affect the whole fabric of American society” to a degree far greater than in the Great Depression.
Growing unemployment now plagues Western and Eastern Europe as well, and by 2010 will more greatly affect most parts of the world, “including China, Asia and Africa. Never before has there been a global unemployment crisis affecting the world simultaneously.” Ahead expect sharp drops in consumption and global trade leading to depression, poverty, “famine and social unrest.”
Already, conditions are worse than in the 1930s, but the worst is yet to come. Expect:
— an extremely severe global depression in most countries with grave economic, political, and social consequences;
— social safety net protections will end;
— private and state pensions will likely collapse; and
— unemployment, poverty, homelessness, hunger, and famine will cause a protracted period of economic, political, social, and institutional upheaval.
If von Greyerz, Panarin, Todd, and others with similar views are right, a deepening, protracted, unprecedented global catastrophe approaches that “will be life changing for most people in the world.”
-###-
Stephen Lendman is a research associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday – Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

by Stephen Lendman
Posted originally September 4th, 2009

AUSTRIAN ECONOMIST LUDWIG VON MISES (1881 – 1973) said: “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Under Alan Greenspan, Ben Bernanke and successive US Treasury Secretaries, America chose the latter path and now faces the consequences of their reckless, criminal behavior. In early 2009, economist Michael Hudson said: “The (US) economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but (at) the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored, but only delayed to postpone a painful day of reckoning.”

Economist Hyman Minsky (1919 – 1996) described a “Ponzi finance” system during prolonged expansions and economic booms. Speculative excesses create bubbles, triggering structural instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.

On December 29, 2008, the Wall Street Journal online headlined: “As if Things Weren’t Bad Enough, Russian Professor Predicts End of US” and then continued:

Read the rest of this entry »

The Fraud of the Federal Reserve Bank

with one comment

The Fraud Of The Federal Reserve Bank
Companies / Banking Stocks
Aug 24, 2009 – 12:08 PM
By: Captain_Hook
Far too many look for easy ways to get rich quick these days, only to be disappointed or shocked when reality bites in the end. Because of this there are no shortage of Ponzi like schemes characterizing the financial landscape, one by one being found out to be frauds, with Bernie Madoff at the top of the list in history thus far. The public was shocked when they discovered the size of the Ponzi scheme he was able to put together and perpetuate for so long, as usually, operations like this fall apart much quicker.
The following is a commentary that originally appeared at Treasure Chests for the benefit of subscribers on Thursday, August 13th, 2009.
Of course the reason for this was because a far larger Ponzi scheme of which the public remains oblivious enabled Bernie to maintain the illusion for as long as he did as it is at the very heart of our fiat currency based monetary system, that being the Fed. The Fed (and Treasury) have been issuing credit and printing fiat currency on an increasingly unhealthy basis for years now, since Nixon went off the gold standard in 1971, putting the US (and world) on the fiat currency system we find ourselves today.
In case you have not realized it yet in knowing this, it should also be understood that because US credit is issued in USDollars ($), that it too is a Ponzi scheme like bubble as well, to go along with all the other bubbles in stocks, bonds, and real estate. So you see, because of the Fed’s easy money policies all these years, the entire financial system is in fact a giant de facto Ponzi scheme, and that because the $ is presently the world’s reserve currency, the entire global economy has been built on this house of cards. What’s more, and like Madoff then, it should also be realized that although it could still take a few years, we are also coming to the point where the rest of the Fed’s Ponzi schemes will be recognized for what they are as well, with it’s fiat currency printing shenanigans central to the fraud. You should notice I do not use the term ‘fiat money’ when referring to what the Fed does because it does not print money. In order to qualify to be called money, whatever is being exchanged must hold some sort of recognizable value, which the $ does not in being fiat specie backed by a country that owes more than it owns.
So you see, it’s the Fed’s Ponzi scheme that’s the biggest and central, where they are now having to create copious amounts of new currency at break neck speeds in order for Peter to pay Paul in all the smaller Ponzi Schemes that are the result of the Fed’s unbridled printing presses. In knowing this, the next question that naturally arises is ‘how long can they keep this up’? In order to answer this question, one must first understand there is a difference in the Fed’s Ponzi scheme (and other central banks) compared to others, which is why it has gone on for so long. This difference lies in the fact it does not need to find a new batch of suckers on a regular basis to perpetuate the illusion like Madoff and the others must do in order not to get caught. No, all the Fed has to do is expand its balance sheet whenever needed (print currency), which in effect creates the cash flow it needs to feed all the smaller Ponzi schemes down the chain. This keeps everybody fed, which in turn keeps them happy, and maintains the illusion something of worth besides pushing a whole lot of paper around is actually happening.
Thus, in answering the question ‘how long can they keep this up’, appropriately, we must respond ‘far longer than a logical man might think’. This is of course because like Bernie, our self-serving bankers, bureaucrats and politicians will allow the deception to go on for as long as possible no matter how many are financially destroyed along the way, which is why an end to this insanity might be more violent than most are prepared for. And while it’s true the world still accepts the $ in exchange for goods and services, and in turn foreigners issue fiat currencies of their own they expect to be honored on the same basis, pressures are mounting in this respect due to rising prices and supply concerns that are largely created as a result of the mal-investments improperly allocated capital in fiat currency economies tends to sponsor. And again, while it may not happen today or tomorrow, put in simple terms, at some point the worthlessness of all these fiat currencies floating around will be exposed, having hit the limits of their own Ponzi scheme like limits, and trade will breakdown on a global basis.
Will this be the result / cause of war? Who knows? The only thing I know for sure is when this occurs, and because international trade will of course not completely break down, a new means of international exchange will need to be devised to replaced the fiat currency based system we have today, one based on a new trust. And as you may know if you are already well versed in these matters, history teaches us there is only one way to accomplish this, that being gold (and as process unfolds silver) backed currencies. This is when the intrinsic value stored in precious metals will be released. Counties, wealthy individuals, and the general public who have been ignoring the warning signs in this regard will be caught ‘flat footed’ and forced to buy at higher prices. Moreover, whether we arrive at such a point due to inflation or deflation it will not matter in real terms, as the purchasing power of gold and silver will endure either scenario given tight supplies, declining production, and the hoarding that will take place.
Perhaps this is why longer duration precious metals charts continue to look attractive, because it just doesn’t matter. Obviously there are enough people out there that know once the Fed’s Ponzi scheme blows up the demand for gold and silver will literally explode overnight. All that has to happen in order to trigger this is a bank holiday in the States. This would turn the lights on for the ‘dazed and confused’. And all we need for this to happen is for the credit markets to begin freezing up again, which is in fact happening as we speak. In terms of who is the chicken and who is the egg within the formula, the credit markets are a function of the asset bubbles, and the asset bubbles are a function of the Fed’s ability to maintain the illusion it can create wealth. Once this illusion is shattered for the masses, which would happen in a bank holiday revaluation, even the dazed and confused will get it at this point and stop believing in the Fed and its worthless currency. Once the Fed looses the faith of the people, it will be all over for the usury and corruption that it represents, even though it would take time for radical change to appear assuredly.
That’s what I think will happen in the not too distant future based on the way things appear to be unfolding. Sooner or later the Fed will have used all the arrows in its quiver, as clever as they have been to this point. Increasingly, they will find it difficult to expand their balance sheet, especially if it’s to keep increasing monetization practices. They already have a healthy mortgage portfolio, now rivaling Treasury holdings, as can be seen here. What’s next – commercial loans, credit cards, and then more Treasuries as foreigners see this madness and react accordingly. What’s more, if the Fed begins monetizing more and more items (as the real economy continues to unravel), won’t this put its shareholders out of business? After all, the Fed’s primary purpose is to aid the banks in lending, not replace them because the public is broke. If this were to persist, how would banks increase their balance sheets, allowing them to stay in business? The scary part of all the supposed temporary actions on the part of the Fed is they are not temporary at all, and as process unfolds, one by one its member banks will be put out of business by the very actions it now hopes will re-stimulate an exhausted consumer / borrower. (See Figure 1)

by Captain Hook
Posted at The Market Oracle, Aug 24, 2009

Far too many look for easy ways to get rich quick these days, only to be disappointed or shocked when reality bites in the end. Because of this there are no shortage of Ponzi like schemes characterizing the financial landscape, one by one being found out to be frauds, with Bernie Madoff at the top of the list in history thus far. The public was shocked when they discovered the size of the Ponzi scheme he was able to put together and perpetuate for so long, as usually, operations like this fall apart much quicker.

OF COURSE THE REASON FOR THIS WAS because a far larger Ponzi scheme of which the public remains oblivious enabled Bernie to maintain the illusion for as long as he did as it is at the very heart of our fiat currency based monetary system, that being the Fed. The Fed (and Treasury) have been issuing credit and printing fiat currency on an increasingly unhealthy basis for years now, since Nixon went off the gold standard in 1971, putting the US (and world) on the fiat currency system we find ourselves today.

In case you have not realized it yet in knowing this, it should also be understood that because US credit is issued in USDollars ($), that it too is a Ponzi scheme like bubble as well, to go along with all the other bubbles in stocks, bonds, and real estate. So you see, because of the Fed’s easy money policies all these years, the entire financial system is in fact a giant de facto Ponzi scheme, and that because the $ is presently the world’s reserve currency, the entire global economy has been built on this house of cards.

Read the rest of this entry »