"The U.S. is running the biggest Ponzi scheme in history."

The Government Ponzi Scheme

The U.S. is running the biggest Ponzi scheme in history. Shortfalls created by early Social Security beneficiaries receiving far more than they put in were funded by future generations. Social Security is solvent only to the extent that there is a new supply of workers that exceeds the number of retirees. Excuse me, but isn’t this the very definition of a Ponzi scheme.

Because of the Baby Boom generation, payroll tax receipts exploded and the government ignored the coming funding problems, even taking the liberty to rob the Social Security trust fund. Some argue that because the Social Security trust fund carries U.S. Treasuries that Social Security is fully funded. Ok fine. But when the government redeems these Treasuries, who will pay them? Themselves! This is one big joke, except the joke is on us.

All Ponzi schemes end the same way. Boomers continue to retire at a record pace, which is creating an ongoing shortfall in revenues. Prior shortfalls were covered over by the issuance of U.S. Treasuries, which anyone with common sense knows are a losing bet. After all, the Fed has gone to the extreme of buying Treasuries directly. The writing on the wall can’t be much clearer. The facts aren’t really under question, yet there is this pervasive lack of belief. People tried to warn Madoff investors that he was running a Ponzi scheme with irrefutable facts, but almost no one listened. Understand that as an American you are implicitly invested in the U.S. and therefore have latent biases that you must come face to face with. Strive to be intellectually honest and synthesize the data accordingly. Blindly disregarding a massive debt crisis is foolish.

With the current tools we have, there is no way out of this crisis. Politicians like to argue that they can raise payroll taxes and save Social Security. Let’s get real here. Do you really want to raise payroll taxes in the midst of a recession? State governments are going bust and the worst of the layoffs in the public sector lie ahead, yet politicians think they can raise payroll taxes? Inflation is rising, eating into discretionary income, yet politicians think raising taxes will solve everything? As an aside, it’s humorous that people are calling commodities a bubble. This is inflation created by the monetary policies of the Fed pure and simple. While everyone was talking gibberish about deflation, I was steadfast that inflation was the only real threat. Those who think this inflationary trend is going to end soon are seriously deluded.

There comes a point where the imbalances in the economy become so great that there is nowhere to hide. Our ability to fund our growth through debt is disappearing. So is our ability to create employment through the public sector. Our entitlements are coming due and our working population is declining relative to the retired population. It’s time to face the music. Gold is going nowhere. Government bonds are going to get demolished. These are the obvious trends people just refuse to believe. So many people are going to get crushed by this crisis that it saddens me. But as usual, no one listens when you preach an inconvenient truth.

Read more:
http://expectedreturnsblog.com/the-government-ponzi-scheme/