US economics: One big Ponzi scheme

Excellent article I read today while following latest news from Libya at Al Jazeera:

So who will do anything about it?

The political right prefers to change the subject, while the left does not seem to have the time or energy to make economic justice its principal concern - even as polls show the economy is the number one problem for most in the US.

Progressives should hang their heads in shame at the minimal amount of activism taking place against the banks and the escalating numbers of foreclosures. Homes and hope are being stolen from people for whom the term "depression" now has a personal, as well as economic, meaning.

The other day, economist Jeff Sachs - who has a lot of atoning to do for his own misguided, destructive economic advice to Russia after the fall of the Soviet Union - warned that little is being done about economic inequity and the growing ranks of the poor in the US. He asks if people who run things in the US want "another Egypt". He is a policy wonk, not an activist - and likely fears the idea.

english.aljazeera.net...#

reply to post by alomaha


Honestly, coming from an economics major, economic policy has just been the straw that broke the camels back. Our system, once the FED was established, was thought to be like the Titanic; Unsinkable. Heck the whole reason we ALLOWED the FED, not CREATED it (it is a private Bank owned mostly by the Rothschilds), was to control the Money supply to combat normal fluctuations in the market that 'could' lead to a recession or even depression. I do not wish to explain how the FED works in detail, but basically by being the leading trend setter in interest rates allows the FED great control over the money supply via buying and selling US bonds. When there is too much money in the system, the Fed raises interest rates and sells bonds. When there is too little they lower interest rte sand buy more bonds back. It is kinda like an 'overflow' valve for the money supply in the economy.

Anyway, two major factors that were not addressed quickly enough have been the underlying threats to our economy for years. These two things are "Technology" and my personal favorite, "Globalization."

I'll keep it short for you. Barring all policy, technology has increased at a blinding rate in the past 40 years and our markets simply could not keep up with the transitioning between industries; some industries were enhanced, some were created, and others were simply destroyed (look at computers, killed the printing and type writer industry when they became affordable and viable technology. Cell phones are slowly killing personal landline telephones, CDs killed VHS, DVD is killing CDs with Bluray about to kill DVDs. You see these markets cannot adjust fast enough for the next greatest thing, we cannot retrain employees fast enough, we cannot switch business models fast enough, many smaller companies simply cannot keep up with technological innovation. (I had a friend whose dad owned a CD manufacturing plant. They were really wealthy, but in 2006 it shutdown because DVD overtook CD sales and he couldn't compete with the newer DVD producers in cost. They lost their business.)

Then there is globalization. Everyone in our modern times knows this word, but many do not understand it more than it's face value of "Evryone and every market in the world is connected and information can be easily shared. Well first off information has a price, a value, and globalization shrinks that value to almost nothing. Why would you pay someone for financial advice when you could get it from a website for free? I know that is not the best example, but essentially the market for information has all but collapsed. In addition now we have "disinformation" which actually devalues real information further. Thats just one small part though. The really bad part is that globalization has connected markets that should never have been integrated. Take the Euro for example, worst financial and economic decision EVER. The wealthier producing countries now had the same currency and value as the poorer ones. Take Italy for example. That country has a very low production market and a much higher services market. The people in Italy rely and prefer on imports for much of there daily life, especially from Germany. Germany has a stronger economy and therefore is more expensive than Italian made goods of the same type. Therefore, when Italy's import market is greater than both their production and export market, they are fiscally in negative GDP growth. If they each had there own currencies, than Italy could increase the cost of imports through local currency and balance the markets to where production and export would be closer to import, and therefore the market effects would be minimalized.

Then there is the obvious negative side effects of Globalization that is always headlined like outsourcing for cheap labor, international market a production policies, unregulated currency exchange where the domestic policy of a country can affect the value of its currency in the world market (China has been doing this for YEARS). Globalization in lamens terms is the redistribution of markets and demand from large economies to smaller ones, where Americans now purchase 60% of there goods from Chinese manufacturers, and we import almost as much as we export.

Globalization in todays form is nothing less than Global economic socialism; Big economies bring smaller ones up, but at acost of 2:1 to their own.

When the rules are different for each player, you cannot have a fair game.

How about the fiat banking system where they loan out 11x their reserves?

reply to post by CosmicCitizen


Agreed. That is another one of my hot buttons.

How can you ever have a fair system of value when value is whatever we declare or whatever number the banker types into the system. Money these days is not backed by anything, therefore it only has "potential value" for whatever the guys up top say it is or what the market analysts think it should be at the FED.

reply to post by Mikemp44


It is good to read someone here who has a good understanding about what is going on. What do you think about the G20 getting policy control of the IMF and expanding the SDR to help with global transactions? Also, it sounds like there are trillions of dollars in toxic assets still floating around the derivatives markets. Do you think these markets can be salvaged or should we just pull the plug?

reply to post by kwakakev


Excellent questions my good sir!!!

When it comes to the IMF it really doesn't matter who gets control, and increasing regulations on international financial transactions will only further HELP those nations who are artificially affecting the value of their currency. IMO the IMF should be broken up into smaller funds managed directly by the UN and applied for via area of economic concern. For instance, Europe and North America are vastly different in their national need for the IMF; quite obviously Europe has needed it much more than the U.S or Canada (FOR THE MOMENT), but that is only because of the wonderful blunder that was the Euro. So to answer your question about the recent G20 resolution on the IMF, frankly I don' think it will change much other than smooting transactions between nations, if that.

As for the derivatives market, that depends on when and where. There are a lot of toxic assets circulating the global market place, most of them are in future contracts. Since the market is still unstable globally these future contracts really are not safe bets, no way to be sure WHAT you will get out of them as trends have been reset by the financial crisis. However, many OTC (Over-The-Counter) contracts are still quite viable, and many are excellent investment opportunities. I see you are down under friend, stay away from the Future derivatives market there, your "safest" bet would be import/export OTC contracts for shipping companies, but only PER LOAD.

So essentially future derivatives contracts should be killed, while OTC exchanges are still alive and well.

Interesting thread.

What do you folks make of inflation? It seems to me massive inflation is the only way out for every major nation on earth at this point. The interesting question is, what happens when all the major nations crank up the presses more or less at once? This is pretty much uncharted waters for the global economy -- unprecidented. The Great Depression saw every major economy slide into a deflationary morass. Could our current debacle be the beginning of a mega-stagflationary epoch of some sort?

Mass systemic panic would open the doors for IMF moves towards SDR/"basket currency" solutions, which of course bring to mind ATS-style fears of one-world currency and so forth. Now, I wouldn't by any stretch of the imagination say its impossible for a one-world currency to emerge. However, I don't get the feeling that there is enough consensus and cooperation to make it happen at this point. The euro can barely hold itself together...can you imagine trying to juggle that three-ring circus plus Dollar/Yen/Rinminbei/Rupee/Rouble etc.

Another point: there is a lot of vested interest in keeping the underbelly of finance murky, if you know what I mean. The total transparency of some sort of gleaming, idealized, UN-style one-currency global regime would not gel with the needs to obscure vast money flows for all sorts of shady goings on. So I do not see a drift towards a one-world currency anywhere on the horizon. I think the IMF SDR system is the clearest possibility to emerge as a model for a future currency system, but it is by no means the only one. Commodities, for example, are going to play an increasing role as storehouses of real value and everyone knows it. The current paper/electronic system in general is not set up to handle commodities properly. Creating a tighter mesh between paper markets and physical exchange/delivery of commodities is a major challenge that would need to get sorted out before any kind of one-world currency system would come into place. Judging from the chaotic messy slapdash nature of things right now, I don't think the torque exists to get these ambitious projects off the ground. Of course, if society melts down to a lower complexity level for any reason, it gets easier to ram anything through....

reply to post by Mikemp44


Having the UN oversee the global economy instead of a few bankers is in the global interest. The G20 getting control of the IMF is an important step in this direction. The UN getting BIS is going to be another important one. The Euro was a scam from the get go, the constitution reads more like a corporation than a nation and the pressure applied was very underhanded at times. There has been some benefits, but still a lot of problems.


reply to post by silent thunder

What do you folks make of inflation?

Inflation means just printing more money. It kinda works if you are the one getting this new money for nothing, but society at large suffers as the money already in the system become more worthless, it is cheating capitalism. The Fed is a big problem here and needs to be put down. This would save the government heaps as a big chunk of its debt repayments just disappear. This is one reason why JFK got shot, so expect it to get messy if the nation is to take back this important infrastructure from private hands.

I like to think that the SDR has some great benefits to putting an end to all the conflict and corruption going on in the international money markets. With different countries having different laws it has opened a lot of cracks so those in the system can skim a lot out of it. With an international currency it will help seal up all these cracks. One problem is if a nation or individual does go rouge with counterfeiting or money production, it does need to be isolated to not effect the greater global economy. So having all these different currencies united, but easily separated and individually managed within this basket can serve as a circuit breaker and keep the currencies real.

Your comments about systemic corruption is an important one. Basically corruption is just unregulated trade, as such it can be very forceful and bias at times. As more of the global economy comes under scrutiny and observation it is going to gradually get harder to amass wealth and capital without justification. How the Swiss banks have frozen funds of run away leaders during these revolutions is one example. There is still great imbalances and power plays in the system. There is no other choice other to fix it, for if the economic system was to collapse then it would be very destructive. As for how and when, there are a lot of cultural issues to work through first.

reply to post by alomaha


I don't even need to read past the title because this is fact - anyone who denies it is a ponzi scheme does not understand how it works.

Originally posted by byteshertz
reply to post by alomaha

 

I don't even need to read past the title because this is fact - anyone who denies it is a ponzi scheme does not understand how it works.

I guess most people who are on this forum know that we all live in one huge ponzi scheme, but I would advise you anyway to read the article, because it's not just about that. It's more about hypocrcy of this society: how they sacrified Bernie Madoff as a scapegoat, although everebody knew very well that he was running a ponzi scheme, like everybody else in that bussness.

reply to post by alomaha

how they sacrified Bernie Madoff as a scapegoat, although everebody knew very well that he was running a ponzi scheme, like everybody else in that bussness.

Of course he was a scapegoat though he was still guilty of ripping off the public and deserves all he got and then some..

The entire market is a ponzi scheme setup to cater to the very very rich that are in the know..

Derivatives, fractional lending, futures trading...It's all a ponzi scheme to take money and property from the average joe in the street..

This was made possible with FORCED savings/superannuation policies...

Originally posted by backinblack
reply to post by alomaha

 

how they sacrified Bernie Madoff as a scapegoat, although everebody knew very well that he was running a ponzi scheme, like everybody else in that bussness.

Of course he was a scapegoat though he was still guilty of ripping off the public and deserves all he got and then some..

No question about it. It's just that he's a "chosen one" to rot in jail...

reply to post by backinblack

This was made possible with FORCED savings/superannuation policies...

Superannuation has been promoted as a long term goal to help take some pressure of the pension system. Mismanagement of the large pools of funds has not helped. The real problems as I see it is in the privatisation of key infrastructure such as the IRS and the Fed along with deregulation of the financial system. This has turned a critical system that supported capitalism into a barbarianism culture of lies, corruption, creative accounting, deception, greed, misrepresentation, cover ups, skimming and theft that supports the traders at the expense of the community.

Originally posted by kwakakev
reply to post by backinblack

 

This was made possible with FORCED savings/superannuation policies...

Superannuation has been promoted as a long term goal to help take some pressure of the pension system. Mismanagement of the large pools of funds has not helped. The real problems as I see it is in the privatisation of key infrastructure such as the IRS and the Fed along with deregulation of the financial system. This has turned a critical system that supported capitalism into a barbarianism culture of lies, corruption, creative accounting, deception, greed, misrepresentation, cover ups, skimming and theft that supports the traders at the expense of the community.

Isn't that what I said in far less words??
We were FORCED to put our money into their scheme where vast amounts were funneled off to the elite..

It's not just that. Ponzi scheme is not sustainable system. It cannot go forever, it has to burst sometime. Was it intentionally made to burst from beginning (I don't think that people that set up the system, or the scheme were stupid) or is it that greed was much more powerful force in their minds that they didn't care about the ending? It's like with those mideast dictators: their own greed for power and money has finally swallowed them...

A ponzi scheme , yes , but everyone participated and the Fed facilitated . For decades the guy that got the vote was the one who promised and delivered the most free sh*t to their districts without ever paying for it . Everyone wanted paved roads , hospitals , schools , overpasses and bridges along with employment and industry but no higher taxes so the money was borrowed , the Fed created book entry money and loaned it to everyone and everyone was so happy . Everyone wanted and received a subsidy of some kind including low taxes and the bills went unpaid while the interest compounded . Now so many are electing reps to cut the debt but at the same time the hypocrites want everyone elses subsidy to be cut but don't touch my free sh*t . An unusual state is North Dakota where politicians promise paved roads and the people say , wait a minute , that'll be done on borrowed money and i'll have to pay for it so leave the roads alone . The best fiscal shape of any state because they knew that free sh*t is never free . The federal and state government would have to be gutted by 30% and all taxes would have to be raised by 300% just to get the debt back to 10 trillion dollars and it will never be done because everyone still wants their free sh*t as nobody wants to pay for it and the Fed is there to facilitate the loans . The debt is over 14 trillion , going to 16 trillion when the debt ceiling is raised and will be somewhere around 19 trillion just before the next presidential election and no elected rep wants to lose their job for not delivering free sh*t to their constituents . Free sh*t can be more highways in Idaho and more welfare in Atlanta and 100 thousand voters added to the federal work force by Obama with great wages , benefits and pensions for all . It's all done on borrowed money printed by the Fed and no one cares as long as they get their free sh*t . $11.00 for a gallon of gas in England , some of the cheapest in Europe , $5.00 in Canada and we get it for under 4 bucks because we'll only tolerate free or cheap sh*t and if our gas goes to 5 bucks we'll vote everyone out of office . The Fed prints 110 billion per month to purchase US Treasuries to subsidize the cheap and free sh*t because we won't pay for it , but we want it all so we're more than happy to go to the loan sharks . The Fed only facilitates our habit like a drug dealer facilitating a junkie . The Tax bill at Christmas keeping the Bush tax cuts , 80 billion dollars added to subsidize one of the biggest hoaxes of all time , ethanol , for just two years . That's 80 thousand billion dollars to corn farmers and refineries to take 25% of the food crop farm land out of production and put it in the gas tank and the industry requires a massive subsidy because it cost 1.5 barrels of crude to manufacture 1 barrel of ethanol . Don't like that , what subsidy will you give up ? None and if your congressman doesn't deliver multi-millions , maybe billions in free sh*t to your district , he's gone . Government workers are protesting and rioting all over the place to keep their subsidized cheap and free sh*t but there isn't much difference between them and anyone else who will vote their rep out in a heart beat if their taxes go up and they have to start paying for their free and cheap sh*t . No need because the Fed will cut another loan to pay for the last loan . We spend on average 8% to 12% of our income on food depending upon whos' numbers you believe while 50% of the planet pay 50% or more of their income on food and if a 10 pound bag of potatoes here goes up by 25 cents we want answers right now . Food is so cheap here because of the farm subsidies that are in no way affordable or sustainable but the Fed has lots of money for the subsidies so who cares . A previous poster professed a high degree of understanding of economics and tried to simplify it for everyone and he completely missed the point . The junkie needs a dealer and if we eliminated the Fed tonight we'd be living in the 1930's in a very short time . Search Dr. Ron Pauls speeches and you'll see that several times he has said that if we ever could eliminate the Fed it would take several decades and another systems would have to be in place long before and during the transition . 70% of parents would revolt if they had to send their kid to school with a lunch and 100% of everyone would revolt if they could no longer write the interest on their mortgage payments off their income taxes and Obama is about to give an $8,500.00 tax beak to everyone who buys a Chevy Volt even though it just placed 14th out of 14 green cars , dead last . The government has zero money , it's all done on borrowed money facilitated by the Fed and demanded by us .

reply to post by bandito



Yes,you're absolutely right. When party was going nobody was asking where are drinks coming from... and nothing is changed probably, people are complaning why has party stoped...

reply to post by alomaha


JOHN FITZGERALD KENNEDY tried to "do something about it" and THEY BLEW HIS BRAINS/HEAD OFF IN PUBLIC SITE!!!
What do you have to say about that?
My opinion: people are too druged , manipulated AND STUPID to do something about it!


www.john-f-kennedy.net...

"With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificats were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the gevernment the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.

After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. The Final Call has learned that the Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $6 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level. "

reply to post by alomaha


Ofcorse I read the article even though ya had me at the title.
It is one big Ponzi scheme and those that deny it are just like those that swore by amway, because they got a cut of the cream they think it works - not realising they should be getting alot more and other's are getting none.

reply to post by backinblack

We were FORCED to put our money into their scheme where vast amounts were funneled off to the elite..

Pretty much, but before a witch hunt starts to get rid of the problem it is important to correctly define it. Here in Australia we have Superannuation as well and it took a hit during the GFC, but not enough to collapse the system and bankrupt everyone. The well regulated financial system here in Australia helped fend of a lot of the initial crash in the market, but we still got hit with the shock waves as they went around the world. Our government also got sucked in to take big loans from the banks and help fund them with the ongoing interest repayments. It has been the lack of regulation that has created a wild west situation in the financial markets. While people continue to make up their own rules the integrity of the game falls apart for everyone else.