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The Entire Economy Is a Ponzi Scheme
Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky, the Wall Street Journal and many others say that our entire economy is a Ponzi scheme.
Former Reagan budget director David Stockman just agreed:
So did a top Russian con artist and mathematician.
Even the New York Times’ business page asked, “Was [the] whole economy a Ponzi scheme?”
In fact – as we’ve noted for 4 years (and here and here) – the banking system is entirely insolvent. And so are most countries. The whole notion of one country bailing out another country is a farce at this point. The whole system is insolvent.
As we noted last year:
Nobel economist Joe Stiglitz pointed out the Ponzi scheme nature of the whole bailout discussion:
Europe’s plan to lend money to Spain to heal some of its banks may not work because the government and the country’s lenders will in effect be propping each other up, Nobel Prize-winning economist Joseph Stiglitz said.
“The system … is the Spanish government bails out Spanish banks, and Spanish banks bail out the Spanish government,” Stiglitz said in an interview.
***
“It’s voodoo economics,” Stiglitz said in an interview on Friday, before the weekend deal to help Spain and its banks was sealed. “It is not going to work and it’s not working.”
[The same is true of every other nation.]
Credit Suisse’s William Porter writes:
“Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot rescue Spain (as is surely about to become all too abundantly clear), France cannot rescue Italy, but Germany can rescue France.” Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e, it seems to us that it probably cannot fund to the extent needed to save the credit of one (and probably imminently two) countries that had hitherto been considered “too big so save” without joint and several guarantees.***
As Nouriel Roubini wrote in February:
[For] problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around.
As Roubini wrote in February:
“We have decided to socialize the private losses of the banking system.
***
Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, “Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns.”
Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems.
Roubini characterizes super-sovereign intervention as merely kicking the can down the road.
He says wryly: “There’s not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone.” [Others have made the same point.]
But, despite the paper shuffling of debt at the national level—and at the level of supranational entities—reality ultimately intervenes: “So at some point you need restructuring. At some point you need the creditors of the banks to take a hit —otherwise you put all this debt on the balance sheet of government. And then you break the back of government—and then government is insolvent.”
Peak Demographics?
Indeed, population may be the biggest ponzi scheme of all. Specifically – as we’ve pointed out for years – rapidly-aging populations in the developed world will exert a big drag on the economy.
The Global Mail notes:
Half the world, including almost all the developed world, now is reproducing at below replacement level. A generation from now, according to United Nations Population Division projections, less than a quarter of the world’s women – most of them in Africa and south Asia – will be reproducing at above replacement rate. And those UN forecasts are probably on the high side, for reasons we’ll come to later.
And as the birth rate has plunged in developed nations, and the native-born population has begun to shrink and rapidly age, governments and business have sought to make up the numbers by importing people to prop up their economies. It’s all they know how to do, for our economic system is, at its base, a giant Ponzi scheme, dependent on ever more people producing and consuming ever more stuff.
But what happens if that all stops? What happens when you get an ageing, shrinking population that consumes less?
“The answer to that question is that we don’t know because it’s never happened before,” says Peter McDonald, professor of demography and director of the Australian Demographic and Social Research Institute at the Australian National University.
***
“We’re certainly operating a Ponzi scheme in Australia,” says Dr Bob Birrell, an economist and migration expert from Monash University.
“Our growth is predicated on extra numbers… [and] more of our activity is going into city building and people servicing, which do not directly produce many goods that can be traded in overseas markets.
***
Half the world is facing the problem of low fertility, and Australia, with its massive program of importing people, is providing an extreme example of one approach to the conundrum.
In a nutshell, the problem is this: lower fertility rates mean older, less innovative and productive workforces. More importantly to the Ponzi economic order, older, stable or declining populations consume less. So growth requires either importing people, or exporting stuff, or a combination of the two. Orthodox economics simply can’t cope otherwise.
Europe as a whole has been reproducing at well below replacement rate for close to 40 years. The last period for which UN data showed Europe’s total fertility rate above the replacement rate was 1970-75.
Europe’s contemporary demographics give new meaning to the descriptor ‘the old world’. The continent’s average person is over 40 now. By 2050, if things continue on trend, the average European will be 45.7. If one takes the UN’s “low variant” projection, he/she will be over 50 years of age.
And the low variant now looks closer to the mark. Fertility rates had actually rebounded a little over recent years, the result of a bit of “catch-up” after a shift over several previous decades in which women delayed child-bearing. But the European recession has set fertility rates plunging again.
The recession’s effects will likely linger for decades, in lower rates of earnings and savings, and also in reduced fertility.
***
Last year, Forbes magazine, that most reliable voice of the economic orthodoxy, laid the blame for Europe’s economic decline squarely on its citizens’ failure to reproduce in adequate numbers, in an article headlined What’s Really Behind Europe’s Decline? It’s The Birth Rates, Stupid.
The Forbes piece was unequivocal: the biggest threat to the European Union was its low fertility rate.
***
The piece ended with a dire warning that unless Club Med managed to induce people to have more babies, catastrophic economic consequences would flow for all of Europe and maybe the world.
***
As Thomas Sobotka, one of the authors of a 2011 study on population trends by the Vienna Institute of Demography, told the Guardian newspaper, massive cuts in social spending would only exacerbate the problem.
“This may prolong the fertility impact of the recent recession well beyond its end. It could lead to a double-dip fertility decline,” he said.
But when it comes to fertility declines, Asia takes the cake.
Japan, Singapore, South Korea, Taiwan, Macau, Hong Kong, and most importantly China currently all have fertility rates lower than those of Europe.
***
China’s and Korea’s are about to start falling, if they haven’t already.
“I’m pretty pessimistic about the east-Asian situation,” says McDonald. “I think those countries find it very difficult move in the right direction of supporting work and family, in particular, reducing work hours.
“We are now talking about some 30 per cent of Japanese women not getting married.”
“I saw a couple of people from the Japanese government give a paper recently, essentially accepting this as an inevitability – a low birth rate forever,” he says.
It’s the same all over Asia.
***
Hong Kong has a birth rate of 1.09, which is on track to see its population almost halve in a generation. Taiwan is at 1.10; China, 1.55; Thailand, 1.66; Vietnam, 1.89. Even Indonesia’s fertility is just above replacement rate, at 2.23, and is falling fast. Malaysia and the Philippines are still growing pretty quickly, as are the south-Asian countries, which may give them a competitive edge for a few decades – and a growing export industry of people. But it is not projected to last more than a few decades.
Let’s return to America. The United States also is reproducing at below replacement rate, and its birthrate has declined sharply in recent years.
***
The US birth rate not only fell to its lowest level ever in 2011, but the greatest decline was among immigrant women.
***
In the longer term, the world will have to adjust its economic system to cope with the novel concept of less. Fewer people, less consumption, lowered need for resources, energy, housing, roads, you name it.
Indeed, smart curmudgeons like Jeremy Granthan and Chris Martensen think that we have not only “peak” demographics, but also peak resources.
There’s HOPE
The above is admittedly depressing. But the reality is that there’s hope.
We can have a very bright future, indeed … if we switch from the status quo to something smarter. For example, see this and this.
For example, we can cut out the middlemen in the banking and political realms … and prosper.
And as we’ve previously noted about energy:
The current paradigm is that energy is produced expensively by governments or large corporations through gigantic projects using enormous amounts of money, materials and manpower. Because energy can only be produced by the big boys, we the people must bow our heads to the powers-that-be. We must pay a lot of our hard-earned money to buy electricity from them, and we can’t question the methods or results of their energy production.
Our life will become much better when we begin to understand that energy is all around us – as an ocean of electromagnetic forces and as a byproduct of other processes in the form of heat, pressure, etc. – and all we need do is learn how to harvest it.
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You're arguing for a solution without evidencing a problem. Sorta like the laundry list of "we musts" that are appended to the hoax of climate change.
when you tweet these stories i seriously hope you use the @WashingtonsBlog handle
this fine soldier's feed is a fucking ghost town
what gets me is how, even now... still just dancing around the issue and the obvious fear in people's eyes to go beyond entities like FRS in their synthesis
people say things like "the powers that be" w/e gets you through the day sweetheart
http://youtu.be/EgFgEqm3o60
Reality Bites - the next step is to openly admit to the slaves that the NWO is not a conspiracy theory anymore but it is good for you and you need to accept it - this narrative has already been laid by world leaders and already exists in the public square - but so do the endless harping lies that anyone suggesting this is the case is insane.
the next step is to just leave the revelation of the method on the table and do the "here's what were doin to ya folks" rap etc.
http://youtu.be/i5dBZDSSky0
I feel for those who lose sleep over fear of some NWO. While it's certain that there are pushes for it (nefarious or belligerent, doesn't matter), one ought not confuse "possibility" with "probability." The EU should provide a picture for how "probable" any world-wide govt is going to take root: they're putting as much energy in all this as is possible and they are STILL going to fail horrendously: BAD SYSTEMS FAIL!
I feel for those who lose sleep over fear of some NWO.
I feel for those who lose sleep over fear of death.
that doesn't mean many people will suffer greatly for the TPTB's little social experiments
Yes, if you read what I post on a regular basis here you'd know that I don't take this lightly. I speak what I know to be based in logic and probabilities, that doesn't mean it's what I WANT. I'm a hardcore realist: my wife is from an extremely poor part of the world and I have a pretty darn good idea what's going to happen to people when all of this goes to shit (those who are already living shit are going to take even more shit).
Lastly, it's not some come-lately social experiment. The grow-or-die meme has been with us since the beginning of time. We've only allowed ourselves to ignore where it would all lead; and by so doing we allowed all these carpet baggers to massively jack their game up.
GW at it again.
Your typical 'american' hijacking the entire humanity to prevent himself from the ugly truth.
'Americans' are global players who reached an insolvency point at a global scale.
So now back to reality,away from 'americans' impotency at facing the reality of 'americanism'.
Humanity is the amazonian jungle dwellers plus all the rest( rest that includes 'americans')
The whole system is insolvent.
Remove the amazonian jungle dwellers: the system remains insolvent.
Remove the rest,the amazonian jungle dwellers are solvent.
Repeat the pattern until parting humanity between
'Americans' and the rest of humanity.
As a whole, the system is unsolvent.
Remove the rest of humanity, the system remains insolvent.
Remove 'Americans' and who knows?
But hey, for stuff like that, suddenly, 'americans' see humanity as a whole.
Humanity put us in that mess, the whole of it.
Not 'americans' exclusively.
Welcome to an 'american' world, a world where the word responsibility bears a whole new meaning.
An 'american' meaning.
AnAnonymous at it again.
It is funny how ideologues love to side track a topic to avoid facing the facts related to it. Just a Chinese citizenism citizen seajacking a comment for any cause that is.
Emotional appeal to authority, I dont know. It is not the matter. This guy's commentation is lacking on a simple ground: it is built on proclaiming a fact.
Of course, the common Chinese citizenism propagandist's spirit does not reek of elitism... Nope.
This must be the kind of excellence you can expect from Chinese citizenist college smart educated people.
Storytell better stories...
Indeed, the duplicity, and the inability to self-indict and face reality, of the typical Chinese Citizenism citizen knows no boundings.
When the chain reaction of Chinese hypocritizenism reaches criticality, one can expect no less than a Chinese Citizenism meltdown. That is quite a messy process, as all can see.
But meltdowns and Long Marches of Insanitation do not deter the Chinese Citizenism troll, no never, stuff like that in fact does the opposite, it feeds him in his Great Leap Forward into Stupidity and "Do as I say, not as I blob-up".
Ah, the duplicitous eternal nature of the bigoted hypocritizen. Where to find it always?
"Made in China".
You have to give it to Chinese citizenism citizens. They produce and smoke strong dopes. In all forms.
Read some Chinese citizenism propagandist "thinkers" and it is dope effect.
This gives them the natural tendency to offset any obvious fact staring them in the face to spread their propaganda.
Take some Chinese citizenism dope.
Make me laugh.
Chinese Citizenism dope smoking is only part and package of Chinese Citizen eternal nature since 12 October 221 BC.
Dope effect is inherent in themselves, no more. Opium Wars and all that.
Impossible to seek symmetry between 'american' dope smoking and Chinese Citizenism sort, no never, that is not the case.
'American' smoking of dopes is merely for recreationizing. Fun, release, relaxation making for sure.
On the other foot, Chinese Citizenism dope smoking is necessary for avoidance of reality, spinning out of tired propaganda bits, putting on happy face when inability to self-indict raises his ugly head.
Dope fuels the Chinese Citizenism troll, therefore it is essential.
Chinese Citizenism dope smoking also ups the ability of the Chinese hypocritizen to more efficiently throat the ideas of bigotry and hypocriticality while monolizing the speeching means over reason and fact.
Dope is the spark plug of the magical time-traveling flying rickshaw of fabled Chinese Citizenism past and future.
Without dope, how could the Indo-American Eastern Islanders be blobbed-up 500 years ago?
Do not make mistake of conflatuating 'american' dope smoking with the much deeper Chinese Citizenism dope smoking. That would be the other kind of it, and then some.
To be a Chinese Citizenism dope, smoking dope is the mattering thing.
Ah, very good expressions of reality you have poured. Explains the popularacy of Peoples Liberation Opium Parlours throughouts Chinese citizenism society.
Avoidery of realitance indeedmuch is the essence, the very mettle, of Chinese citizenism anti self indiction. The opiated haze over the Chinese citizenism propagandist communauty gives bypassability over the hypocriticalized contradictures told when throating messages of absurdity.
When conflicted with unbypassable behaviours, the Chinese citizenism citizens tend to look for people to shift the burden of the bad consequences of the behaviour. Debatting the morality of Chinese citizenism citizens is indeed vain. The great congregation of crime...
It is funny how Chinese citizenism citizens are naturally drawn to that behaviour. When confronted with their actions and the propaganda they wish people to believe in, they naturally tend to track others' actions in hope they did worse.
However, how hard they try, they can't change the nature of their actions. Others' doings are others' doings.
That gravel-voiced clown "interviewing" Stockman just never shut up...!
dream on, this is going to end horribly.
Zerohedge is mentioned by the Keyenesian moron Krugman in this Stockman interview on Bloomberg:
http://www.youtube.com/watch?v=qYCHoK0RYWM
"I would say he got lost" - brilliant
Every new day is a chance Bugman will fall down an open elevator shaft or get hit by a random bus.
The economic royalists who benefit from status quo are not interested in thinking outside the box, only in working the angles of the one they've trapped us in.
Would YOU change what's working for YOU?
They're going to send us down to the ballast room as they scamper up the mast. The ocean that we're sailing on is deep. Knowing how to swim will be the ONLY think that'll save you. I don't think that They can survive without floating on someone...
And it's "David Stockman," not Stockton.
Yeah, I found I made that sub-conscious mistake several times before too, until I noticed doing that.
"The above is admittedly depressing. But the reality is that there’s hope.
We can have a very bright future, indeed … if we switch from the status quo to something smarter. For example, see this and this.
For example, we can cut out the middlemen in the banking and political realms"
Golly! There is hope! Why haven't we thought of that before! (sarcasm)
The key flaw in that statement is "cut out the middlemen." Suddenly that's going to happen with the vast majority of sheep in the world not even knowing exactly what the problem is or, in many cases, not even knowing there's a problem? Add that to the the fact that "the middlemen" own governments and central banks worldwide and there isn't the slightest glimmer of hope other than the hope for change brought about by a total systemic collapse.
China and Australia just "cut out the middleman" ie: the US and the reserve currency dollar.
It's becoming a trend and doesn't bode well for the fiat dollar.
And both are on a headlong dash to crash against the rocks of hyper-growth. Operation was a success, but the patient died.
I got a great idea..........lets run an entire economy, the entire world economy and the most ruthless Empire in history on DEBT...........
The American Empire is the greatest wealth distributor EVER.....from poor countries to our shores.......and we wonder why they hate us....
Fuck you DEBT-MONEY
But, but... debt is a great enabler of growth, and after all, growth is what is the name of the game*.
* It's a poorly premised game, but those are the rules. Can't sue me for it because I didn't make it up.
...let's have a bunch of psychopathic subhumans run an entire economy, the entire world economy and the most ruthless Empire in history on DEBT...
There.
I wish Cavuto would shut up and let Stockman speak; jeez, so many interruptions.
Stockman is telling it like it is; unvarnished, clear, plain, cold hard facts.
Facts no one wants to hear.
He's just another of the blowhards on Faux. Stockmam delt with it well.
Here's Stockman on Bloomberg with even better coverage of the points made in his new book:
http://www.youtube.com/watch?v=KnpSzk37M7A
Stockman's Mam is at it too?
Not to pick nits...but Stockman dealt with it well...not Stockmam.
(just kidding around lol)
Good Lord, that Clive Crook is an idiot.
"If you have a syringe at home you may stick it in your eye" LOL
Talking of Stockman.Watched an interview he gave.Couple of
the words, and phrases were directly from ZH.At one point he almost said Gold bitchez(not really,
but he had the fight club lingua franca).
Come out from behind your avatar David Stockman.
I very much doubt that Stockman reads ZH. The reality is more likely that Truth rhymes with Truth and you are fortunate enough to perceive the rhythm.
Congruent perceptions of reality.
Yes George we play by house rules.
I agree that energy will play a big part but for a while it will work against us - the re-emergence of cheap enegery will sustain the status quo for many years as they remain in position to control it.
I don't think it is neccesarily to that collapse will fix anything same with violence.
"the re-emergence of cheap enegery"
He said that? Really? Is that to be found hiding behind the missing unicorns?
"Cheap" is mainly made possible via (positive) economies of scale. If you do not have a sufficient number of people helping to prop up the volume then any cheap unit price will have a bit of a struggle with unit costs- margins will struggle.
I'd like to point out that the "status quo" is on a lot shakier ground NOW than perhaps you realize. It maintaining for "many" years is highly doubtful. I hope that you're not basing your adjusting on such a timescale.
BitCoin is in a "V" recovery. Green shoots have lifted its price.
drop all ordinance on the commods and jp demon
so we price everything, value everything according to
the basic unit defined as a Ponzi note and then
wonder why nothing seems to
make sense, add up or work out,
yet there can be no problem with the basic unit
of financial accounting. it is neutral, right?
.
it seems that people will not know the truth of
the world or themselves until the money fails.
I say good, i'm looking forward to it. why?
because there must be more value in the truth than
there can be in any lie or Ponzi illusion where
fraud and math are combined to create a rationale
for negotiated enslavement.
"it seems that people will not know the truth of
the world or themselves until the money fails."
I'm afraid that it's unlikely. One need only look at several of the postings here to see folks lashing out at anything but the real source of our dilemmas. Sadly, the hierarchical nature of our social structures work wonders to pit the underlings against one-another while protecting those at the top.
But, really, it all comes down to only one of two possibilities:
A) We create agreements with which to hold us in peace as much as we can (though there still is war);
B) We just duke it out.
The problem with "A" is that humans are deceptive. The negotiators are those who tend to negotiate themselves to be above those being negotiated for: all animals are equal, but some are more equal. And, "B," well... I'm sad to say that it's likely going to come down to that, if only but for a short and very painful time; the reason being is that the greed etc that exists today will not accept any lower living standards that most assuredly would have to come as a result of increased population sizes (we'll continue to grow for a while yet), thus tending to heighten tensions for war (effectively "B").
I suppose that we could sit tight and realize that we're aging and just let ourselves die out and make way for a smaller population. It's quite possible that nature will find a way to do this (attacks on the elderly): it's why I try to stay fit.
The economic Ponzi was a way of ensuring access to cheap energy: energy is the biggest driver of economic growth. When this realization was made (early 70s) the push was on for some way to paste over all of this- enter the start of the financial deregulation and more obscuration. This new wave of deceit was so good that it caught fire around the entire globe. But now the music has stopped. Food, Shelter and Water, more and more people are going to be dying for these fundamentals. The "education" on money will likely not only not be had, but it'll be irrelevant. Sorry to say...
We won't be alive that long
We have no one to blame but ourselves. Our ignorance. Our greed. Our indifference. Our exhaustion.
We are all frogs in the boiling pot.
Speak for yourself. I have long refused to participate in a political process so openly corrupt that those who do participate in it are to blame. Which is not to say that the state -- government and those who control it -- hasn't been wildly successful in dumbing the people down to the point that they have no idea what's actually going on. Instead, they grumble incessantly about a system they perpetuate out of blind, bread-and-circuses patriotism, and they will continue to do so until it collapses around their empty heads.
Meanwhile, those with eyes to see, heads to understand, hearts to resolve, and hands to work will straddle the divide between collapse from above and chaos from below -- the "Middlemen," who will lay the foundation for a new paradigm of freedom amid the rubble of statism.
The "problem" is world-wide. I suspect that the person you're replying to is looking at this at a more macro level.
You can remove all the statism, and I'd go along with That, but unless you figure out how we can go forward without overrunning our environment, in an other than grow-or-die paradigm, you have not changed the equation, you've only changed the players. The same mindset that is fucked up at the top can also be found at the local levels, and it can be just as catastrophic, though at a more localized level (but does it really matter if you're nuked from afar or from up close?).
Our instruction manual is defective. "Go forth and multiply" is being shown to exhibit some flaws...
The Universe is a very large place (or so I'm told).
You and Anusocracy are nihilists, then, as either "Nature" or our "instruction manual" is to blame for our problems, and there's nothing we can do about it. Consequently, you have nothing constructive to offer and are therefore part of the problem, not the solution.
I believe, on the contrary, that with the demise of statism, humanity will be liberated as never before, launching itself on a journey of discovery and achievement the likes of which the world has never seen.
And I work for that day as best I can.
In the meantime, the state can kiss my ass.