Central Planning, Lying Career Politicians, and the US Ponzi Debt Scheme

Phoenix Capital Research's picture


The political class in Washington has failed to reach a deal. They are effectively playing a game of chicken with the markets to see who blinks first. As usual, there are plenty of lies and spin swirling around this situation.


The US Treasury has stated it will run out of cash on October 17.


This in of itself is a strange claim as technically we hit the debt limit back in May and have been resorting to “extraordinary” measures since then. I don’t recall anyone in at the Treasury talking about the importance of the “debt ceiling” then, do you?


Secondly, the Government has effectively been running a Ponzi scheme with our debt for the greater part of 20 years. Over $5.7 trillion of our debt is owned by the Federal Government, ($2.1 trillion is owned by the Fed, $2.6 trillion is owned by Social Security, and over $1 trillion is owned by various Federal Retirement entities).


Indeed, the single largest owner of US debt is not in fact China, but our own Government. We’ve been running this kind of scheme for over 20 years.


Now this is not to say that a debt ceiling breach or a possible default on some payments are NOT huge issues. What I am saying is that the US Government can shuffle money around just as it has for the last 20 years to insure that we meet our debt obligations.


So the debt ceiling “we’re going to run out of money and the world ends” talk is not accurate. What is accurate is that playing games with your debt limits impacts other investors’ psychologies. And THAT is the real issue here.


The Fed has already screwed this up royally. Indeed, by engaging in QE, the Fed alters the very structure of risk in the financial system. Traders on Wall Street, knowing full well that the Fed would be soaking up Treasuries, rushed into new debt issuance with the intention of flipping over these assets to the Fed in the near future.


This became a self-fulfilling prophecy as the “front-running the Fed” trade became a dominant theme for Wall Street. By piling into bonds, traders forced prices higher and yields lower: precisely what the Fed wanted.


It is critical to note that a significant percentage of these investors had no interest in actually owning US debt as an asset class in the long run. They were simply looking for an easy trade that made money. As a result, interest rates were driven even lower by the “investment herd”.


 We saw this when Treasuries dived soon after the Fed hinted at “tapering” QE. At that time, traders realized the “front-run” the Fed trade may be ending and dumped Treasuries. Rates rose, mortgage rates rose, mortgage applications collapsed, and the slew of other problems surfaced.


My point with all of this is that Central planning is always a disaster. We are now watching another Central-Planning debacle in the form of the debt ceiling fiasco. These folks got us into this mess, expecting them to get us out of it is foolish.


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Best Regards

Graham Summers



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Teddy Tenpole's picture




Just how wrong and for how long has Pheonix Capital been?  You blog posts should run on a shopping channel somewhere.  Better yet, set up a booth in the local mall and inform people of impending doom.

Since it is unlikely that you actually read the great and pertinent info on here your organization has been chosen by the Boomer Doomer Douche Bag Award Commitee as a potential sponsor.

Let me know what you think?



robnume's picture

Carlo Ponzi would be proud to be an Amerikan today. Send all of CONgress to the Middle East to fight their own goddamn wars; "We the People" have had enough of their shit. Abolish the Feral Reserve Bankster System and let's get on with the real business of ridding ourselves  of an increasingly moribund central planning apparatus. CONgress is HATED.  Right, left, no one has a clue. Since these incompetent morons - CONgress - have no idea how much they are despised by the people whom they purport to represent, and since they won't willingly resign, let's do something to force them out. Whatever it takes, I'm in.

digitlman's picture

How come Greece hasn't been kicked out of the EU yet? 


Just more shit from this guy

EnslavethechildrenforBen's picture

Because if they get kicked out then the Bankers won't be able to continue to steal all their resources in exchange for useless pieces of paper.

Serfs_Up's picture

Why does this headline seem redundant? 

Ying-Yang's picture

I hate to say it but Phoenix Capital said it well... good to see it put out there again for anyone who may having been sleeping.

EnslavethechildrenforBen's picture

You mean pretend paper money is actually only worth a piece of paper? I guess a Government based on pretend money is only a pretend Government.

Isn't it fun to play along?

Lets all pretend that we really have a Government!