The 10-Step Plan To End The Era Of Ponzi Finance

Tyler Durden's picture

The developed world’s Ponzi scheme is caused by record-high levels of public and private debt. As Boston Consulting Group notes, it is exacerbated by huge unfunded liabilities that will be impossible to pay off owing to long-term changes in developed-world demographics. Addressing these challenges at any time would be difficult. To make matters even worse, however, BCG points out that they come at a moment when the developed world’s traditional model of economic growth appears to be broken. This is partly a consequence of the Ponzi scheme itself. The underlying issues cannot be ignored any longer. The developed world faces a day of reckoning. It is time to act. In this excellent layman's guide to the the real world, not only does BCG explain the Ponzi, but they lay out ten critical steps that developed economies must take to definitively end the era of Ponzi finance. Some are sacrifices required of various stakeholders. Others are new social investments, both public and private, that are needed in order to return to a sustainable growth path.


The paper starts with the Origins of the Ponzi Scheme we call modern economies...

goes on to discuss the Broken Growth Formula...



Then lays out ten steps to any solution for developed economies...

Via Boston Consulting Group:

1. Deal with the debt overhang - immediately. A precondition to addressing the fallout of the unsustainable policies of recent decades is a fast cleanup of the debt overhang. In previous papers, my colleagues and I have discussed the various options for doing so.35 Put simply, some combination of writeoffs and restructuring, austerity, higher taxes, and sizable inflation will be necessary.


2. Reduce unfunded liabilities. Once debt restructuring is under way and the broader public sees that wealthy owners of financial assets are contributing to the necessary cleanup, it should be easier for politicians to take another painful step: addressing openly and directly the trillions in unfunded liabilities that are weighing down budgets and balance sheets across the developed world. It will require a combination of several measures to bring these unfunded liabilities under control.


3. Increase the efficiency of government. Parallel to reductions in government spending on social-welfare benefits, another key to reducing government’s share of GDP and increasing economic growth is to make government itself more efficient. A smaller government sector does not necessarily mean a weaker government. By defining the right “rules of the road” for society and business, governments can set the tone and priorities for development in a more effective as well as a more efficient way.


4. Prepare for labor scarcity. Countries need to start now to prepare for the coming era of labor scarcity. Doing so will require a series of initiatives to reduce the decline of the workforce.


5. Develop smart immigration policy. Even if developed countries take all these steps, it will still not be enough to reverse demographic trends. Therefore, these countries also need to become far more open and attractive to immigrants.


6. Invest in education. Education has to play a significant role in the future growth potential of the developed economies. Quality education will be the decisive factor in protecting and increasing GDP per capita. It is also the foundation of social mobility and a precondition to fully utilizing the innovative capabilities and entrepreneurial talent of a society’s members. For both reasons, it needs to be another key target of social investment.


7. Reinvest in the asset base. For more than a decade, the developed economies have reduced investments in public infrastructure and productive assets. Given the importance of the quality of capital stock to productivity and economic growth, it is time to reverse this trend.


8. Increase raw-material efficiency. The age of cheap resources may have come to an end. Developed countries have to increase their efforts to decouple economic development from resource consumption.


9. Cooperate on a global basis. Competition among countries will become more intense in the years to come. All countries will try to increase their exports; all will try to attract the best-educated immigrants; and all will try to secure scarce resources, from water to oil to commodities. This increased competition will pay dividends in the form of new and innovative products. But even as they compete, the world’s countries must also cooperate. The problems of the developed economies can only be addressed in a cooperative way on a global scale. Otherwise, the world risks descending into a vicious circle of beggar-thy-neighbor economic policies leading to much lower growth and slower improvement of living conditions worldwide.


10. Launch the next Kondratiev wave. Last but not least, the developed world needs to prove Robert Gordon wrong. By investing in a growing and highly productive workforce and making it easier for engineers and technologists to innovate and for entrepreneurs to start new businesses, the developed economies need to unleash a new Kondratiev wave of global economic development.


and ends with ideas for Negotiating The Fallout...

Must Read!

BCG Ending the Era of Ponzi Finance Jan 2013

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Seer's picture

"There's more than enough savings there."

For what?  To pay off our debts?

"We'll consume our own oil and gas."

Duh!  Consume until it's gone, that's what bacteria and cancer cells do.

Whenever you make a statement follow it with the question: "And then what?"  If you cannot get past two levels of answers then it's time to question the starting premise.

Seer's picture

A down-arrow from an infinite-earther.  Please step up and accept your Darwin award.

Bicycle Repairman's picture

To pay for social programs, fucktard.

As for gas and oil, three years ago you fools didn't even know what fracking was. 

Seer's picture

So, YOU'RE the infinite-earther?

Do I really want to engage in a intellectual/serious debate with a name-caller?

BTW - One can make all sort of claims, but doing so without any data to back them up is kind of like, well, name-calling.

Bicycle Repairman's picture

Don't you have a rainforest to save or an ozone hole to fix?  GFY.

dolph9's picture

More polyanna bullshit.

Let me translate:

Suck it up, American bitchez!  Work your ass off so that millions more people can come to your country, and you can support the 7 billion hungry mouths around the world!


This is my response:  I'll see you fuckers in hell.

Seer's picture

"Work your ass off so that millions more people can come to your country, and you can support the 7 billion hungry mouths around the world!"

Well, MANY in the poorer countries have paid for our lavish lifestyles for MANY years.

The reality is as it was stated- an issue of demographics.  Do you not agree that there's a looming problem with an aging populace?  You either start preparing for a new crop of humans to be the "replacement" workers or you work harder: another option would be to start taking a bunch of Viagra, but that ain't likely going to help with actually raising kids (not since most are in poor physical shape).

I have no problem with younger people taking over my farm (assuming that there's sufficient gratitude that I can stay there until I die).  I DO, however, have a problem with a government (ANY government) taking it over.

And just what of yours will be here for any next generation?

booboo's picture

American needs testicle growth, then proceed to physically frog march the accused before 1000 Grand Jury proceedings called and seated by the citizens. We become the law when we demand it.

earleflorida's picture

Got lucky and thread-jacked these links from another site? If you've got the time... they're worth a look [jmo]!

Thomas Hoenig [Pres. K.C. Fed.[6/27/11] __  [22min.]

Sen. Sherrod Brown (OH) [8/3/11]__  [~4min.]

"Minsky 2010 Conference: Michael Greenberger on Credit Default Swaps" [1:31min.] __    

"SIFI & FASB"__ [dated 4/2/09?]

Lastly... Merry Christmas 'Julian Assange' ;-)>


ugmug's picture

Madoff will be released from prison to run Obama's economic policy...this will give Obama more time on the links.



Absinthe Minded's picture

The more I read today, the more I wish the End of the World did happen. Ponzi, pyramid, Madoff, they're all just symptoms of a morally as well as economically bankrupt society. We look at guns as these horrible weapons of murder and mayhem, but guess what, when you teach your kids that kill count is great in these new video games, they quickly become desensitized. We may have had psychos go on rampages in the past but they usually were not teenagers. When food starts to become scarce there may be a zombie apocalypse, but the zombies will be those who did not prepare.

ramacers's picture

only one step, economic human nature. it's on the front step and it'll be unimaginably ugly.

frenchie's picture

ponzi was a jew from italy

ekm's picture

Please Zerohedge, I beg you. Please stop using the stupid word "ponzi". Nobody knows who Ponzi is and it happend 60 years ago.


Please, please, please use the term: MADOFF SCHEME. This one, everybody knows about.

Atomizer's picture

Multi-level marketing, Madoff, Worldcom, and Enron were all shell games which led to the ponzi scheme collapse. Don't underestimate this audience, many know who Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi was. :\

ekm's picture

Oh, I'm not worried about the audience.
I'm worried about those who click once or twice a month, see these old terms and decide not to get educated here at ZH.

However, I can tell you that only few actually can visualize how a pyramid scheme works.

Seer's picture

We'll quit using "ponzi" when you quit using "pyramid?"

Most people probably have good thoughts about pyramids.  Lots of tourism.  And, the Food Pyramid is a good thing, no?

Unless you tack on "scheme" "pyramid" is basically neutral.  Hell, tack on "scheme" to anything and that thing gets negative-looking.  "It was a charity 'scheme,' oh, how wonderful!

POINT: No one can confuse "Ponzi" with anything good.

I'd prefer to inform people about exponential functions, but I'm afraid that that won't work either; BUT, it is EXACTLY what is occurring.  Further, it's what ALL economists purposely avoid: the reason why they avoid it is because if people were to understand it the economists would be out of jobs and would have to do actual (most likely physical) work.

Radical Marijuana's picture

Most of the comments above I agreed with, regarding the travesty of this article.

It was deceptive since it started with the statement that the whole world's economic scheme IS a Ponzi scheme. That appears to be perceptive and an accurate assessment. However, all the rest was too fantastically fairy tale stuff, which appears to be due to a total failure to face the meaning of that FACT that the whole system is one vast Ponzi scheme, which has reached the point where the debt slavery has become debt insanity.

All of the subsequent solution steps are about pretending that the established systems could somehow be reformed, when the basic reality of those systems is runaway fraud, backed by force! It is always astonishing to me how "economics" can be done in this abstract, sublime bullshit way, which manages to discuss everything in ways that deliberately ignore the basic concepts of ecology, and especially ignore the central real role of the murder system, or the death controls, throughout everything that economics actually does.

This list of 10 steps were sanitized, in ways which were practically insane. I understand WHY the economic system is run by the best professional liars, who are able to be sublimely hypocritical about everything that actually happens. However, it still astonishes me to watch that in action, as in this article!

The ONLY real ways that the established systems are preparing for the future is to prepare for genocidal wars, along with democidal martial law.  Those are the "logical" end games of increasing entropy of economic systems controlled by the triumph of frauds, backed by force. They grow and grow, until they collapse into crazy chaos. They do NOT do anything saner, because it is impossible for them to do that, within their own frame of reference.

The real world is controlled by the best organized gangs of criminals, who have taken over governments, to legalize their own crimes. That is the basic foundation of the global Ponzi scheme. That system is based on REALITY, which is that there was a combined money/murder system, in which the debt controls depended upon the death controls. The truly significant leverage was through the death controls, with the assassination of politicians providing the maximum real leverage inside those systems!

This article is bizarre pie-in-the-sky day dreaming, which admits the problem is the Ponzi scheme, but then proposes a series of political miracles as being the good solutions. ... Well, maybe so, in the fairy tale land where the best organized gangs of criminals do not actually control the real world, because the Ponzi scheme global system just somehow happened to become triumphant. It is bizarre to ignore the real history of HOW the Ponzi scheme became triumphant, while proposing solutons to the problems produced by that system totally taking over too much, for too long!

The reality is that the world operates according to the methods and principles of organized crime, and therefore, the only realistic solutions to those problems have to address those central social facts, which means that there must be alternative murder systems, doing alternative death controls, or else there are NO real alternatives, just fantasies for a series of utterly improbable political miracles! The political economy is always inside the human ecology, and economists who continue to talk about economic solutions without that context are just more of the same old problem of society being almost completely controlled by the triumphant bullshit of the biggest bullies, dominating the public debates with their huge lies!

This article is one of the increasingly bizarre manifestations of mainstream folks recognizing THE problem is that the whole global system is a Ponzi scheme pyramid system, but then, managing to continue to muddle through without actually understanding and addressing WHY that is the central social fact! As the global Ponzi scheme automatically reaches its tipping point, where the debt slavery systems become debt insanity, and even mainstream people, who look at the numbers, are forced to recognize that fact ... ... those people then return to operating within their mainstream delusions regarding how the world is supposed to operate, and therefore, what good solutions could be possible within that frame of reference about how they presume that the world is supposed to be operated. IN FACT, the real world is operated according to the methodical application of the principles of organized crime, and there are NO realistic solutions which are not more of the same, in order to change the dynamic equilibria of those forces.

The Old Man's picture

Right your own ticket.

R M. As prior stated it surely looks as if TPTB are allowed to do as they please by simply changing the rules of the game to their favor. Mirrored to the scheme of a public safety net such as Social Security or anything the public has adapted to by oiling that squeaky wheel through political representation. The advantage TPTB have is manipulating numbers and balance sheets to ensure they are the overall winners in a system that is favored towards them as the major holders of money and powerful global leverage while the little guys hope for a monthly payment someday that will cover the rent and buy some food.

Nice to think that such acclamations and false suppositions by an organization such as represented would come foul with our and your humanity, but they can say or state about anything they like knowing that few will listen or really give a shit. Most of what you say is true. A few know it. But.

Over a very short period of time, probably three years or less, the system will crack to an inevitable "Your on your own!" mentality, much harder than the 29 crash. Until then I suggest you get into hard assets. PM's, food and water come to mind. And learning how to sew would be good too. It's not just us who are going to take the hit. It will be global beyond what we can now conceive. IMHO

Absinthe Minded's picture

Couldn't be more spot on. John Corzine was just the beginning, turds in the punch bowl will start turning up more and more. Hopefully our populace will finally come to an awkening, en masse, and direct that outrage appropriately.

G_T_A_44's picture

Not surprisingly absent from the BCG's plam to rid the globe of its troubles/ills - is the lack of addressing/gutting the Cancer itself.....Rampant-Pervasive-Wide-spread Fraud/Corruption that deck ALL halls. Shocking....Carry on!

max2205's picture

Cut govt spending by 50% now and by 3% for 20 years

There fixed it

Oh and have goog ge appl ect pay 36% in taxes like they should have for the last 12 years

StychoKiller's picture

Do YOU understand where Google, GE, etc., get the munny to pay their taxes?

TumblingDice's picture

Fortunately, there is still time to act. But leaders from all social sectors—government, business, organized labor, environmental and other stakeholder groups—need to act decisively and quickly in order to secure future economic prosperity, social cohesion, and political stability.

That about as realistic as the plot of a porno. The entire article sounds like maybe BCG would recommend that we ask for half our money back from our leaders. The gracious ponzi lords will take pity and give us back 5% and start the next Kondratiev wave with smart, targeted investments towards our engeneers, technologists and other serfs. Gee wiz that sounds great! Brb there's a blonde with huge knockers at my door with some pizza... But hold on, I didn't order any pizza! Thanks again BCG!

Monedas's picture

BCG ! This 10 step plan is anti-Capitalist fantasy porn !  Pure rubbish ! If you don't understand Capitalism and Freedom intimately .... you ain't gonna fix shit, mufucker !

Anusocracy's picture

I thought it was written by some starry-eyed EU socialist from LEAP 2020.

Monedas's picture

We need to give evolution an assist and get rid of a lot of bad seed .... starting with Negative Rates ?         "Boston is England .... New Orleans is France .... New York is anyone for ten cents a dance !"... Lorenz Hart "Pal Joey"            Monedas    1929     Eye-On-Zion World Report

ugmug's picture

I purpose genetically modified debt - GMD - that will pay itself off twice as fast as unmodified debt.

I'll call it QEInfinity

Beuker's picture

All ideas still based on 'back to growth'. Time for the next step in the Maslow pyramid.

Fizzywig's picture

3.  Increase the efficiency of government.



awakening's picture

Short summary; repeating the same thing again but expecting a different result.

Albert Einstein had a few words about that and insanity, I believe.