Guest Post: A Very Subtle Form Of Theft

Tyler Durden's picture

From Simon Black of Sovereign Man

A Very Subtle Form Of Theft

Say what you want about him, but Bernie Madoff was a guy who knew how to keep the party going. For years, he ran one of the largest private-sector Ponzi schemes in history and always heeded the golden rule of financial scams: make sure your inflows are greater than your outflows.

He was finally done in when redemptions exceeded new investments. He didn’t have enough cash to pay out investors, and he wasn’t able to scam more people into paying in to the scheme. As a result, Madoff finally had to admit that the whole thing was a total fraud.

Governments around the world are in similar situations right now with their own public sector Ponzi schemes. Faced with failed auctions, declining demand, and rising yields, politicians are having to resort to desperate measures.

Like any good scam artist, they’re appealing to the masses first; all over Europe, governments are sponsoring new marketing campaigns suggesting that it’s people’s patriotic duty to buy government debt.

In Spain, they’re actually issuing instruments called ‘Bonos Patrioticos,’ or ‘patriotic bonds’. Ad campaigns say that the bonds are “good for you, good for the future.”

In Ireland, they’ve issued “Prize Bonds” which carry a 0% interest rate; instead of receiving interest, bondholders are entered into a weekly lottery contest.  Naturally, lottery winnings are only possible as long as people keep buying the bonds… pretty much the definition of a Ponzi scheme!

In Italy, they’re rolling out the country’s sports celebrities to encourage everyone to buy Italian sovereign debt.

What’s ironic is that Italy’s dismal balance sheet is almost universally acknowledged. It’s as if everyone knows the country has almost no chance of making good on its obligations, but they still feel the need to willingly throw away their hard earned savings for the greater good of political incompetence.

Thing is, it’s not the millionaire sports stars, wealthy business leaders, or political elite who are buying these bonds… at least, not in anything beyond a token, symbolic amount. It’s the average guy on the street who really stands to get hurt when the government finally capitulates.

This is a truly despicable act and amounts to theft, plain and simple.

The United Kingdom, which is rapidly reaching this banana republic sovereign debt status itself, has unveiled a plan to issue roughly $50 billion in infrastructure bonds. This would be the equivalent of issuing $300 billion in the US– not exactly chump change.

Given Britain’s already colossal debt level, private investors aren’t exact diving in head first to loan the government even more money.

Undeterred, British Chancellor George Osborne plans to ‘highly encourage’ UK pension funds to mop up about 60% of the total amount. “We have got to make sure that British savings in things like pension funds are employed here and British taxpayers’ money is well used,” he said.

In other words, ‘we are going to make sure that British people buy our junk, one way or another.’

The last year has seen numerous pension funds around the world, from the United States to Argentina to Hungary, be raided for the sake of keeping these Ponzi scheme going.  The UK is already lining up to be the next.

It’s one of the last acts of a truly desperate government to begin directing public and private savings into their Ponzi schemes.

Fast-forward a few downgrades and you can plan on seeing the exact same thing in the United States– appealing to people’s patriotism to loan their hard-earned savings (if they even have any) to the Federal government at a rate of interest that fails to keep up with inflation.

It’s nothing more than a very clever (and subtle) form of theft.

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hugovanderbubble's picture

Gold Confiscation coming....World Wide Across all boards....

They want our hard assets... FIGHT

Hard1's picture

At least Madoff had class and ran a ponzi scheme that stole from the 1% and wouldn't ruin the world when it busted.  Timmay, Pelosi, Merkozy to the guillotine

Popo's picture

Guillotines require organization.   I have a feeling the rise in violence that we'll probably see in the PIIGS will be much closer to anarchy.

Dr. Richard Head's picture

They have anarchy now, which is directed by their heads of state.  Government is anarchy in the fear mindset of that word. 

Manthong's picture

I submit that history offers simpler and more appropriate remedies.

WhiteNight123129's picture

Was VLAD the impaler experimenting a new monetary policy to reduce inflation by slaugthering people, therefore reducing velocity?

Papasmurf's picture

Depends if you're supply side or demand side economist.  Sure, demand would drop.  But supply will drop too. 

Old Poor Richard's picture



Looking forward to a field of stakes in Central Park.

Zero Govt's picture

Precisely ...anarchy is the State, a small group of violent thieving MF'ers (Bush, Bumma et al) running riot across society

it's not "anarchy" breaking out in Greece etc.. it's society kicking-off against the parasites on their backs.. the Govt

Both the Tea Party and Occupy have to realise they are fighting the same enemy for the same reason: the parasites of Govt sucking society dry and destroying our livelihoods (see the history books how many times Govt has repeated this rape of society)

the best way to fight is simply stop paying your taxes to these parasites ...bleed the suckers

Zero Tax = Zero Govt

falak pema's picture

why be choosy, start wit the GS/JPM bankstas!

dolph9's picture

In comparison to the jokers running things, Madoff is a hero who should be sainted.

Hippocratic Oaf's picture

"it’s people’s patriotic duty to buy government debt"

Only during times of war my friend

duo's picture

WWII bonds weren't such a bad deal.  Because of the gold standard and low inflation, they actually yielded something.  Buying government debt now is pure theft, through inflation (slowly) or currency destruction (quickly).

MacGruber's picture

Agreed, the gold standard made government bonds good as cash. The thing the people in these countries should be fighting for is a structured default - one in which they give up some social services to balance the budget, then kindly tell the banks "no thank you" to the principle due.

The most disturbing aspect about this ponzi is the myth the banks have created, one who’s thesis is that bonds are not a risk instrument. I wish the MSM would present this point; we have it programmed in society that default is bad, when in reality it is the risk exposure that the interest payment is alleged to offset. Without the risk of default all you have in essence are mob-like protection payments to the banks.


TBT or not TBT's picture

California advertises its debt offerings on the radio, to the California listening public, with messages about how great California is!

There is some notion of private individuals being able to buy new isues directly, thereby getting the jump on the big institutions.

What an awesome deal for Joe Six Pack, Jane BoxedWine, and Pat Pothead, to hold a piece of Sacramento issued Golden State bonds!

Popo's picture

Gold confiscation?   They won't even need to be so obvious.  They'll just tax gold sales, and strictly tarriff imports/exports and thereby confiscate a significant portion of gold's value.   These fuckers will extract wealth at every turn.

The thing is:  That's what the USSR did too.  The game was so rigged that ultimately the only solution was to be a lazy unproductive sloth.   When the system became so rigged that the average man could not win,  the ultimate answer was to be unproductive.    

It's already happening here.   I see it all the time.  How many young people are motivated to work when there are "insiders" in every sector who do 1/10th of the work for 10x the reward?  Young people can either try (and fail) at an obviously rigged game -- or they can play Xbox and smoke pot.   The latter actually becomes increasingly tempting the more rigged the system becomes.

Odin's picture

lol good post man.

Temporalist's picture

Everyone is going to be like this:


"Somebody needs to pay...for alll my children."

Chuck Walla's picture

Man, she needs to install a toll both on that thing!

buyingsterling's picture

This doesn't change until paternity tests are required to obtain welfare. Then the 'daddies' can either work or sell a kidney to help pay for the costs of their rutting. Nah, that won't work - they'll just turn to crime/prison or they'll go underground.
So long as welfare exists, we're paying for our own undoing: pay the unproductive to breed and you get more unproductive people. Make it more expensive for the productive to breed and you get less productive people. That's the current formula, the end seems clear over a long enough timeline.

Xanadu_doo's picture

"Young people can either try (and fail) at an obviously rigged game -- or they can play Xbox and smoke pot.   The latter actually becomes increasingly tempting the more rigged the system becomes."


-more and more every single fucking day, man. WOOT!

dolph9's picture

I don't work particularly hard and don't really give a fuck.

But I do work, I do save, and I do buy gold.  One foot in and one foot out is how I'm playing it.

TeresaE's picture

hugover says, "Gold Confiscation..."

gold, 401(k)s, then stocks.  All will be "borrowed" by the Federal government to fund their own warchests and pensions.

Our savings, that we worked hard to earn then chose to SAVE instead of SPEND is going to be stolen to kick the can and buy off the unions & politician & minions for just a little while longer.

Plunging us all into abject poverty without a pot to piss in.

Enjoy.  I know I question daily why I sacrifice to save when I'm betting there is a better than 50% chance I'm going to have it stolen by the guv and squandered by everyone else except me.

MacGruber's picture

401(k)s are already confiscation. They were originally designed to augment existing corporate pensions, but then morphed into the only savings instrument anyone had, corporations have by and large eliminated pensions. The real genius was making the banks the people who would hold your money for you in a 401(k) - that way they can quietly siphon off fees without a guarantee on returns. A brilliant system, well designed to be both captive and extractive.

In Fed We Trust's picture

Let one jew get caught so the other Jews get away.

Its the Jewish way.

Madoff was the sacraficial lamb to take the camera off of the Goldman/aig/NY Fed fraud of epic porportions.

GeneMarchbanks's picture

Nationalism on the comeback! This was refreshing from your usual shit...

non_anon's picture

ha ha, nothing like forced giving

onthesquare's picture

when the government prints more money they water down or dilute the value of the money you are holding.  Buying usless govenmnet bonds or having them water down your $US has the same zero sum gain.  it is just more smoke and mirrors.

When the SHTF the only thing that will matter is how to put food on the table.

Dugald's picture

Think of what you can do for your country not what your country can do for you.....

Warrants a pithy comment, from a Merikan......

A Lunatic's picture

The State calls it's own violence law, but that of the individual crime.

-Max Stirner-

OliverTwist's picture

And so another illusion comes to an end. ... though we have walked a long way on the road of evolution of this social cultural society game, but the basic fact from the begining of time remains still true. The strong will rule over the weak. Don't expect protection from the strong and powerful without paying the price! And don't think of price in terms of money but in terms of life time and freedom!


Little John's picture

"Rich men write their books of laws for poor meen to defend,

   But true law is only written in the hearts of honest men."


from a song i heard once


jack stephan's picture

damn lightning fast the first guy always says "bitchez!!!" so facehuggers for all bitchez!!!

LawsofPhysics's picture

Precisely why everyone should be going to physical cash and PMs right now.

Shizzmoney's picture

And the best part on how we got into this "debt"?  Banks over leveraging themselves, not but bloated pensions or social programs (which can always be modified).

When you prudently borrow money to buy a house or build a factory, you are investing in the future using leverage.  But when a bank uses fancy complex derivatives through opaque secret deals, a bank is linking its balance sheet to risks it may not understand and to systemic threats regulators can’t track.  Banks are essentially making money by throwing dynamite into random mine shafts and hoping they dig a gold mine.  Goldman Sachs and JP Morgan have written credit protection on $5 trillion of global debt, but can’t say how much is Eurozone debt.  This is why our markets have gone crazy – last week, the Dow jumped by 400 points in one day, after swooning in November and nearly crashing in August.  Asset prices these days reflect guesses about which stick of dynamite will go off, as opposed to doing what markets are supposed to do, which is reflect prudent profit making potential of securities and credit instruments.

When balance sheets are linked across the world, that creates the possibility of a systemic collapse.  One day, you’re wealthy, the next day, you’re insolvent, and so is everyone you know.  Secrecy magnifies the problem, because it means that we cannot prepare for shocks.  None of this is inherent.  If derivatives were put on exchanges with multiple bidders and sellers, at least we could more easily see price movements that indicate risks.

theprofromdover's picture

"......Goldman Sachs and JP Morgan have written credit protection on $5 trillion of global debt...."

-that they can never cover. Now even in a corrupt world, there must be some authority who can be enjoined to demand to see how the books balance.

Even the auditors for Cheesy's sake.

JW n FL's picture



anything but tax those fucking scumbags who made billions and paid no fucking taxes!

there is plenty of money to carry the debt!

but no one wants to pay for it!

they all believe that living like animals / austerity is better than keeping the sheep comfortably numb!

when people start a class war.. then they will think that paying an extra 5% wasn’t so bad!


maybe they already know that..

maybe the sheep are using up to many non-renewable resources?

maybe all this information is being made available to start drama in hopes of thinning the herd?

Al Bartlett on energy consumption versus population

JW n FL's picture

Never Mind! We are ALL! Saved!!

U.S. stocks hit intraday highs on report of new firepower in Europe's debt-crisis fight
12/06/2011 03:07:27 PM

Get the latest news on our mobile site:

Xanadu_doo's picture

totally bullish -- lots of new 52-week highs, I'm sure, if one looked hard enough... /sarc

catacl1sm's picture

they will come for your preciouses.. be sure to have a boating 'accident'.

vegas's picture

Only an idiot would buy European Government debt [or US debt for that matter]. Who cares about getting an extra 1/2 % interest rate, when you know it's just a matter of time before default.

What is voluntary today will be mandatory tomorrow, especially for retirement accounts. Get the hell out now.

s2man's picture

Agreed.  I expect them to ease into it with, perhaps, "All new deposits will go into TSY's". Followed by "All tax exempt retirement accounts will be converted to TSY's".  Followed by "Oops, they are no longer tax deductible".

I'm gittin', I'm gittin'.  I'll be making my third and last annual withdrawal in January, which will just about wipe out the 401k.  It all goes into tangible goods.

onthesquare's picture

So you buy into this scam with your euro dollar, the same euro dollar that will buy a loaf of bread (day old).  It sits around and rakes in interest and then  you cash out on maturity and take all your new wealth and capital home to fine that the growth was only 1/2 of what it now costs to buy a loaf of bread. 

Your investments buying power has halfened.  So long suckers.