US Economy Giant Ponzi Scheme

Economists at the General Delivery University Ponzi School of Economics forecast America's worst depression since the 1930's.

"The US economy is simply a giant ponzi scheme," said Robert Vescow, dean of the Ponzi School. "People have finally figured this out."

An element of the US ponzi economy is robbing Peter to pay Paul. explained the GDU economist. "Take social security. We're using today's tax dollars to pay for benefits for people whose payments into the system were used to give benefits to people in the past. The problem is the people in the future won't generate enough cash flow to keep the benefits flowing. The social security system is just a ponzi scheme," said Vescow.

The national debt is another element of the giant ponzi scheme, said Vescow. "We're mortgaging our future and our creditors around the world are now having serious doubts we'll be able to pay back what we've borrowed."

Rising oil prices put a major crimp in the economy. "The cost of gasoline seriously limits what people can do and spend their money on," said Vescow. "That in turn reduces consumer spending, which shrinks the economic pie."

The home mortgage fiasco also sapped the US economy. "The biggest problem is not the foreclosures, it is the shrinking value of homes," said Vescow. "The net worth of the people of the country is shrinking to where they owe more than their assets are worth, especially their homes."

The crash in new home construction triggered a ripple effect in job losses. "First all the real estate agents and construction workers lost their jobs. With that reduction in money circulating in the economy, furniture stores started laying off people, and then manufacturers because no one was buying anything, so what's the point of making anything?" Vescow asked.

The same thing happened in the auto industry. No one could borrow any money to buy a car, and no one wanted to risk going into debt out of fear they'd lose their jobs. Thus, with no car sales, the auto industry tanked.

The ultimate crash will came when people wake up one morning and realized there is not really any money in the economy.

"Money is actually mostly a belief system. If everyone suddenly decided money isn't worth anything, then everything just stops," Vescow said. "The really scary thing is most of what we think of as money is not currency and coins, it is electronic data. If suddenly the electronic data vanished, we'd have to return to a cash economy, and who has any cash really?"

"Belief is reality," said Vescow. "If you don't believe in the monetary system, then poof, it is gone."

"Confidence is everything in maintaining the fiction of an economy, and if people don't have any confidence, what do you have?"

The credit crunch or liquidity crisis as it is being called is the ominous sign the total collapse of the US economy is imminent, according to Vescow.

"The whole country runs on credit. Whether it is the government borrowing money to build aircraft carriers, or the homeowner using her Visa card to buy clothes, we have long departed from a cash and carry economy," Vescow said. "Eliminate the ability to borrow, then we have a serious reality adjustment to make which is we can only afford to buy what we have the actual cash to pay out for whatever."

"And no one has any cash since their income is pledged to pay off their mortgages, car loans, and credit cards."

"Add to that a loss of income because of the constriction in the employment sector, and the collapse cannot be stopped."

Vescow urged Americans to accumulate as much cash currency as they can for the coming crash.

"The day is looming when all the plastic is going to be worthless, and the only way you will be able to buy anything is with cold hard cash," Vescow said.

"What that cash will be worth remains to be seen," he added. "Outside the United States our currency is going to look like Confederate money. But inside the country a dollar bill still might be able to get you something if anyone will exchange the bill for something else like groceries."

Vescow points the blame for the impending implosion of the US economy directly at George W. Bush and his cronies running the government. "Bush has done what Herbert Hoover did, and for pretty much the same reason. What is generically called Republican philosophy about letting free markets operate without any government regulation." Bush will go down as America's worst president in the wake of the collapse. "Concentrations of homeless people will probably become known as Bushvilles," Vescow said.

"The symbol of Bush's presidency will probably be a formaldehyde soaked FEMA trailer," Vescow added. "Too bad we can't make Bush have to live in one of his trailers for the rest of his life."

(Note: This article was first published on my web site The Frumious Bandersnatch http://www.bandersnatch.com )

Copyright 2008 by Hugh Holub