US Federal Debt: Ponzi Scheme?

[August1991]

A Ponzi scheme can survive as long as new people invest/contribute faster than other people remove their money.

At a macro level, the US federal government can spend as long as people (anywhere in the world) are willing to buy US government bonds - or the US government can tax Americans.

So, is the US federal government a Ponzi scheme?  IMHO, no.

The US federal government has the power to tax (force contributions) many people including, for example, Elon Musk, Bill Gates and so on.

Edited September 28, 2023 by August1991

[August1991]

Let me take a different view of this question:

Is the US - as a society- sustainable?

====

Americans have a lower birth rate - but many foreigners want to live in America.

[August1991]

Individuals have this idea of a "bas de laine" - money put aside.

Norwegians collectively think like this. They too have a Caisse. 

Edited September 28, 2023 by August1991

[cannuck]

at $34 trillion and counting it does somewhat resemble an elaborate Ponzi scheme.  The banks long ago took over legislating, regulating and enforcing (or not) ANYTHING to do with financial law, policy and crime.   They started infiltrating levels of government in 1934 and "too big to fail" was demonstration that Goldman Sucks actually runs everything to do with economic law, policy and administration in the USA.  They will simply reward thenselves with endless "money for nothing:" (i.e. speculative gain) in the hopes they will inflate the economy so badly that the $34T debt will be service and possibly at some time paid off by money so devalued that it will easily be covered by the asset value of the nation.

[August1991]

On 1/27/2024 at 7:40 PM, cannuck said:

at $34 trillion and counting it does somewhat resemble an elaborate Ponzi scheme.

....

Agreed, for several years, various US governments (federal, state. local) debt is rising faster than the US gdp.

IOW, the American governments are borrowing more than their people can produce.

 

 

Edited February 12 by August1991

[sharkman]

Let me throw some numbers at you.  US debt to GDP is at 128%, and climbing.  No nation has ever been able to come back from 130%.  They go bankrupt.  They experience actual hyper inflation that wreaks havoc on fatality stats, as well as the economy.  They are never the same. 

Next up, 8.9 trillion in US treasuries are coming due this year.  That means that the US government has to pay off that 8.9 trillion that they borrowed.  Their tax base can not pay this, the yearly deficit is already well over 1 trillion in the red.  They don't have the money.  Can they borrow it?  Print it?  Either option will serve to be the straw that broke the economy's back.  The US just keeps raising the debt ceiling and sending more cash to Ukraine instead of dealing with this catastrophe.  So they'll probably start a war, if domestic terror events haven't started up by then(there are now over 8 million illegals within US borders, some of them known terrorists from the ME).

The US government, Congress, Senate and president all know this, and they are not telling the people.  Which is probably wise as the resulting panic would be unproductive and even devastating to the nation.  So sometime this year, probably before the election, the dollar, the DOW and the economy are probably going to crash.  The government will probably blame Russia, but at that point it won't matter one bit who is to blame. 

Batten down the hatches, we are in for rough seas.  I've never been a prepper, but Canada will certainly get a cold from Uncle Sam's sneezes in this case.

[cougar]

On 9/28/2023 at 1:56 AM, August1991 said:

Is the US - as a society- sustainable?

 

It is not, but then there is no society in the world I see as sustainable.

The US can continue to accumulate debt.  The way I see it the banking system is a scam.  Interest payments are a scam.

The assets supposed to back the banking system up are a joke.

We should not look at money as numbers/commodities set in stone.  Money is just a medium of control - it limits the buying power of the most of the world's population , while those with the trillions have absolute control and do not care what they buy with what they have.

 

[August1991]

On 2/19/2024 at 5:33 PM, sharkman said:

Let me throw some numbers at you.  US debt to GDP is at 128%, and climbing.  No nation has ever been able to come back from 130%.  They go bankrupt.

....

Japan debt to GDP is higher. The US govt debt to GDP was higher in 1946.

[August1991]

23 hours ago, cougar said:

...I

We should not look at money as numbers/commodities set in stone.  Money is just a medium of control - it limits the buying power of the most of the world's population , while those with the trillions have absolute control and do not care what they buy with what they have.

 

Agreed.

Money? Merely paper - but have you noticed that money always has a number? 

[sharkman]

12 minutes ago, August1991 said:

Japan debt to GDP is higher. The US govt debt to GDP was higher in 1946.

After WWII?   Was their debt level 32 trillion?

Let’s watch what happens to Japan.

Edited February 21 by sharkman

[Moonbox]

1 hour ago, sharkman said:

After WWII?   Was their debt level 32 trillion?

Let’s watch what happens to Japan.

What do you think will happen to Japan?  🤔  

[sharkman]

1 hour ago, Moonbox said:

What do you think will happen to Japan?  🤔  

What do yoooooooou think will happen to Japan?

[Moonbox]

10 hours ago, sharkman said:

What do yoooooooou think will happen to Japan?

I don't know.  Presumably you have thoughts, if you're saying we should watch what happens to it...🤔

[sharkman]

I’ve been focusing on the US as they impact Canada far more than Japan.  For instance, on March 11 the Bank Term Funding Program ends.  Ever heard of it?  BTFP, a little program that has been keeping smaller banks afloat.

Will they extend it?  Can they afford to?  What will happen to these smaller banks as they can no longer meet their obligations?  What will these effects do to public confidence?  All very interesting questions.

[Moonbox]

5 minutes ago, sharkman said:

I’ve been focusing on the US as they impact Canada far more than Japan.  For instance, on March 11 the Bank Term Funding Program ends.  Ever heard of it?  BTFP, a little program that has been keeping smaller banks afloat.

For someone who's so focused on it, you don't seen to have anything concrete to say about it.  The BTFP was a short-term emergency measure.  I suspect when it ends, things will proceed much as they did before it was implemented.  What do you think will happen?  

Edited February 21 by Moonbox

[sharkman]

1 hour ago, Moonbox said:

For someone who's so focused on it, you don't seen to have anything concrete to say about it.  The BTFP was a short-term emergency measure.  I suspect when it ends, things will proceed much as they did before it was implemented.  What do you think will happen?  

I'm not hyper focused on it, but keeping track of several things that are all pointing in the same direction. 

-The US Gov will have to pay back 8.9 trillion in maturing US treasuries this year.  They can't do it.

-US debt to GDP is dangerously high.  There is less interest in buying US treasuries.

-US debt is over 34 trillion, annual interest is over 1 trillion, annual deficits are around 1.7 trillion.  Historic.

-US interest rates are greatly impacting real estate, auto purchases and consumer debt.

-The aforementioned BTFP ends on March 11.  Regional banks will be hurting over this.

-Captains of industry(Warren Buffet, Jamie Dimon, MIchael Burry) are preparing for something big.

-The BLS announces over 300K new jobs, as Google, Zerox, Wayafair, Ebay, Paypal, Charles Schwab, UPS, Citigroup all announce MAJOR layoffs.

-BRICS is rapidly moving away from any oil trading in US dollars, the world reserve currency.

-They've developed their own SWIFT like system, neatly circumventing sanctions levied against them

-They are developing their own gold backed currency, and hoarding gold in anticipation of this.

-Since 2000, gold has increased an average of 7.8% per year, better than the S&P or the bond markets.

 

There are more indicators, but none of it looks good.  It appears that we are headed for a serious recession or worse.  My parents were able to prepare for the 1980 recession, and they had to renew a mortgage during that time.  Many family friends did not heed warnings, and then went bankrupt during that time, losing everything.  I don't know for sure what we are facing, it is better to be prepared, just in case.  Like Warren Buffet is.

Edited February 21 by sharkman

[Moonbox]

19 hours ago, sharkman said:

The US Gov will have to pay back 8.9 trillion in maturing US treasuries this year.  They can't do it.

They just roll it over or issue new debt to cover it.  They can, and they will.  

19 hours ago, sharkman said:

-US debt to GDP is dangerously high.  There is less interest in buying US treasuries.

-US debt is over 34 trillion, annual interest is over 1 trillion, annual deficits are around 1.7 trillion.  Historic.

-US interest rates are greatly impacting real estate, auto purchases and consumer debt.

All true, and these are drags on the economy, but interest rates are going to go down, and American institutions own most of the debt.  Social security, for example, own almost half of it. 

19 hours ago, sharkman said:

The aforementioned BTFP ends on March 11.  Regional banks will be hurting over this.

I suspect you won't even notice it.  

19 hours ago, sharkman said:

The BLS announces over 300K new jobs, as Google, Zerox, Wayafair, Ebay, Paypal, Charles Schwab, UPS, Citigroup all announce MAJOR layoffs.

Individual company layoffs are irrelevant compared to the aggregate data, which BLS posts.  For every one of those layoffs, there were new hires and more.  

19 hours ago, sharkman said:

-BRICS is rapidly moving away from any oil trading in US dollars, the world reserve currency.

-They've developed their own SWIFT like system, neatly circumventing sanctions levied against them

-They are developing their own gold backed currency, and hoarding gold in anticipation of this.

-Since 2000, gold has increased an average of 7.8% per year, better than the S&P or the bond markets.

We've already discussed this, and it's a nothingburger, mostly pushed by pariah states like Russia, North Korea and Iran.  China and India aren't interested in a BRICS currency, so the project is dead in the water. 

As for gold prices, the only reason that number looks so good is because in the year 2000, gold prices plummeted to their lowest levels in 60 years.  Pick a different starting point, and the S&P outperforms gold easily.  Since 2011, gold has lost 15% of its value.  In the same time, the S&P 500 grew +400%.  

[sharkman]

And for those keeping track, add another 10,000 layoffs by auto parts manufacturer Forvia. They make parts for Tesla.

[sharkman]

2 hours ago, Moonbox said:

They just roll it over or issue new debt to cover it.  They can, and they will.  

All true, and these are drags on the economy, but interest rates are going to go down, and American institutions own most of the debt.  Social security, for example, own almost half of it. 

I suspect you won't even notice it.  

Individual company layoffs are irrelevant compared to the aggregate data, which BLS posts.  For every one of those layoffs, there were new hires and more.  

We've already discussed this, and it's a nothingburger, mostly pushed by pariah states like Russia, North Korea and Iran.  China and India aren't interested in a BRICS currency, so the project is dead in the water. 

As for gold prices, the only reason that number looks so good is because in the year 2000, gold prices plummeted to their lowest levels in 60 years.  Pick a different starting point, and the S&P outperforms gold easily.  Since 2011, gold has lost 15% of its value.  In the same time, the S&P 500 grew +400%.  

Not sure why you think gold’s 60 year low was the year 2000. Check the 1970’s, 1960’s, and so on. It’s average value in 1972 was 58.17 for instance.  And today it’s 2030.

I hope you are right about the rest of it…Warren Buffett seems more pessimistic than you.

Edited February 22 by sharkman

[Moonbox]

32 minutes ago, sharkman said:

Not sure why you think gold’s 60 year low was the year 2000. Check the 1970’s, 1960’s, and so on. It’s average value in 1972 was 58.17 for instance.  And today it’s 2030.

I was just going from memory.  The point was that gold hit a low back in 2000 that hadn't been seen since the 1970's, and using that as a starting point for performance is a cherry-pick that's misleading.  As I explained, gold is worth almost 20% less today than it was in 2011, while the S&P has quadrupled in that time.  

32 minutes ago, sharkman said:

I hope you are right about the rest of it…Warren Buffett seems more pessimistic than you.

As I said, Warren Buffet is a value stock-picker.  He looks for stocks that are profitable, and priced well.  Right now, the market is priced at the top (too high).  It is difficult for Berkshire Hathaway to find value in that environment, so they let money sit in bonds or cash and wait for the market to correct downward amidst a (likely) light/moderate/short recession.  At that point, he'll load back up on the cheap.  

He's not predicting doom for the economy.  

[sharkman]

57 minutes ago, Moonbox said:

I was just going from memory.  The point was that gold hit a low back in 2000 that hadn't been seen since the 1970's, and using that as a starting point for performance is a cherry-pick that's misleading.  As I explained, gold is worth almost 20% less today than it was in 2011, while the S&P has quadrupled in that time.  

As I said, Warren Buffet is a value stock-picker.  He looks for stocks that are profitable, and priced well.  Right now, the market is priced at the top (too high).  It is difficult for Berkshire Hathaway to find value in that environment, so they let money sit in bonds or cash and wait for the market to correct downward amidst a (likely) light/moderate/short recession.  At that point, he'll load back up on the cheap.  

He's not predicting doom for the economy.  

Gold is not worth 20% less today than it was in 2011.  Gold peaked around 1930 in 2011.  Or what am I missing?

I’m not really concerned about gold as much as the hoarding of it by various nations.  

[Moonbox]

If you're concerned about hoarding, don't be.  The US has more gold hoarded than anyone.  Global economies outgrew a gold standard a long, long time ago, and it can't function as a real currency anymore.  There's not enough of it.  Switching back to a gold standard would mean everyone would hoard it instead of spending it, and you'd see deflation everywhere. 

[sharkman]

On top of Warren Buffet having a huge pot of cash on the sidelines, apparently Jeff Bezos, Jamie Dimon and Mark Zuckerberg have recently sold off stock that totals 9 billion.

Actions speak louder than words.  And the above people have picked up on something to come that has them moving billions in preparation.  They are going to swoop in when the time is right and make a killing.

 

[Moonbox]

17 hours ago, sharkman said:

On top of Warren Buffet having a huge pot of cash on the sidelines, apparently Jeff Bezos, Jamie Dimon and Mark Zuckerberg have recently sold off stock that totals 9 billion.

Warren Buffet also just explained why he has a huge pot of cash on the sidelines.  Did you read what he said?  

[sharkman]

7 hours ago, Moonbox said:

Warren Buffet also just explained why he has a huge pot of cash on the sidelines.  Did you read what he said?  

Let me say it again since you seem to have missed it.  Actions speak louder than words.  Let me also add:  sometimes the truth is so precious, she should always be attended by a bodyguard of lies.  That's a Churchill quote.

Someone like a Buffet can usually never release the truth, or the whole truth, or nothing but the truth.  Everything is measured through what his competitors may or may not do with it.  Let's face it, at his level he is engaged in a form of economic warfare with his competitors.  As is Dimon.  As is Bezos.  As is Zuckabuck.  As is Bil Gates.  As is Elon Musk and the rest of them.  These folks also have to measure their words and actions with an eye on what the public will do as a result.  "Buffet says sell!!!"  I'm sure you can imagine what can go wrong.

He, as the rest, always play with their cards held close to their chest.  As far as that goes, these folks may even take actions as a feint to fool others, much like a skillful politician.  Lets face it, billions of dollars of profits are at stake.  And they are all mostly getting into a strong cash position.  That speaks loudly, moonbox.  Hopefully you can realize this.

BTW, why didn't you link Buffet's quote that you were referring to?  No I haven't heard what his latest comments are, but there are quotes from 3 days ago, today, and other releases.  I'm not going to read them all, trying to winnow out which one you are referring to.