Why buying Greek bonds is the same as investing in a Ponzi Scheme. What is a Ponzi scheme? A Ponzi scheme is an investment operation where the investor is given returns that are drawn from subsequent investors. Let’s assume that investor A invests €1000 in a Ponzi Scheme P, and is promised a net return of 20% in a year. Investor B invests in the same Ponzi Scheme P €2000 six months after investor A. When investor A comes back to withdraw his money after a year he is given €1200 of investor’s B €2000.
So, each investor is paid with the money of subsequent investors. When there are no more new investors the Scheme collapses. What does this have to do with Greece? This is quite understandable if we give a look at some figures. In fact, when you invest in Greek bonds you are giving your money to old lenders. How do we know that it is collapsing? Truth sounds absurd sometimes, but it is still truth. Student Loans Have Grown 511% Since 1999 - Daniel Indiviglio - Business. You think the housing bubble was enormous? Meet the education bubble.
On Wednesday, an article here by Andrew Hacker and Claudia Dreifus explained the debt crisis at American colleges. But some startling statistics will help to make their analysis a little more tangible. The growth in student loans over the past decade has been truly staggering. Here's a chart based on New York Federal Reserve data for household debt. The red line shows the cumulative growth in student loans since 1999. This chart looks like a mistake, but it's correct. The chart above is striking for another reason. How does the housing bubble debt compare? Obviously the number of students didn't grow by 511%. This student loan growth sure looks unsustainable. All this college debt could put the U.S. on a slower growth path in the years to come. . * You might notice that student loan growth was actually flat in the second quarter. Is Government Debt a Ponzi Scheme? A Ponzi scheme pays returns to separate investors, not from any actual profit earned by the organization, but from money paid by new investors.
No investments that accelerate future cash flows are actually made. Funds borrowed are merely transferred to people that elect politicians and then consumed without any investment return from those consumers. In order to pay old lenders, new lenders are required Ponzi scheme runners usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. No other entity can offer the guarantees that the government can, that it will print currency as a last resort.
No other entity offers the current 4% consistently for 30 years no matter economic conditions, fiscal finances, wars, pandemics, etc, etc. The objective is usually to deceive laymen who have no in-depth knowledge of finance or financial jargon. Quantitative easing. source : wikipedia. Ponzi Planet: The Danger Debt Poses to the Western World - SPIEGEL ONLINE - News - International. When Carlo Ponzi, a dishwasher from Parma, Italy, immigrated to the United States in 1903, he had $2.50 in his pocket and a million-dollar dream in his head.
He was able to fulfill that dream, at least temporarily. Ponzi promised people that he would multiply their money in a miraculous way: by 50 percent in six weeks. With his carefully parted hair and charming accent, Ponzi beguiled investors and fueled their avarice. The first investors raked in fantastic returns. What they didn't know was that Ponzi was simply using the next investors' money to pay them their profits. The scheme continued. Economists use the term "Ponzi scheme" to describe a disastrous mechanism in which someone pays off old debt by constantly taking on new debt. It's the classic pyramid, or snowball scheme, practiced by thousands of con artists after Ponzi. Western economies have not acted much differently than the fraudster Madoff. Bigger Snowballs Living on Credit This is even true of seemingly rock-solid Germany.
Obligations européennes : un abominable succès. Bravo et merci à tous nos politiciens, c’est un succès, c’est vraiment super, génial, et ça met en joie tout honnête homme qui n’a rien compris : l’Europe a réussi le lancement de ses premières obligations. Ouvrez une bouteille ! Arsenic pour tout le monde ! 5 milliards d’euros ont donc été émis, et apparemment, il y a du monde pour en croquer, puisque 19 milliards étaient souscrits. L’excuse officielle était l’aide à l’Irlande. L’idée est donc la suivante : l’Europe émet des obligations, dont le taux à 5 ans s’établit autour de 2.5%. Par cette manipulation qui ne berne que les politiciens les plus stupides, les institutions européennes ont réussi à diluer le risque irlandais (et bientôt, espagnol) sur tous les autres pays de la zone euro, dont l’Allemagne et la France, France qui se goberge de son triple-A sans tenir compte du taux de ses CDS qui n’arrêtent pas de grimper, mécaniquement entraînés vers le haut notamment à cause de ces manipulations grossières.
La parabole de l’aspirine… A Scheme to Make Ponzi Proud.