The U.S. is a Ponzi Nation

Bernard Madoff has his followers: The United States now also is in a Ponzi scheme. It must bring in new money to pay the interest on the old borrowed money. And every day that passes the amount that cannot be paid back increases.

In fighting the economic correction the United States so far paid about $14 trillion. That includes not only the amounts actually spent, but includes the Fed’s guarantees for purchasing toxic asset, etc. Mr. Paulson treasurer in the Bush administration, argued at the time, that buying the banks' toxic assets would actually make money for the taxpayer by the time the world comes back to its senses, it would then realize that these assets are worth MORE than the going price. Laugh!

That was about $6 trillion ago. Every day the losses continue to increase. Instead of being clever buys, the bank's disgusting assets have proved to be even worse than imagined.

U.S. official national debt has jumped over $11 trillion. The feds say they will borrow an additional $2 trillion this year. If the bailouts and stimuli continue as planned, the national debt will grow by almost $10 trillion in the next 10 years. In other words, the nation will add more debt each year for the next 10 years than it did in the entire first two centuries of its life.

Do you have still faith in these public officials? Probably you should! They'll cause inflation like we never have seen before. Give them time and the dollar will be inflated to zero, the Zimbabwean way of doing today, the end result… the debt and the dollar are gone!

With the U.S. Government printing money like never before, the ghost of inflation floats over the currency and bond markets. In fact, inflation has dropped to almost nothing after hitting a high of 5.6% by mid last year. Within the past two weeks the Fed created one trillion dollars out of thin air.
History has taught us that governments can take a perfectly good piece of paper, put some ink on it, and make it totally worthless.

It recently happened in Zimbabwe that takes its place in history with the most corrupt government and devalued currency. Apart from being just another economic disaster, there is something to learn from this extreme example of central banks gone wild and why inflation is so important.

Inflation is the rising cost of daily goods and services, usually based on the Consumer Price Index. "With inflation, everything gets more valuable except money." It is a long way to explain why inflation needs to be managed, because it eventually will lead to Hyperinflation. That simply explained is a runaway inflation, thus out of control.

Imagine a $2.00 gallon of milk spiking to $775.40 within a year, which happened in Argentina in 1988.

Some inflation is necessary to see a reason for investing money, when your dollar is going to be worth a dollar "tomorrow," you would be less inclined to risk it in an investment, because inflation eats away at purchasing power.

Central Banks and governments have a number of other tools at their disposal to influence inflation, but their main tools are to shrink the money supply and raise interest rates. On average the United States and Europe see inflation targets below 3%.

However in this Ponzi scheme this is not going to happen, interest is about zero and the money supply is raised by the day!

Why do Governments not apply these basics? Because policymakers still are thinking that we are in a recession while it already is a depression. Recession is temporarily and can be solved by increasing liquidity, depression is structural and requires a restructuring, by amongst others reducing the output of everything.