Uncle Sam Ponzi

November 3, 2010 18:37

The end is near, according to this post from Mike Krieger that appeared on Zerohedge:

I believe we have finally breached the tipping point in the socio-political landscape of the United States of America.  There will be no going back from here.  Everyone on all levels of society including the elites must make a choice.  Will you stand for real reform and an end of the feudalistic rule of the oligarchs and their paid-off puppets that line the streets of Washington D.C., or will you keep your mouth shut and play the old and dying game in the context of a completely different cultural environment? 

While many will disagree with what I am about to say, I believe the oligarchs and the Federal Reserve have already lost.

Mike Krieger provides an interesting take on the condition of the country and the political class. He believes that we are close to an implosion that cannot be contained by the elites. In his opinion, it will be impossible to continue to cover up the incompetence, duplicity and corruption:

… the powerful institutions that dominate and rob us will continue to fight for survival but the wind is already blowing in a different direction and cannot be reversed.  The smart elites are starting to see this and are hedging their bets.  The dumb or stubborn ones may want to start looking at countries with non-extradition treaties or start blowing the whistle on someone above them and fast.  The window of opportunity to make the choice is closely quickly.

His predictions have nothing to do with election results, although one might reasonably expect that a massive Republican victory would add immediate political pressure to the economic pressures. Newly elected politicians must understand that they either decisively address the problems or they will quickly become a part of the problems and tarred with the same brush as old-timers.

Bill Gross

Mr. Krieger is especially disturbed by the Federal Reserve but not as upset as Bill Gross, the head of Pimco. Gross, in his monthly Letter to Investors, described government debt as a Ponzi scheme, never intended to be repaid except via the issuance of new debt. Worse, as quoted by Krieger,  Gross expounds on an advantage that Charles Ponzi never had (emboldening added):

“The Fed, in effect, is telling the markets not to worry about our fiscal deficits, it will be the buyer of first and perhaps last resort. There is no need – as with Charles Ponzi – to find an increasing amount of future gullibles, they will just write the check themselves. I ask you: Has there ever been a Ponzi scheme so brazen? There has not.

These are extremely strong words from Bill Gross. He is arguably a part of the establishment in the sense that he is wealthy and well-connected with the political elites. He generally supports the political establishment regardless of which party is in power. It is a relationship that has benefited Mr. Gross.

What Mr. Gross stated is true. The fact that he stated it is what is amazing. He has known this truth for many years. Why has he seemingly broken ranks with his political allies (dare one say protectors) at this point in time? My suspicion is that Mr. Gross may be privy to something coming down the road that is big and ugly and that he wants to distance himself from the damage. That is purely specularion on my part, but it seems the only sensible way to interpret such out-of-character behavior.

Gross’ Investor Letter was the equivalent of a rat abandoning a sinking ship. Perhaps things may be developing at a faster rate than even most doomsayers are projecting.

The Chinese curse of living in interesting times certainly applies to us. Uncle Sam Ponzi has ensured that.

by Monty Pelerin at Monty Pelrein’s World

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