Hi GWR!

I guess my feeling is that the bond market has now become the biggest sanctioned ponzi scheme, since it will require those holding maturing bonds to roll them over and buy a new series in order to fund the next round of maturities. You are right, if there was not epic money printing available, then a default would be certain. By allowing a round of new money to buy some bonds, and then deploy that money raised through bond sales to pay off the maturing series, they can keep it all going a bit longer.

The only other ponzi of a similar magnitude is the worldwide scam for government retirement pensions. People talk of the problem from time to time but still not one credible plan has emerged to deal with it, and what will happen as demographics relentlessly push more and more drawdowns from the limited funding available. There is no way that younger workers who are actually paying into this scam will ever collect a dime from it thirty years or more down the road. Again, money printing may be part of the answer, but it also contributes to the problem, because whatever pension payouts may be, they will not cover inflation or provide much of a cushion for those with no other income.

These are the consequences that governments have committed us to. Many people assume that just deflating away debt is going to be a magic bullet. Sure, you can print to infinity and avoid ever having a default, but the end result will be the same in terms of destruction of wealth. The pain will be spread among everyone however, and not confined to the crooks that painted themselves into the corner of bad fiscal management, and that is the tragedy.

For confirmation of this trend, just look to the most recent US data showing consumer spending is flat. Of course it is! First of all, they use an artificially low inflation number to track that, so in all probability consumer spending is actually contracting. But then factor in how utilities, gasoline, insurance, health care, property taxes, and most necessities are up sharply over the last year or two (well beyond the ficticious inflation numbers). How much money do people have left over to go shopping, go to restaurants, etc? Buy a car? Forget it... And we have barely begun to see the decline in the standard of living that is on the way. The more the consumer is squeezed to pay for food and necessities, the less that is left over for all of the other consumption. Inflation will make that worse folks.

Anyone that buys into the assumption that economic growth will bail us all out over time is on glue... The people being harmed by these policies are the savers and those who were responsible with their wealth. Those being bailed out are crooks that were gaming the system with irresponsible decisions, and losers that have been rewarded with financial incentives and entitlements for their bad behaviour. When you punish wealth producers and reward losers, guess where things go?

cheers!

mike