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Monday, December 7, 2009

The global ponzi scheme

As I have written about this subject plenty times the following post is a very good summary of the global ponzi scheme in most nations. The never ending accumulation of debt which can never be paid back. The trigger point for the final break down is the arrival of baby boomers at retirement age in 10-20 years as all social security systems will have to admit they are broke
(they are already - as was Madoff for a long time).
The zero financing world of this depression comes handy as the governments were able to bring their interest payments down radically which is milestone 2 of the operation. Milestone 1 was to create a phony inflation statistic which brought down the official inflation and thereby the interest the governments have to pay. Actually that is nothing but a hidden robbery of Mainstreet as they have to invest for retirement and the interest they earned was below real inflation for at least 10 years now ( its rather 20 years) - negative interest rate. Plus the inflation adjustments on salaries were always too low so effectively salaries were decreased over the last 20 years as the payouts for the management was increased drastically - which is another milestone in the Bilderberger agenda swap the money from the low and middle cl┼čass to the top class. We are talking trillions which were taken away on this 'legal basis' from the regular people. Even the tax system is more beneficial for the top class who pay bottom line a far lower tax bracket although official numbers may look different.
A little trick within this insanity and outrageous scam is that Greenspan came up with his FED model to value stocks - which is one of the biggest drivers of the last stock bubble - as he used far too low interest rates to calculate the equation. He is a criminal chief lobbyist of the Rothschild/ Rockefeller gang - Bernanke compared to him is just a tier 2 player for those people but if he had any dignity he would resign from his job anyway as he has made so many bad calls and poor decisions.


The Dumbest, Richest Investor Around

The US Taxpayer has long been the dumbest, richest investor around. You know the kind – a little overweight, with cheery disposition, not understanding how he’s been “over-served” when in slurred speech he thanks the bar tender for the sales receipt on which he signs his name – plus adding a generous gratuity – for his “new good friends”.

The “diffuse interests” of the US taxpayer suggests that for all practical purposes, a very few ruling elite (elected and appointed officials) operate with little interference in controlling capital flows, selecting somewhat arbitrary “winner” and “loser” business sectors (and now individual “winner/loser” companies), and micro-managing industries in which the authorities have never worked and fundamentally do not understand. It’s an unrealistic assumption that the “average” person with a job, a family, and a “real” life is able to defend himself from the full-time professionals that have extensive resources and full-time attention that are intent upon betraying the public trust.

It wasn’t supposed to be this way: The US Government never before had this type of authority. The citizens never granted government these types of powers. The three branches were to serve as checks-and-balances on each other to protect the defenseless – the smallest minority -- the individual citizen.

We need not seek blame on conspiracies, nor sociopaths, nor narcissistic control freaks (though people conspire every day, and many individuals in power are shown to have impressive character flaws). Rather, never underestimate the impact of bad management; of clueless “leaders”; and of stupid people in large groups (in reference to economists and the US Congress).

The idea itself is ludicrous that the USA’s regulatory structure and budget can be trusted to 535 politicians in Congress (strike one), most of which are lawyers (strike two), and all of which are beholding to populist noise and their own image in the mirror (strike three). These people don’t understand the world and how it works. Sadly, the same can be said for most economists, who never saw the economic crisis coming, and afterwards assure us it’s not a big deal, because their prior blindness should be entirely understandable.

“Drinks for everyone” he’s happy to announce. (“If I get enough overtime next week, I’ll be able to cover this before the bill comes due next month,” he thinks to himself.)

Usurpation of power is fun, which is why it is practiced by all three branches of the US government. Who doesn’t love to spend other people’s money for charitable largess in his own name? What court doesn’t want to project its personal bias, laws be damned? What politician doesn’t want to promise the most things to the most people, even if it means exceeding his authority and the laws of math and physics? Don’t we all “deserve” a new car and dinner in a really nice restaurant?

Like celebrities that are never told “no”, this ruling class is comprised of teenagers who continue to stay out past curfew, performing increasingly outrageous neighborhood pranks, in search of true boundaries. Sadly, no authority is making efforts to establish boundaries, and the absence of consequences for decades has taken us far beyond the point-of-no-return.

Every country in the world has promised its citizens future services for which some unspecified third party will pay. Those services will never come.

He’s a happy drunk, and for much of the evening, quite amusing. “The life of the party” he reminds himself, as the rest of the room watches the painful display with amusement, and sometimes with cheers, and periodically with uncomfortable glances.

The US Government is bankrupt. Other large nations in Europe and Asia are even more bankrupt. The entire world banking system is bankrupt. Though everyone knows this, it is in no one’s best interest to say so. Thus, we all look away.

The fundamental problem is the illegal governmental accounting that pretends “cash flow” is the same thing as addressing liabilities. In reality, reserves are never created against liabilities. As long as we keep filling out credit card applications each month, we’ll be fine. For any business, or any individual, or any institution in the world (except for government), these practices would land you in jail.

Like “geologic time”, we now operate on a scale that is so big that the human brain was not designed to comprehend it. The implications are so unthinkable, that politicians and central banks all over the world continue to pretend to come up with “plans” to “fix” some ill-defined symptom with a non-specific target.

While simpletons may privately hope while publically deny their current plan to inflate our debts away, the world cannot borrow itself prosperity. It cannot drink itself sober. Alternatively, welfare states the world over have betrayed their populace with the promise of future services – pensions, medical care, and food stamps – which will never be fulfilled.

The math and demographics make it impossible, and inflation does nothing to provide these services (in fact, that sinister tax makes matters worse).

As the evening wears on and the novelty wears off, increasing moments of awkward silence do not go unnoticed. Even through his stupor he notices the abatement, and so gropes with ever more outrageous dance and gestures to revel yet again in former celebrity.

“We thought Social Security was bankrupt decades ago” the people reassure themselves, as if that alone is justification that it can continue a few decades more. No, it will not.

The jig is up. We only await the accountants, who apparently spent the evening in the toilet. We expect them back any time now, for the waiter has brought the check, and everyone is politely pretending to reach for their wallets, knowing they are empty, with the expectation (and hope) that someone else will grab the check first to pick up the tab.

There is no “someone” to pick up the tab.

Not an academic discussion, this final accounting is not ten years away. It will be addressed now, by the current generation. All debt that cannot be repaid will default, and these private and national debts cannot be repaid.

As 2009 closes with the commencement of “phase two” for the default cycle initiated in 2007, we will only see acceleration of this destruction. Curiously, people are not interested in hearing that the destruction actually occurred long ago – at present, we are only talking about correcting past accounting that was made in error. The loss was created when the document was originally signed. On the day of signing, the document was never worth the net-present-value that was claimed through bad math and even worse assumptions.

The evening wears down, and the others fetch their coats while giving wide berth to the slobbering man in the middle of the floor. While any of them could have called for him a cab, instead the night ends with the crowd filing out, one-by-one, pretending they don’t see him even as they step over the sprawling figure on their way to the door. Sadly, in his half-conscious state, he doesn’t even see them go.

He is to be pitied, really.

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I am a professional independent trader