Ponzi Scheme

Fed bought 80% of new government debt in 2009

You've heard the term Ponzi Scheme. Well now I want to introduce you to the term Ponzi Economy.

Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds.

Madoff Ponzi Scheme Could Cause $17 Billion in Lost Tax Revenue

This title is most amusing, Madoff Scandal May Cost Tax Revenue, where the estimates of lost revenue are as high as $17 Billion dollars.

Considering we have $8 trillion in pledges to the financial industry while Congress and the Bush administration pound on a poor auto workers union and AIG doubles it's executives salaries, doesn't $17 Billion seem trivial?