SPDBRNR – Eyes Wide Open
Sports, Politics, Financial Markets, Silver & More

Ponzi Schemes…Like US Govt Debt

Just in case you don’t realize that US Govt debt is nothing but a Ponzi Scheme, here’s a little analogy for you.

Imagine your household has $220,000 of income expected in 2010, and expenses of $380,000.  So you go to your lender and say, I need to borrow $160,000 this year to pay my bills.  I know I already owe you $1.23 million, but I’ll get you that cash eventually…some day way out there in the future, not sure how.  Oh, and next year I expect to borrow $130, 000 against the same $220,000 of income to pay my expenses, and for the next 5 years after that you can expect me to need to borrow at least $100,000 a year. 

The only difference is that the real life US Govt’s case is worse, because it assumes that the income (US Govt tax reciepts) will be rising in the future – which is quite optimistic as they enact new policies and regulations that absolutely strangle free market economies.  Now of course, there is one reason why the govt can do this – $2.2 trillion income against $3.8 trillion of expenses budgeted for the 2011 fiscal year – and you & I can’t.  They have the Fed and the printing press.  They will create the money, selling brand new debt (and much of it to themselves) to pay their bills, including maturing debt issued in the past. 

Oh…and this does not include future liabilities from Social Security and Medicare, that multiply the $12.3 trillion of debt by 7 or 8 times…promises to pay that taxes have already been collected on – but of course, spent on current bills, not socked away for the future.  This debt will never and can never be repaid.  New debt will be created to pay old debt – just like new $$$ in a Ponzi Scheme comes in to pay old $$$.  Same thing.

One final note.  Don’t forget that gold and silver and platinum are mined out of the earth, sometimes in god-forsaken places and conditions, with only so much manpower and machinery available.  And the Green Movement wants to make mining harder to do everywhere – certainly here in the U.S.  So it is either costly and cumbersome just to get permission to get to work, or they just deny you outright. 

And silver remains an astounding 68% below its $50 highs in 1980…now 30 years ago!!!!  Buy silver here under $16 as I type this.

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