The US Economy - A Ponzi Scheme
 

The U.S. Treasury has been forced to issue $1,040,965,000,000 in new debt since fiscal 2015 started just eight weeks ago in order to raise the money to pay off Treasury securities that were maturing and to cover new deficit spending by the government. During those eight weeks, Treasury took in $341,591,000,000 in revenues. That was a record for the period between Oct. 1 and Nov. 25. But that record $341,591,000,000 in revenues was not enough to finance ongoing government spending let alone pay off old debt that matured.

https://www.fms.treas.gov/fmsweb/vie...e=14112600.pdf

The Treasury also drew down its cash balance by $45.057 billion during the period, starting with $126,568,000,000 in cash and ending with $81,511,000,000.

The only way the Treasury could handle the $942,103,000,000 in old debt that matured during the period plus finance the new deficit spending the government engaged in was to roll over the old debt into new debt and issue enough additional new debt to cover the new deficit spending.

“A Ponzi scheme," says the Securities and Exchange Commission, “is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. “With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue,” explains the SEC. “Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.”

A Ponzi scheme is exactly what we're doing, and I've made this point before about Soc Sec, which is funded in the same manner. The Federal gov't continues to spend more than it earns, despite record tax revenues. In terms of comparing US Treasury receipts in constant 2014 dollars, we're now in the same range as previous record receipt years that occurred in the 2nd term of both the Clinton and G W Bush presidencies. See below.

http://cnsnews.com/sites/default/fil...2014-CHART.jpg

More here: http://cnsnews.com/mrctv-blog/terenc...s-pay-old-debt

The article goes on to explain how the US continues to roll over debt into short term notes which tend to have a lower interest rate: about $1.4 trillion worth of short term debt. However, this strategy relies on short term interest rates remaining at their current absurdly low levels (thank you Federal Reserve). If market conditions were to change and the cost of short term debt start to rise - it wasn't all that long ago that such rates were in the 4% range (not to mention the 12 - 15% range during the Carter years), the impact on the nation's long term debt would be staggering.

It ain't a Ponzi scheme, Whell. Were it not for Reaganomics, Dubya's tax cuts and his lax enforcement of securities law, we'd be sitting fat.

Sorry, but the facts presented don't support that contention, even though I know that's the lefty programmed response any gov't spending issue that might be raised. Note my comment that appears just above the graph in the OP:

In terms of comparing US Treasury receipts in constant 2014 dollars, we're now in the same range as previous record receipt years that occurred in the 2nd term of both the Clinton and G W Bush presidencies.

Now, I don't want to rehash old discussion, but to further the point:

http://www.taxpolicycenter.org/taxfa....cfm?Docid=200

Note the deficits when expressed as a ratio of GDP. Declining in Reagan's 2nd term once the impact of tax policy kicked in, and would have declined faster if similar reductions in budget that were targeted weren't given away at the budget negotiation table. Also declined significantly under G W Bush in term 2, despite "Dubya's tax cuts". Then, jumping to stratospheric levels under Obama, and remaining there despite allegations of economic growth the addition of jobs and the "summer of recovery". :rolleyes:

What's interesting to me - and not represented in the graph, so you actually have to do the math - is to compare the relative fiscal discipline of each Administration by comparing the ratio of budgeted income to outlays. Reagan and Bush Sr's a higher than Clinton's on average. "Dubya's" is lower than Clinton's average for their respective terms. Obama's ratio is stratospheric by any comparison.

What I see from those numbers is that Clinton balanced the budget (something you've denied for years) and that Dubya screwed the pooch immediately thereafter, with consequences that we're just digging out of.

I've never denied he "balanced the budget" as gov't wonks define a balanced budget. My point has simply been that the definition of balanced as our gov't uses the term includes borrowed funds as "income". That's like saying: "I paid off my Master Card with my Visa."

The idea that we're still experiencing the consequences of Bush budgets is yet another leftist apologist phrase. How you label yourself a "fiscal conservative" is beyond me if you cling to that fable.

Not his budgets, per se, but the lasting effects of his policies (i.e., his tax cuts persist as does the legacy of the recession that resulted from his lax regulatory policy).

BS on both counts. The Bush tax cuts are now the Obama tax cuts. You can't have that one both ways. But even at that, how could the "Bush Tax Cuts" be a bad thing for the Federal budget when the Feds just took in tax revenues at record levels???

Because receipts would have been greater yet. Getting rid of the irresponsible Bush tax cuts is politically impossible. The House would rather set the Capitol building ablaze than to fix the fiscal problem caused by these cuts.

Objection, Your Honor. Supposition and conjecture which is not supported by available facts. You have not been shy about pointing out that TEFRA under Reagan was a significant tax increase. Yet in 1988 when TEFRA kicked in, the rate of revenue growth slowed. Same for the Bush Sr "read my lips" tax increases in 1990 - 1992.

Clinton increased taxes starting with the 1993 budget year, and saw modest growth in revenue. Clinton's budget, however, also benefited significantly by the dot-com boom that started around 1994. His frugality was also helped along mightily by a fiscally conservative Congress that came on the scene that same year. Yet, when Clinton cut taxes in 1997, there were not revenue reductions that year or in any of the years that followed. We don't see revenue reductions again until 2002, which was a significant recessionary period that started with the dot com bust late in 2000 and was exacerbated by the 9/11 attacks in 2001.

So, sorry, your post is conjecture not supported by the evidence.

I'm not willing to google them up again, but I've posted several graphs in the past from reliable sources showing that the lion's share of debt growth in recent years were directly a result of Bush's tax cuts, the costs of two protracted and mismanaged wars, and the costs associated with the avoidable (through proper policy and enforcement) recession.

You can wish this away if you want to, but I haven't bothered to do so. It would be an exercise in trying to deny the obvious.

That sure sounds like boohoohoo. The Dems could've done it, just as certainly as Clinton could've regulated derivatives.

Pete

Yes he could have except both the Fed Chairman and his Treasury Secretary told him that it was not necessary.:rolleyes:

You have had this pointed out to you on several occasions but you persist in dragging in that stinking red herring, why is that?

Pete likes his politics in sound bites. It's more fun.

When it comes to the left, the buck stops.... somewhere else.

Pete

No you see when someone becomes POTUS he/she gathers around him people to advise him on subjects with which he/she is not infinitely familiar. This is usually called the Cabinet. Greenspan was initially a GOP appointee and a disciple of Ayn Rand so it is not surprising he could not tell his arse from his elbow. Rubin was just another of those Goldman Sachs revolving door people that seem to infest our government.

So that buck stopped right where it belonged.

So Bush wasn't responsible either.

Pete

No he was completely irresponsible.:)

Right, with their 60 votes in the Senate that they had for four months. :rolleyes:

http://www.msnbc.com/rachel-maddow-s...-supermajority

Not wishing anything away here. However, you're assuming causation based on little else but faith or dogma. You're assuming tax cuts among other things as central to causation of our current economic issues, and our current levels of underfunding (Of course, I also remember that some of those tax cuts were passed through Congress in partnership with Democrat majorities). There's no evidence to support your assertion.

You're also choosing to ignore the impact of dramatic increases in spending under Obama. Over his tenure, we've spent, on average, 38% more per year than we've taken in. While that ratio has settled down a bit in the last year or so (bit still historically quite high), it was as high as 67% (2009) and 60% (2010). Bush Jr averaged 12%, and his worst year was 22%. Obama's best year so far is 2013 at 24%.

As you like to quote: facts are stubborn things.

We all make our choices. During that time, the Dems chose to make the priority the stimulus and health care reform. I guess they used the time they had in line with their priorities.

And extending 'Bushes' tax cuts ;)

Pete

Still conveniently ignoring the two wars put on the country's credit card, eh Whelly? Not too mention the economy in free fall prior to President Obama's inauguration. I'll give ya props for being studiously dense though pally. :rolleyes:

Is that a bumper sticker again? :rolleyes:

It should be :p

Pete

Speaking of dense, apparently you either fail to understand or are choosing to conveniently ignore the info that I provided in paragraph 2 post 23. Do you somehow not understand that defense spending would be included in that calculation, as well as the Treasury data in post 1?

Back to the Ponzi analogy. It's as much of a Ponzi scheme as refinancing your house is. It would economic malpractice if we didn't refinance debt at lower interest rates.

So?

You managed to hand that turd over to Obama.

You're still the ones that shat it.

Just like you did with Iraq, Afghanistan, the sub-prime economic melt down, etc.

It's what you people do.

Shit out big fat steaming turds and then leave them for someone else to deal with.

Doesn't it suck when actions speak louder than words?

Pete

Indeed. Kansas was well set financially until Brownback told the rich folks they didn't have to pay taxes any more. Now the red ink is endless.

Self inflicted wounds.....

Just their simple math from the Right. No money, no social programs. A way to cut the ""entitlements"" they don't like!



Barney

He was rather naive with that one trying to be bipartisan with the GOP and he got mugged. Hell I had only been down here six months and knew enough then to never trust a Republican.

Laugh a minute Bobby Haircut is planning on running in '16

Bad analogy. Not sure if you can find any housing lender who would sell you a mortgage where you would only pay down interest without paying down any principle for the life of the loan.

If you could find one, I'd think such a mortgage product would be an example of economic malpractice. Of course, a loan like that would be a great example of the ARM products that got so many homeowners in trouble recently. Those homeowners gambled and lost on rising interest rates. Our gov't is making the same gamble with public debt.

Once again you are conflating Micro vs Macro Economics and committing the fallacy of seeing everything as a 'Zero Sum' game.

Ref. http://en.wikipedia.org/wiki/Monetary_economics

edit - I would tend to agree that the stock market and corporations engage in Ponzi Schemes to the detriment of society as a whole. ;)

The difference is that the US government can't, by indention, default (as long as we keep the 'Baggers silenced in the corner wearing dunce caps).

What's an indention? Is the the new progressive term for a tax? :p

The difference is that mortgage companies can't just print more money (or buy up their own notes) like Uncle Sam can.

Oops, meant "definition." For the very reason bolded, the US can't go bankrupt, per se, and thereby can't be a Ponzi scheme.

You could print so much money it becomes worthless. The government wouldn't technically default but everyone would be screwed regardless.

Pete

You could, but we haven't. If anything, our QE efforts were to too tame (but indeed necessary), as evidenced by our low interest rates.

You're a brave, brave man Pat. If I were superstitious I would say knock on wood.

Pete