The US Economy - A Ponzi Scheme

[whell]

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.



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.