When will the Great Financial Ponzi end?

[Uncle Festivus]

An interesting dilemma for The Controllers?

Global equity markets breaking record highs on a daily basis, presumably on the 'assumption' that our banking overlords will cut interest rates, yet their underlying economies continue to stagnate in stagflationary cost-of-living quagmires?

Equity markets clearly do not reflect any underlying economic fundamentals, as usual, even more so than in 2008 when the GFC began (and still continues).

Everything is being held together with cotton twine and $Trillions in money printing...because they got away with it all those years ago.

So, when will THEY pull the pin & go for a reset?

 

[Value Collector]

An interesting dilemma for The Controllers?

Global equity markets breaking record highs on a daily basis, presumably on the 'assumption' that our banking overlords will cut interest rates, yet their underlying economies continue to stagnate in stagflationary cost-of-living quagmires?

Equity markets clearly do not reflect any underlying economic fundamentals, as usual, even more so than in 2008 when the GFC began (and still continues).

Everything is being held together with cotton twine and $Trillions in money printing...because they got away with it all those years ago.

So, when will THEY pull the pin & go for a reset?

How is it a Ponzi scheme if it’s churning out real profits and products continually?

I mean sure you might have the opinion that the market is over valued, but the companies within it are churning out products that feed, clothe, house and entertain us, while its producing dividends, taxes and wages.

You see a quagmire, others see a system that is pumping out value, it probably says more about how you look at things

 

[finicky]

the companies within it are churning out products that feed, clothe, house and entertain us, while its producing dividends, taxes and wages.

When has that not been the case? That was happening in 1929, 1987, 2000, 2008 and 2020.

others see a system that is pumping out value

Much of the the 'value' is coming from debt, inflation and debasing currencies

 

[Value Collector]

1. When has that not been the case? That was happening in 1929, 1987, 2000, 2008 and 2020.

2. Much of the the 'value' is coming from debt, inflation and debasing currencies

1. Yep, that’s my point… and the economy wasn’t a Ponzi scheme during those times either. Dollar cost averaging into the market even through all those periods returned sound results.

2. No, the “Value” is coming from corn fields growing corn, Iron ore mines producing Iron ore, factories turning cheap raw materials in valuable products, builders building houses etc etc.

Millions of dollars of value is being produced and consumed every day, by the businesses on the global stock markets, and that value is distributed to their workers, their investors and governments.

 

[finicky]

Millions of dollars of value is being produced and consumed every day, by the businesses on the global stock markets

Millions of inflated dollars
And the real goods and services are being produced and consumed at the cost of monumental and mounting debt.

 

[Value Collector]

Millions of inflated dollars
And the real goods and services are being produced and consumed at the cost of monumental and mounting debt.

Dollars are just an artificial concept we invented to account for the value we produce and move around, don’t let focusing on them to much distract you from the real value of goods, services and capital moving around.

The Global economy is real, it’s producing tonnes of value everyday, and if you own part of it you will get a share of its production every year.

We can argue around the edges about what the fair price is for the individual units of the economy that we buy and sell called shares and bonds etc, and sometimes they are genuinely over priced, but to say it’s a Ponzi scheme is very misleading, and probably puts you in the wrong head space to actually make rational decisions.

 

[Uncle Festivus]

Dollars are just an artificial concept we invented to account for the value we produce and move around, don’t let focusing on them to much distract you from the real value of goods, services and capital moving around.

The Global economy is real, it’s producing tonnes of value everyday, and if you own part of it you will get a share of its production every year.

We can argue around the edges about what the fair price is for the individual units of the economy that we buy and sell called shares and bonds etc, and sometimes they are genuinely over priced, but to say it’s a Ponzi scheme is very misleading, and probably puts you in the wrong head space to actually make rational decisions.

Sure looks like a ponzi scam - relies on ever increasing new money/debt to keep it together

"At current rates, the U.S. national debt is growing by a remarkable $1 trillion about every 100 days, equal to roughly $3.6 trillion per year.

As the national debt has ballooned, debt payments even exceeded Medicaid outlays in 2023—one of the government’s largest expenditures. On average, the U.S. spent more than $2 billion per day on interest costs last year. Going further, the U.S. government is projected to spend a historic $12.4 trillion on interest payments over the next decade, averaging about $37,100 per American.

Exacerbating matters is that the U.S. is running a steep deficit, which stood at $1.1 trillion for the first six months of fiscal 2024. This has accelerated due to the 43% increase in debt servicing costs along with a $31 billion dollar increase in defense spending from a year earlier. Additionally, a $30 billion increase in funding for the Federal Deposit Insurance Corporation in light of the regional banking crisis last year was a major contributor to the deficit increase.

Overall, the CBO forecasts that roughly 75% of the federal deficit’s increase will be due to interest costs by 2034."

 

[finicky]

The Global economy is real, it’s producing tonnes of value everyday

Well yeah, but it's not all real value, e.g the financial industry funding real estate inflation. And stocks will deflate if margin is called or if liquidating to pay other debt.
The point of the original poster I think is that the debt will be brought to account as hyperinflation or a deflationary collapse. The present value is being produced and consumed at the expense if the future. There'll be a disastrous reckoning of the borrowing to spend and so using the 'Ponzi Scheme' term is apt.

 

[Value Collector]

Sure looks like a ponzi scam - relies on ever increasing new money/debt to keep it together

1. For every $1 debt some one owes, some one else has a $1 asset owed to them, So the net debt of the world is $0.

2. The USA federal government is just one part of the economy, if it takes in debt to fight wars, build infrastructure or pay pensions or what ever it’s doing, that’s its business. It doesn’t make the whole system a Ponzi scheme, it can raise taxes or reduce spending if it really wanted.

3. You have been banging on about this stuff for years, mean while trillions and trillions of dollars of value has been produced and distributed to those contributing their labour and capital into the system.

Will the stock market crash eventually? for sure, yes that’s certain, should that bother you? No not really.

 

[Value Collector]

Well yeah, but it's not all real value, e.g the financial industry funding real estate inflation. And stocks will deflate if margin is called or if liquidating to pay other debt.
The point of the original poster I think is that the debt will be brought to account as hyperinflation or a deflationary collapse. The present value is being produced and consumed at the expense if the future. There'll be a disastrous reckoning of the borrowing to spend and so using the 'Ponzi Scheme' term is apt.

You can’t see the trees because the forest is in the way.

The real estate market has risen because the population has grown faster than the supply of new houses at the same time that the cost of building new houses has risen due to a variety of factors.

Not a Ponzi scheme, just real world factors.

 

[divs4ever]

An interesting dilemma for The Controllers?

Global equity markets breaking record highs on a daily basis, presumably on the 'assumption' that our banking overlords will cut interest rates, yet their underlying economies continue to stagnate in stagflationary cost-of-living quagmires?

Equity markets clearly do not reflect any underlying economic fundamentals, as usual, even more so than in 2008 when the GFC began (and still continues).

Everything is being held together with cotton twine and $Trillions in money printing...because they got away with it all those years ago.

So, when will THEY pull the pin & go for a reset?

well , i was predicting ( and biasing the portfolio ) for a MAJOR correction in the mid 2013 , so my reputation for predictions is a little ... tarnished

but the whole currency system relies on TRUST , when will that disappear

what if they pull the pin , and most folks just stop using currency and the banking.financial system and resort to just goods/services exchange ( something similar to barter ) China is doing this with selected trading partners already

i suppose the real question is a slow devaluation of the currency or a sudden one

 

[divs4ever]

Sure looks like a ponzi scam - relies on ever increasing new money/debt to keep it together

it is only a Ponzi scheme when some enterprising person does it , when a cartel does it they wield enough power to make it acceptable ( in the medium term )

much the same as the distribution of opium ( some VERY big companies are allowed to import/export opium )

 

[divs4ever]

Will the stock market crash eventually? for sure, yes that’s certain, should that bother you? No not really.

bother me ?

terrify me no , but can i plan to resist or even benefit from it ( if it occurs in my lifetime )

some of the strategies implemented for the 2013 event have worked out anyway ( so far )

 

[Value Collector]

well , i was predicting ( and biasing the portfolio ) for a MAJOR correction in the mid 2013 , so my reputation for predictions is a little ... tarnished

but the whole currency system relies on TRUST , when will that disappear

what if they pull the pin , and most folks just stop using currency and the banking.financial system and resort to just goods/services exchange ( something similar to barter ) China is doing this with selected trading partners already

i suppose the real question is a slow devaluation of the currency or a sudden one

The system basically is a barter system, except we use a currency to facilitate the transactions, so we don’t have to use the exact goods and services our customer produces.

If one currency becomes broken we would just have to invent another, it’s happened many times. But we are a long, long way from that.

Humans have been inventing currencies to facilitate trade for thousands of years.

 

[Value Collector]

bother me ?

terrify me no , but can i plan to resist or even benefit from it ( if it occurs in my lifetime )

some of the strategies implemented for the 2013 event have worked out anyway ( so far )

You can try and predict and time the market, if you guess correctly you will out perform, if you guess wrong you will under perform, but you can just invest through out the cycle and do well.

 

[divs4ever]

You can try and predict and time the market, if you guess correctly you will out perform, if you guess wrong you will under perform, but you can just invest through out the cycle and do well.

well i keep on adjusting as opportunities arrive and conditions change

but the question on if i am correct can only be answered in hindsight

so it is question of 'liquidity ' vs. tangible commodities ( reserves so you avoid being a forced buyer or seller )

 

[Uncle Festivus]

1. For every $1 debt some one owes, some one else has a $1 asset owed to them, So the net debt of the world is $0.

2. The USA federal government is just one part of the economy, if it takes in debt to fight wars, build infrastructure or pay pensions or what ever it’s doing, that’s its business. It doesn’t make the whole system a Ponzi scheme, it can raise taxes or reduce spending if it really wanted.

3. You have been banging on about this stuff for years, mean while trillions and trillions of dollars of value has been produced and distributed to those contributing their labour and capital into the system.

Will the stock market crash eventually? for sure, yes that’s certain, should that bother you? No not really.

So by going with your logic, that $Trillion in debt that was created in just 100 days means there is now a $Trillion in fresh new assets???

Like what? Mining something, human labour??? 'Asset' creation has never been created that fast ever.

Or maybe it's just a measure of how much previous debt/money is being vaporised into thin air by bankruptcies, business failures, useless wars etc

The $USD is basically worthless, the rest of the world knows it, it's just a matter of (very short) time before there is an organised crash into CBDC

 

[Dona Ferentes]

well, this is a silly thread. good night.

 

[Value Hunter]

Dollars are just an artificial concept we invented to account for the value we produce and move around, don’t let focusing on them to much distract you from the real value of goods, services and capital moving around.

The Global economy is real, it’s producing tonnes of value everyday, and if you own part of it you will get a share of its production every year.

We can argue around the edges about what the fair price is for the individual units of the economy that we buy and sell called shares and bonds etc, and sometimes they are genuinely over priced, but to say it’s a Ponzi scheme is very misleading, and probably puts you in the wrong head space to actually make rational decisions.

Nobody is arguing that real goods and services aren't being produced. Its just some people are making the argument that quantity of demand for those goods and services is artificially inflated by debt based consumption.

When the debt to GDP ratio keeps rising that means at some point future consumption must be lowered. The piper must be paid eventually. As a simplified example if John's income is $100,000 per anum and he consumes $110,000 of goods and services in that year by incurring a debt to increase his consumption then in some future year his consumption would have to be $90,000 so he can repay the $10,000 debt. So his consumption would drop from $110,000 to $90,000.

In most countries debt to GDP ratios have been rising for decades.

So yes there will always be a minimum base level of real demand in the global economy for the products and services produced by corporations but the current fiat financial system adds a ponzi layer of demand on top of the genuine demand. So yes corporations producing the goods and services consumed by society will always have some value however if demand for their goods and services declines due to end of credit growth obviously their output will be lower and they will be worth a lower amount.

Of course its an oversimplified example and there are all kinds of complicating factors such as productivity growth over time, interest rates on the debt and so on, but I think the principle broadly holds true.

 

[Value Hunter]

1. For every $1 debt some one owes, some one else has a $1 asset owed to them, So the net debt of the world is $0.

While its by definition theoretically/nominally true in reality it doesn't work like that. Fractional reserve banking doesn't operate that way. It only works that way in a hard money system where there is real savings behind the debts. There is a lot of newer academic research showing that despite what outdated textbooks might say its actually loans that create deposits rather than deposits creating loans. Professor Steve Keen has done some good analysis on this.

Also the value of derivatives contracts dwarfs the size of the real economy.

Either way its a moot point because if somebody borrows $1 and does not have the capacity to pay it back in reality your asset is worth $0 instead of $1. The fact that you choose to bury your head in the sand and pretend the asset is still worth $1 does not make it worth $1 in reality.