United States a Giant Ponzi Scheme?

[crgarcia]

Quote from bearice:


Figure 1 highlights the incredible expansion in America’s national debt. It is noteworthy that at the turn of the millennium, America’s national debt was less than half of its current value. Put simply, American policymakers have taken on more debt over the past decade than they have over the last one hundred years!

In real terms or nominal terms?
i.e. Now more debt is issued in dollar terms, but 1910's $100 buy more goods than 2010's $100.

Quote from bearice:

Given the precarious state of so many economies in the West, we are amazed that the respective government bond markets have not fallen apart at the seams. Perhaps, they are all heading down Japan’s route, where national debt is now above 170% of GDP, yet the yield on Japanese government debt is pathetic. But then again, perhaps they are not…

Don't forget that during recessions, specially deflationary recessions, demand for new money (credit) is reduced, which reduces interest rates.
Besides businesses are in trouble during recessions, so there are few investment (or growth) opportunities se people accept whatever low yields they may get as there are few opportunities.

Quote from bearice:

Furthermore, if our world-view is correct, extremely high inflation is now inevitable. As long as the monetary velocity in the US is weak, inflationary expectations will remain subdued, but once the economic activity picks up, the world will experience spiralling inflation. When that occurs, hard assets will protect the purchasing power of your savings. Accordingly, we have allocated a large portion of our clients’ capital to energy (upstream companies, oil services plays and alternative energy plays), precious metals miners and diversified base metals miners.

Inflation only happens if ALL this money gets into the real economy, and it's not.
T-Bonds withdraw excess funds from the economy.
Bonds only let out the (modest) interests they provide.


Finally all this money being printed by the Fed to pay and rebuy more debt is much less than the money that was printed by the banks out of thin air (fractional lending where they lend more than the deposits), during the recent credit bubble.

Just look at the M3 money supply:
http://www.shadowstats.com/alternate_data/money-supply-charts
It is going down BIG!