(Mike Maharrey, Money Metals News Service) You’ve almost certainly heard of Bernie Madoff’s Ponzi scheme. He was sentenced to 150 years in prison for running it. Well, as Mike Maharrey explains in this episode of the Money Metals’ Midweek Memo, Joe Biden is overseeing an even bigger Ponzi scheme – the national debt.
In this episode of the Money Metals’ Midweek Memo, Mike puts the national debt into perspective, explains how it’s a Ponzi scheme, reveals the ramifications, and argues that despite most people’s apathy about the debt, it really does matter to you.
Mike opens that show by arguing that Madoff’s $65 billion Ponzi scheme was child’s play compared to the $34.5 trillion scheme run by President Biden.
That $34.5 trillion number might clue you in on the fact that Mike is talking about the national debt.
“Now, you might be thinking, sure, the national debt is pretty bad, but how is it a Ponzi scheme? Well, I’m going to get to that, but first I want to put the national debt into perspective.”
Mike concedes that trillions of dollars are unfathomable, so he makes a few comparisons to give you an idea of just how big the debt has grown. Nevertheless, most people don’t seem to think it’s that big of a problem.
“When you talk to the average person about the national debt, most people don’t care. They’ll just shrug. Some politicians will get all bright-eyed and tell you, ‘Yeah, we need to do something about that.’ But they won’t. I think the prevailing attitude is that people have been warning about the debt for decades and nothing bad has happened. Here’s the thing: something that is unsustainable will still keep going until it doesn’t. You can play kick the can down the road for a long time until you run out of road.”
Mike then points out the root of the problem.
“To really grasp the problem of the debt, you have to understand how it’s a Ponzi scheme. And to get that, you have to understand the root of the problem. It’s the spending.”
Mike continues, providing numbers to support his point.
But even if you think the debt is ultimately a problem, how is it a Ponzi scheme?
“It’s not the debt itself. It’s the borrowing to fund it.”
Mike goes on to explain exactly how the government borrows money and why it qualifies as a Ponzi scheme.
“It literally has to find new people to buy bonds in order to pay back the people who bought bonds in the past. That is, by definition a Ponzi scheme. And what do Ponzi schemes eventually do? They collapse. You have to find more and more investors to cover the outstanding debt and eventually, you run out of people willing to play the game.”
Mike then focuses on the ramifications of the debt, explaining how interest expense is already becoming unsustainable due to the recent Fed rate increases.
But what does all of this mean?
It means they are going to keep wrecking the dollar.
“The only way out of this fiscal death spiral is significant spending cuts and/or major tax hikes. I don’t know about you, but I’m not holding my breath. Oh, sure. They’ll talk about spending cuts. Or at least some of them will. And they’ll talk about tax hikes. Or some of them will. And they may even claim they have cut spending. I mean, supposedly, they cut spending with the debt ceiling deal, right? Spending hasn’t actually gone down a penny. They’ll propose a budget that makes the increase in spending a little less than last year and call that a cut even though total spending went up. Biden will stand up there and claim, the deficits are getting smaller. Yeah. Smaller than the historically high deficits of the pandemic era. You and I both know that an $828 billion deficit in less than half a year isn’t anything to brag about…
“These people are wrecking the dollar. We can debate about how badly they’re wrecking, but I don’t see how anybody can deny that the economic and fiscal realities bode ill for the greenback.”
Mike argues that’s why you want to have real money – gold and silver.
“It’s interesting because the Chinese get it. Their economy isn’t doing so great either. Do you know what young people are doing there? Buying gold.”
Articles Mentioned in the Show
China’s Gen Z Turning to Gold to Protect and Grow Their Wealth
The Federal Budget Deficit Was Back to Normal in February–Massive
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
