Posts Tagged ‘ponzi scheme’
by stuartbramhall in The Global Economic Crisis
Here comes another prediction, from the blog Ecomomic Collapse, that it will. It’s based on evidence that the government and major banks are making preparations they aren’t telling us about.
Among other ominous signs, blogger Michael Snyder points to:
1. A secretive directive from regulators that big investment banks, like Bank of America and Goldman Sachs, set up contingency plans to dismantle themselves if their Ponzi pyramid bubble bursts and they have to declare bankruptcy. (These are already technically insolvent since their debt level vastly exceeds their assets.)
2. The US government is stockpiling food and ammunition, and Obama is signing a raft of executive orders to be implemented in response to a societal meltdown.
3. The European debt crisis continues to worsen as EU economies continue to contract. There is even talk of Germany leaving the Euro.
4. Over the past 12 months, hundreds of banking executives have been resigning and selling off enormous quantities of stock. Many have been shopping for “prepper* properties” in rural communities.
5. Economists and European leaders are predicting the next banking crisis will be worse that the one in 2008 – mainly because governments are too indebted to deliver more bailouts – and other policy fixes (such as dropping interest rates and quantitative easing) have already been enacted. One former World Bank economist believes the coming banking crisis will be so severe that civilization won’t survive it.
6. The problems facing human society aren’t merely economic. Energy, water and food distribution (especially with the severe drought in the US and Russia) are also in totally disarray.
It’s clear from Snyder’s blog that he’s been predicting economic collapse for awhile – he uses the site to hawk gold, silver, emergency food rations, seeds and guns (to keep your neighbors from stealing veggies out of your garden). However I find it highly significant that he’s citing mainstream sources, such as Reuters, a former World Bank economist, a Fortune 300 executive and a member of the European Parliament.
Read more here.
*A prepper, a term derived from preparedness, is someone who becomes self-sufficient in providing for food and other basic needs.
by stuartbramhall in End of Capitalism
Book Review (Part 1 of 2 parts)
The End of Growth: Adapting to Our New Economic Reality
by Richard Heinberg
(New Society Publishers Aug 2011)
The basic premise of The End of Growth is that the world economy has flat-lined. Not only is it contracting, rather than expanding as many politicians claim, but there are important reasons why it will never return to the pre-2007 growth rates that characterized the last century.
Now that #OccupyWallStreet has seized control of the narrative around the banks that control the US government, the End of Growth will likely be the most important book of 2011. As well as making an ironclad case that the era of perpetual economic expansion has ended – that the US, like most western nations, has become a Steady State economy – Heinberg also gives examples of far-sighted governments (Japan, Sweden, Denmark, Norway and Finland) who have enacted policies to ensure the welfare of their citizenry as they confront the massive downsizing required by this new economic reality. Beyond organizing to end to corporate rule, #OccupyWallStreet also needs to pressure the US and other western governments to abandon the pretense and enact similar measures.
Heinberg and others in the Peak Oil/climate change movement have always argued that infinite economic expansion is mathematically impossible, given that we live on a planet with finite natural resources. They point to the massive ecological devastation caused by this reckless obsession with economic growth and warn that we are depriving our children and grandchildren of natural resources (fossil fuels, water, industrial fertilizers, fish stocks, top soil) that are essential for basic survival.
Why Capitalism Hit the Wall in 2008
In Heinberg’s previous work on resource scarcity, he envisions a timeline of a decade or more before the scarcity and prohibitive cost of natural resources (oil, coal, water, etc.) cause the capitalist economic system to hit the wall. In The End of Growth, he argues that it has already happened – when global economic expansion ended in October 2008. His data shows that while a few countries can claim an occasional quarter of increased GDP, aggregate global economic growth is either stagnant or slowly contracting. Even China’s so-called economic “miracle” hasn’t been sufficient to generate a genuine increase in total global wealth.
Heinberg’s new book is unique is that it combines his extensive research into resource depletion with an analysis of our flawed fractional reserve banking system. He is also the first, to my knowledge, to factor in the immense cost of the growing epidemic of natural disasters. Most (the floods, droughts, wildfires, landslides, etc.) relate to climate change. However some, like last year’s Gulf oil spill, relate to the depletion of global oil and gas resources and the adoption of riskier methods of fossil fuel extraction.
In addition to quoting a number of highly placed financial business experts, like Microsoft CEO Steve Bollmar, who agree that global economic expansion has permanently ended, Heinberg also presents a wealth of statistical data. This includes graphs from John Williams of www.shadowstats.com, who argues that the US government is misrepresenting the true Gross Domestic Product (GDP), just like they misrepresent the true unemployment rate – which is really 16-18%. According to Williams, after government figures are adjusted for inflation and methodological reporting changes, 2010 GDP actually decreased by 1%.
The Ultimate Ponzi Scheme
Even a look at conventional World Bank and IMF data leaves the clear sense that the American public is being systemically lied to. Although we are told that total global wealth has nearly returned to its 2007 high of $63 trillion, this figure doesn’t take account of the $40 trillion owed by the US and other governments nor the $60 trillion of debt owed by banks, businesses and households. Even if global GDP does increase by 3% per year (which, as Heinberg clearly shows, it won’t), 3% of $63 trillion barely covers interest payments on a $100 trillion debt, much less paying down the original loans.
Yet as Heinberg points out, none of these numbers represent true wealth. Under the fractional reserve lending system, this debt has been invented out of thin air by banks to generate interest payments. As he points out, it’s the ultimate Ponzi pyramid scheme. It only works so long as suckers keep putting money into it. In a global monetary system where money is created through bank loans, there is never enough money in the system to pay back all the debts with interest. This type of system can only continue to function so long as there is continued growth. It’s precisely because economic expansion has stopped, Heinberg argues, that the world confronts its current massive debt crisis.
To be continued, with a discussion of what’s really happening in China.