Re: [Pen-l] PK on the Madoff Nation

[raghu <mraghu01@xxxxxxxxx>]

On Fri, Dec 19, 2008 at 6:19 AM, Jim Devine <jdevine03@xxxxxxxxx> wrote:
> [Has the financial industry really been a Ponzi scheme, i.e., paying
> current dividends by selling new assets? Right-wingers used to call
> the US social security system (OASI) a "Ponzi scheme," but that was
> totally bogus...]


Every bubble is by definition a Ponzi scheme, so to the extent the
financial system is dependent on asset bubbles (rather than fee based
income), it is a giant Ponzi scheme.

But I think the term Ponzi is either widely misunderstood or
deliberately misused to mean all pay-as-you-go schemes such as Social
Security that involve ongoing borrowing in perpetuity. The way I
understand it, the difference between Social Security and "true" Ponzi
schemes is that (as long as demographics are stable) SS does not
necessarily imply an ever-increasing amount of borrowing. On the other
hand, US current account deficits do have the characteristics of a
Ponzi scheme because it involves seemingly ever-increasing borrowing
levels to roll-over current obligations and to fund current
consumption..
-raghu.

--
"Why is the man (or woman) who invests all your money called a broker?"
 - George Carlin
_______________________________________________
pen-l mailing list
pen-l@xxxxxxxxxxxxxxxxxx
https://lists.csuchico.edu/mailman/listinfo/pen-l