I guess if you are selling magazine subscriptions, you need to make your offering sound exciting, dynamic, iconoclastic and (shiver)... daring.

But to describe - in the headline, even - the government bond market ("the"?) as a Ponzi scheme, is stretching the term beyond any useful purpose.

"It is our contention that similar to Mr Madoff's hedge fund, the sovereign debt markets in the West have now become gigantic scams."

Contention is a good word.

Contentious would be even better, to describe the article as a whole. In fact, if it weren't so clearly a sales document, it would be objectionable.

Definition time. 'A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.'

http://www.sec.gov/answers/ponzi.htm

Apart from one fleeting reference, nothing in the article justifies this label

"In our view, in the not too distant future, the interest payments on the outstanding national debts in the overstretched “developed” nations will become so large that their central banks will need to create money"

No numbers. No graphs. No detail. No analysis.

Just "in our view".

All this hyperventilation, simply in order to justify its investment advice that...

"Accordingly, we are not investing in sovereign debt and we suggest that you refrain from lending money to dubious governments"

Which they immediately hedge (this is of course the "advisor's retreat") with:

"we are aware of the possibility of a near-term rally; especially if there is another round of risk aversion in the financial markets"

In other words, we could be wrong, especially if things we predict don't actually happen.

I'm genuinely surprised that this level of blatant spruiking is considered of interest to OLO readers.

They could find more balanced views in the Pyongyang Times.

Does 'quantitative easing' (QE) equate to a Ponzi Scheme? I guess it doesn't qualify if the motives for QE by Reserve Banks are 'in the public interest'. It does however, if people like Mugabe dictate the production targets of currency printing presses.

But hyperinflation could well be the outcome for world currencies if printing money is not quickly countermanded with nimble policy instruments to effectively take it all back when concerns over inflation replace present fears of deflation.

The massive size of sovereign debt is the 2010 legacy of ill conceived decisions to wage war, overlayed with decades of successive tax cuts to the wealthiest and all national deficits have been compounded by the failure of federal governments to restructure their inefficient 3 tier structures to deliver on-going productivity gains for the 21st Century.

We are facing a global financial crisis of historic proportions unless concerted national and global action is not taken promptly to overhaul lax financial regulation, broker peace where there is war, fix rorted and broken taxation systems, achieve a global currency and restructure the way governments govern. Can it be done? Yes it can - but with the current calibre of political leaders? No - they will wait till disaster strikes, frozen in fear.

'Economist- an expert who will know tomorrow why that he predicted yesterday did not happen today.'

It astounds me post GFC, economics analysis from current market players never aspires to consideration beyond short term position. And long term position appears to be short term projection predicated upon that short term position.

As Dr Lacy Hunt of Hoisington Investment Management, Austin, Texas. perceptively quantifies, future western macro economic position is to be observed principly according to two significant factors;

- the expentiture multiplier rate observed from Western economies stimulus responses to the GFC, and,

- comparatives with the rising economies of the eastern tigers, specifically pertaining to GDP rates, that translates to standard of living comparative between those economies, and those in the West.

Ultimately, the key will rely upon economic management, the latter half of that term consistently apparent as receiving comparable consideration to that it receives from the IT industry currently, with ethical integrity and required balance effectively non existent.

I retain no confidence this culture will be remedied in the time frame required. For management is a science, and whlie the west continues its intransigent colonial cultural monopoly upon the application and practice of management, that as the western inheritors of the science, its principles are for everyone else to observe but not incumbent upon itself, we will doubtless observe no change realised.

Alike experience of the GFC, by the time the west is aware of its negligence and duplicity, it is doubtless global warming will probably have reduced the planet to the appearance of a thermowave.

For economic management in the west appears a contradiction in terms, its reminiscent of watching the League of Nations after World War I, conducting consultation for aversion of further global conflict.

Back in the old days when Mum and Dad still lived in Snake Gully an edicated fello came down to explain ekonomixs. After a big speach Mum turned to Dad and said "what did he say" as she couldn't understand, Dad said "if your outgo exceeds your income your upkeep will be your downfall." So what has changed.
Richie 10

The author demontrates that they have NO understanding of the most basic nuts and bolts functioning of our modern monetary economies.

The author believes that we are still on the gold standard and that all the rules and limitations that applied before 1971 actually still apply today.

Governmemt budget deficits will now be a permanent feature - perfectly sustainable - as they always were.

Actually the situation is worse than Puru indicates.
He as well as a number of the respondents here have assumed that
governments can simply work their way out of their monetary situation
by recovery and growth.
Growth is needed to provide the resources to pay the interest bill.
However, what if there is no growth ?

No growth, I can hear you say, impossible !
Growth only comes when you have the energy and resources that can be
expanded to provide the extra goods and services to repay loans and
interest.

You should understand we are now up against maximum energy, ie what
is commonly known as peak oil and peak many other resources.
The economy is already showing the strains of the limits being reached.
China and India have already strained the system and will
also feel the restraints of supply.
What do you think kicked off the sub-prime loan crash in the US and
started us all down the giddy GFC slope ?

You should understand that after the plateau will come the decline
in just a few years.
The massive US debt cannot be repaid.

You need to understand the current economic stagnation in Europe and
the US and eventually the world is permanent.

Unfortunately Bazz, that is in fact the assessment of Dr Lacy Hunt, internationally recognised as not only a reliable economist, but with powerful research findings demonstrating such projection.

He contends the western economy will descend into gradual decline until its GDP to Debt ratio [effectively, per capita standard of living] is in balance with those economies of the eastern tigers.

Anyone who understands scientific management realises such outcome is nearly inevitable, according to the course and parameters of our present settings, as you accurately identify. It follows then, western concepts of growth are required to be reassessed, according to necessity of innovation of a new paradigm.

The GFC was caused by corruption and mismanagement at senior executive level, of both corporate enterprise, and Govt. The record of its global withstanding by the economies of China, and Australia, for example, demonstrate that observation.

Unfortunately, as profound as the western concept of science and observation is observed, its achilles heel is its inherent myopia driven by the extent of information it requires to be absorbed.

Ngarmada;
If this is Dr Hunts opinion;
>He contends the western economy will descend into gradual decline
>until its GDP to Debt ratio [effectively, per capita standard of
>living] is in balance with those economies of the eastern tigers.

Then he truly does not understand what is happening.
Most economists also have the same misunderstanding.
Jeff Rubin lately of CIBC bank is an exception.

As the cost of fuel increases a disconnect will appear between
different economies.
The eastern countries trade will be isolated from European trade as
will American trade.
Everything will gradually become localised.
I the price of fuel rises suddenly than this isolation will occur
suddenly also.
You can see this effect already as steel and furniture manufacture has
moved back to the US.
Another effect is the laying up of thousands of container ships in
European ports and Singapore. Most will never set to sea again.

Bazz, with due respect I believe it is you that is missing the big picture, perhaps owing to a myopic westerncentric view.

I do not doubt the phenomena you identify, however, when eastern tiger economies dominate global commerce, and retain a per capita standard of living well below that of the west, contributing significantly to competitive advantage, its not rocket science to comprehend which economies are in the box seat.

In the west we may contend technological superiority until the cows come home, but the relevant analogy applies to a cricket game; 'the commentary is fine, but at the end of the day you have to consider the scoreboard.'

Ngarmada,
am sorry but you have missed the point.
No one will dominate global commerce !
Everything will be local. If the cost of shipping goods from the east
to the west or the west to the east exceeds the difference in wages
how can trade either way exist ?
It just won't happen.

I know it is a hard thing to get your mind around as for hundreds of
years long distance trade has been a given.
Even rail transport from Europe to Asia will be too expensive.
Certainly it must cease to the Americas, as it has already started
changing. Likewise trade to and from Australia will likewise decrease.
Even more so for Australia as the distance to Australia from China
is greater than to the US.

>In the west we may contend technological superiority until the cows >come home,

That statement has nothing to do with it. Only very small, high value
items such as computer chips could continue. You must realise by
that time there is unlikely to be air travel except for military.

This what is known as The Long Emergency.
It is permanrnt !

Reliable current projections definitely identify a prospect of a Long Emergency. However I understand your predication is upon traditional forms of energy and power resources. There is no doubt their use by date is imminent as upon us.

However, although our current and traditional sources of information may not be observed to serve us competently, mainstream media still myopically focused upon traditional structural leadership, increasingly glimpses of alternative energy development may be observed. Although it may be observed further, there appears no coherent nor cohesive coordination of such initiatives, fairly cursory research may demonstrate it is well underway.

Although time frames of projections for the outcomes of that development are unable to be quantified currently, progress of their pursuit appears promising.

Inevitably the traditional structural establishment will submit to that progress, simply owing to there being no alternative. The key issue is the time frame for that energy metamorphosis, which according to reliable current projections, is a significant cause for concern.