The Greatest Ponzi Scheme Ever

Charles Ponzi is credited with the scheme in which he defrauded investors of their money by paying fictitious returns to investors with new investors' money. All the while he was pocketing the proceeds. While he was not the first to perform such an act (he obtained his infamy in 1920 but there are reports of smaller schemes dating back to the 1850's) he was by far the largest and hence gained notoriety sufficient to have his name attached to these types of fraudulent activities.

Several Ponzi schemes have been uncovered over the years but the largest of them all (so far) was that of Bernie Madoff who made off with $64 billion. This was by far the largest ponzi scheme in the world until now. Madoff's count of $64 billion is being made to look insignificant when compared to the trillions of dollars of new money being printed by the Federal Reserve.

Bill Gross of Pimco fame (the largest bond fund in the world) stated: "Check writing in the trillions is not a bondholder's friend: it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme." And later he wrote; "It seems that the Fed has taken Charles Ponzi one step further. One and one-half trillion in checks written in 2009, and trillions more lie ahead. The Fed, in effect, is telling the markets not to worry about our fiscal deficits, it will be the buyer of first and perhaps last resort. There is no need - as with Charles Ponzi - to find an increasing amount of future gullibles, they will just write the check themselves. I ask you: Has there ever been a Ponzi scheme so brazen? There has not."

There has never been a Ponzi scheme that has worked. At some point you have to pay the money back. As Warren Buffet stated; "It is only when the tide goes out that you see who is swimming naked." The tide always goes out and redemptions always occur whether you are the Federal Reserve or Madoff. Therefore at some point the U.S. government has to start to become more austere or face the real possibility of a total collapse.

Inflation is coming. it is everywhere. To offset this the United States needs to ensure that the dollar is not destroyed but remains strong. To support the dollar the Federal Reserve needs to stop printing money and the White House needs to take some hard steps to balance its budget. The United States is desperate for a leader to stop the madness but I fear that we have none.

While there is still time to fix these structural problems the time in which to do so is rapidly subsiding. In my opinion we have less than five years to put our house in order or face the wrath just like all other Ponzi scheme operators.