A ponzi scheme has nothing to do with deception. A ponzi scheme is when the “profit” is predicated on getting someone else to toss money in. Deception is a helpful tool in running a ponzi scheme, but it isn’t what defines one. It works until someone gets cold feet. Once someone gets cold feet, whoever is holding the last level of the ponzi scheme gets screwed. Our borrowing IS a ponzi scheme. We borrow to pay off our previous borrowing. Each time we do it, we slab another layer of debt on. This works. You can do this. You can keep doing this until the day you can’t, just like in a ponzi scheme.
Further, we are using deception. Promising that we can cut taxes and increase spending with no consequence is deceptive. You are essentially promising that you can have something for nothing. Both conservatives and liberals happily do this, with one promising that we don’t need tax income, and the other promising that we don’t need spending restraint.
I’m not making a radical proposition here. I am just asking that we consider for a moment that we have made ourselves extremely fragile. Our financing of government is utterly reliant on low interest rates and a continued willingness of lenders to lend. If that collapses, we are going to get a quick,short, and brutal lesson on austerity. Western governments literally can’t pay for themselves without lending.
Instead of building fragility on top of fragility, we should be working towards escaping under the debt. It is a win win for everyone except banks. Escape the debt, and you suddenly don’t have to sluff off a few percentage points of your GDP to pay down your interest. You can use that money for useful things, rather than lining the pockets of bankers. You escape the influence of bankers on the economy and politics. Should the bad times hit, you can use your savings, as Keynes advocates, for stimulus, without laying the foundation for the next debt driven crisis.
Raise taxes, cut spending, or do both. I don’t care. Just stop promising something for nothing and building fragility into government.
