and an Example.
INTRO:
For a while now I have been arguing that Europe’s policies for reducing the public debts of fiscally stressed member-states can be described as a Ponzi austerity scheme. In this post I attempt precisely to define ‘Ponzi austerity’.
I'm not well informed on EU economic progress since the crash, but I think it's obvious
austerity here in the U.S. is not working-- not for we the people, that is.
And I think Ponzi austerity needs to be examined here, particularly in the context of a rising stock market, huge wealth increase for those at the top, while at the other end of the spectrum there's a stark contrast; we're sucking gas in regard to creating jobs and rising income for the poor and middle class.
Ponzi Growth
Standard Ponzi schemes are based on a sleight of hand that creates the appearance of a fund whose value grows faster than the value that has come into it. In reality the opposite is true, as the scheme’s operator usually helps himself to some of the incoming capital while the scheme is not managing to create new capital with which to replenish these ‘leakages’, let alone pay the returns it promises. The appearances of growth that does not really exist is, of course, the lure that brings into the scheme new participants whose capital is utilised by the Ponzi scheme’s operator to maintain the facade of genuine growth.
Ponzi Austerity
Ponzi austerity is the inverse of Ponzi growth. Whereas in standard Ponzi (growth) schemes the lure is the promise of a growing fund, in the case of Ponzi austerity the attraction to bankrupted participants is the promise of reducing their debt, so as to liberate them from insolvency, through a combination of ‘belt tightening’, austerity measures and new loans that provide the bankrupt with necessary funds for repaying maturing debts (e.g. bonds). As it is impossible to escape insolvency in this manner, Ponzi austerity schemes, just like Ponzi growth schemes, necessitate a constant influx of new capital to support the illusion that bankruptcy has been averted. But to attract this capital, the Ponzi austerity’s operators must do their utmost to maintain the façade of genuine debt reduction.
The author goes on to point out Greece at the worst example of Ponzi austerity:
This is but one example of the vicious cycle of Ponzi Austerity that is being replicated incessantly throughout the Eurozone. Its stated purpose is to reduce debts. But debt is rising everywhere. Is this a failure? Yes and no.
Anyone can weigh in here, but my understanding is federal government spending is down, but is our debt being reduced significantly? If not,
when is it going to drop enough to satisfy/stop the debt hysteria?
The answer is never because I think what is at play here is as the author suggests, Ponzi austerity. It's the continuing scam, smokescreen to cover up the obvious failure of our economic system at its roots. it's just not working for millions of people, and it's never going to work.
http://www.nakedcapitalism.com/...