According to Wikipedia, “a Ponzi Scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, this scheme leads investors by either falsely suggesting that profits are derived from legitimate business activities (whereas the business activities are non-existent), or by exaggerating the extent and profitability of the legitimate business activities, leveraging new investments to fabricate or supplement these profits. A Ponzi scheme can maintain the illusion of a sustainable business as long as investors continue to contribute new funds, and a s long as most of the investors do not demand full repayment or lose faith in the non-existent assets they are purported to own.”

All I can say is WOW. When I look at the US GDP figures I can’t help but make the connection between PONZI and our economy. While the mainstream media is trying to maintain the illusion that “all is well” there are some disturbing facts:

• First of all, our GDP reporting is manipulated, in that DEBT is measured as GROWTH. This is similar to the PONZI Scheme in that there is GROWTH being reported which DOES NOT EXIST. Of course, at the end of the day the DEBT will still exist.
• While the “experts” on the financial game shows have their hearts aflutter because GDP grew by $334 BILLION in the 4thquarter of 2023 there is NEVER a mention that our deficit in the 4th. quarter was $834 BILLION. Basically, it took about $2.50 in new DEBT to give the illusion of $1.00 in GDP “growth”.
• Many of our leading companies are also manipulating their numbers- mainly by buying back their own stock. As they buy back their own shares it gives the ILLUSION that the company is performing FAR better than it actually is. As the outstanding shares are REDUCED the earnings per share go up. In many cases, there are no more sales or top-line growth, but the bottom line looks better because there are FEWER shares to divide the profits among. The act of buying shares also artificially raises the share price- and makes the chasm between PRICE and VALUE that much larger. This scheme has gone on for so long that PRICE and VALUE have little to no correlation.
• With the purchase of government bonds, the central banks and major banks have distorted the bond, and likely therefore, most all PRICES. How can actual VALUE be determined when a third party- mostly for political reasons buys indiscriminately regardless of the risk or reward? This is the ONLY explanation for negative rates (the only example in recorded history was in the last 10 years). In addition, if an investor were to buy a bond that is issued by a questionable issuer (think Southern Europe) the rates demanded would not be negative but in a free market would likely be in the double-digits. Another major point here is that there is an ILLUSION of solvency that is being fostered by the conjuring up of cash to not only pay current bills but also to pay interest on bonds that were previously issued and to retire those existing bonds that are maturing. This gives an ILLUSION of solvency that DOES NOT EXIST. In other words, we can’t pay our bills without “printing up” over $2 TRILLION in the USA in 2024. Instead of productivity we are using “PRINT” ductivity. In other words- a classic definition of PONZI. There are plenty of examples of how they all end.
• The cheap “money” that dominated the 2010s has led to a massive bubble in most assets- including Real Estate. This is evidenced by the fact that many companies like Blackrock and Blackstone used that cheap money to buy up tons of residential real estate- sometimes entire communities. This has led to a situation where an average person with an average salary is priced out of the market. That is a sure sign of a bubble.
• It is also important to note that the banks have been allowed to report ASSETS at FULL PRICE since 2009 even though some of those assets have had their VALUE cut almost in half. The Bank Term Funding Program (which is scheduled to end March 11) allows banks to deposit the bonds that could be down as much as 50% at the Fed and get funding for 100%. This has been a prop for the banks since the collapse of the three major banks in 2023. Again, the ILLUSION of VALUE where only a fraction of that VALUE exists.
• While the ILLUSIONS that those “in charge” would like us to keep believing- at least until after November 5th– may be kept alive for a while- I am not sure that they will make it to that date.

Having said all of that, I think it is safe to say that we are all being fed a bill of goods that we will be on the hook to pay for.

I believe the entire debt-based system is on the edge of collapse and that it is likely being destroyed on purpose.

On the flipside, there are assets like gold, silver, oil, and many other ASSETS that are not units of debt that are being artificially held down to- again- mask the VALUE of these assets and to punish some of the producers of these assets.

What do you expect to happen when decades of manipulation comes to an end? Remember, we are not just talking about the last few years. This has been going on for decades so decades of distortions will have to be reconciled. My best guess is that many will be walking around like zombies when they are made aware that the PRICE that they paid had VERY LITTLE corresponding VALUE. What IS the VALUE of a promise that cannot- or will not- be kept? We may get our answer sooner than later.

In the meantime, it will be interesting to see if they can keep the illusion alive long enough to get us to November or if the weight of the debts come crashing down before. In either case, I don’t believe we have a whole lot of time to get ready.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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