According to Wikipedia a Ponzi is a form of fraud that lures investors and pays profits to earlier investors with funds from recent investors. In a typical Ponzi-type scheme it is falsely suggested that profits are derived from legitimate business activities where, for the most part, none exist. Many times, false “books” are kept keeping the illusion alive.
Having said that, it appears to me that the bond “market” is entering a phase where it could be exposed as a Ponzi scheme. Why do I say that? According to the OECD Global Debt Report, governments and corporations are set to borrow a RECORD $29 TRILLION in 2026. That is $4 Trillion more than in 2024 and DOUBLE the amount from 2016.
This information by itself should be a cause for massive concern since it exposes the exponential increase in debts globally. However, there is FAR more frightening information in the same report that says 78%, or OVER $22.5 TRILLION, is being used to pay off maturing bonds. Basically, just refinancing existing debt. This will build NOTHING, ADD NOTHING, and do nothing but add to the illusion that those “PROMISES TO REPAY” still have some long-term value. It also adds to the increasingly unpayable interest costs.
Keep in mind that the $29 TRILLION is ANNUAL BORROWING. It is increasing exponentially. To say the least it is unsustainable.
We have entered a period where the fact that current debt payments cannot be made without the “printing” in the hundreds of trillions of currency units that produce NOTHING and add to inflation that could easily get out of control.
This is one of the main reasons the “hawkish” Fed is another illusion. Raise rates and it makes the cost of debt rise which would lead to more “printing” and higher inflation- exactly the opposite of the stated goal. Since gold got hit when the Fed president talked about raising interest rates it is another illusion that will be exposed shortly.
Keep in mind that robotic trading and Wall Street belief is that higher interest rates hurt the price of gold. Tell me again how gold went up 130% since the Fed started raising rates again and how $35.00 gold became $850.00 gold when rates were 18% in the 1970s. Obviously a flawed assumption that is fed to the masses as fact.
Adding to the economic uncertainty, as a fresh $29 TRILLION gets conjured up out of nowhere our ability to service existing debt is getting far more complicated because of a slowing economy, supply disruptions and other factors that are making the tax base shrink when it is most needed to grow. Keep in mind that governments have three choices and two are virtually the same. #1 Tax the public- that goes over like a lead balloon as most politicians are getting elected because of promises of benefits. Taxes are NOT beneficial to anyone but the authorities who get the money. #2 is to borrow more- hence the $29 Trillion giving us a clear picture of the plan and, as a direct result #3 which through action #2 destroys the purchasing power of the currency.
While this is not a classic PONZI scheme it has many of the same characteristics. Instead of falsely suggesting profits, we are being misled into thinking that our output is managing our bills while we are actually spiraling deeper into debt to give the illusion of solvency where none exists without money from nowhere. A question I often ask is “What is the VALUE of a promise that cannot- or will not be kept?”
Keeping this in mind, there is another slew of reports that reinforces my belief that the place to be is HARD ASSETS. I have been pounding the table on this for a while now, but it is becoming FAR harder to ignore what is happening.
I wrote a few months ago that Leigh Goering (Commodity fund manager) pointed out that commodities (hard assets) have never been cheaper in relation to financial assets in history.
Just recently, Barclays, HSBC, JP Morgan, and Goldman Sachs have also issued guidance, saying, “physical scarcity is emerging across multiple commodity classes, driving prices sharply higher and signaling a broader hard-asset squeeze.”
Christopher LeFemina of Jefferies suggested that similar setups emerged during the “nifty fifty” and dot com bubbles before “commodities sharply outperformed stocks.”
According To Jeffrey Currie (former Goldman Sachs Commodity analyst), “It is time to focus on scarcity in the physical world. The illusion of abundance is likely behind us.”
It is no surprise to me that those “in charge” want us keeping paper assets climbing so they can charge us on capital gains as well as keep us out of their way as they amass the things that are needed to sustain life and liberty.
The wars are all about dominating natural resources and in the case of the USA to keep the dollar as viable as possible. Unfortunately, the war is backfiring in keeping the dollar propped up as it is exposing not only our military’s limits but also undermining the confidence in the dollar itself.
When you use the world’s reserve currency as a weapon you can expect prudent actors to seek out a safer avenue for trade and for their reserve assets. This is likely the reason for record central bank and sovereign gold buying in the last few years. It is also a main reason our adversaries and even some historical allies are moving away from dollar settlement mechanisms.
The only way the Fed would raise rates- in my opinion- is to cause a crisis prior to the midterms so they could be cancelled. As outlandish as that sounds can we put anything past those “in charge” these days?
In any case, an outcome like that would leave scorched earth and leave us with FEW options outside of real goods holding VALUE.
In reality, I believe that the Fed will keep rates as they are to enable the out-of-control debts to grow until the cliff that is out there arrives.
Be Prepared!
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