Paging Ralph Kramden - Senator Ponzi calling. (posted March 4, 2003)

[arendt]

Paging Ralph Kramden - Senator Ponzi calling.
by arendt (March 4, 2003)

The Bush tax-cut plan is nothing more than
a Ponzi scheme. For those who don't remember,
here is how a Ponzi (a.k.a. pyramid) scheme works:

1. The perpetrator claims he has an amazing,
but secret, investment vehicle that provides
way above normal return on investment.

2. Early investors are paid that return to demonstrate
the veracity of the claim. The money for the early
payout can come from the pocket of the perpetrator
or, if the scheme is highly advertised, from the
nearly-early investors.

3. Based on the early payouts, huge number of
investors rush into the scheme, providing the funds
to keep up the payouts - *for*a*while*.

4. At some point, when the pyramid can no longer
be sustained, the perpetrators send the bulk
of the incoming funds to a Swiss bank account
and declare bankruptcy.

5. The vast majority of the suckers lose their entire
investment.

Since only the stupidest people fall for such hoary con-games,
it is quite common to see them bet and lose their life savings
in these get-rich-quick schemes.

The last major Ponzi scheme happened in Albania
in the early 1990s, when a totally unsophisticated
population, under Communist rule for forty years,
fell for this oldest trick in the bunko artist's book.

----

Now, let's look at the Bush tax cuts for the rich.

1. The rich assure us that, by the unexplainable magic of
the free market, this investment will, in the near future,
turn the economy around, thereby returning the big payoff.
(Nobody seems to remember the 1980s, when exactly the
same game plan resulted in nothing but debt, S&L scams,
and a big stock market crash. And that was in peacetime.)

2. The American taxpayers entrust literally trillions
of their dollars to the rich in the form of yet another
round of tax breaks for the top 1%. They do this even
as the last year's tax cuts have done nothing except balloon
the Federal debt and the trade deficit.

3. To keep the tax-paying suckers from revolting, a chump-change
taxcut is offered to all as a fig-leaf to cover the massive give-aways to
the super-rich.

Of course, in true Ponzi fashion, this credibility-building payoff is
being skimmed from the very same money that is supposedly being
invested; and this skim cannot be continued for very long.

Where you ask is the "skim" in the case of the Bush Budget? Its
hiding in the financial markets. The tax cut will exacerbate
what are already record-breaking deficits. The money needed to cover
those deficits will compete for investment dollars with the business
investments that are supposedly going to occur as a result of the tax cut.
The resulting inflation will more than negate any positive investment,
as if we were suffering from a lack of supply anyway.

This scenario was exactly what happened in the 1980s. That cut put
way too much money in the hands of the rich. They did not invest in
new industrial capacity, but rather, loaned it back to the government
at interest rates inflated by massive government debt, making a big profit.
The only investment the rich actually made was to buy a lot of politicians.

4. Finally, and differently from the 80s, the super-rich and the multi-national
corporations that are the main beneficiaries of the cut will convert their U.S.
dollars to Swiss francs and send them to overseas tax havens before the dollar
craters.

Its all pretty inventive on the part of the GOP. They can't impose
the usual IMF thumbscrews to the U.S. from the outside - YET.

So, they get the Ralph Kramden's of the U.S. to buy into this
transparently stupid ripoff. And, it is the Ralph Kramden's that
are buying. The same "One of these days, Alice - Pow! Bang! Zoom!",
loudmouth-over-common-sense mentality that is, pardon the expression,
"driving the bus" in America.

And, let's not forget to give credit to the GOP - the slickest bunch of
con-men to ever fleece the American public, bar none. The palpable
ignorance of these crooks is matched only by their bellicose condemnation
of economists, bankers, and other people educated in how to actually run
an economy. To the GOP, like Maggie Thatcher, there is no society, there
is no general welfare; there is only one's own nest to be feathered at
someone else's expense.

5. When this scheme is over, the U.S. will be an economic basket
case, and the super-rich will buy up everything worth owning with
real money: Swiss francs and Euros. Then they will sic the IMF on
what will have become a third-world nation. At that point, the Ralphie-boys
of America will look to be rescued, but no one will be there to save them.
The only problem is that the sensible Americans will be the Alice Kramdens
who suffer the consequences of Ralph's greed and stupidity.

----

Can I connect the dots any more clearly?

[pnorman]

1. Thanks, "Arendt".

That's a saver! I'll use most or all of it in days to come.

I'm still runing into people who describe the Social Security system as a "Ponzi scheme". They're blisfully unaware of the core of all Ponzi Schemes: It's an EXPONENTIAL increase. ie: No matter HOW small the exponent of increase, within a relatively short interval it will begin ballooning out of sight. Not sign of that in the past 71 years! That doesn't describe the stock market system either, but it comes a lot closer.

pnorman