Madoff: Not the Biggest Ponzi Scam Ever

Sure Bernard Madoff ripped people off for more than $50 billion. In one of the largest Ponzi schemes to date Mr. Madoff bilked investors ranging from individuals to charities (yes, even charities – what a scum bag) out of large sums of money. The losses which will likely be more than $50 billion, are more than the MCI Worldcom and Enron debacles.

But Madoff’s Ponzi scheme is not the largest, nor the most nefarious scam ever. I would argue that the largest, most expansive Ponzi scheme is the United States of America. That Ponzi scheme will cost trillions upon trillions of dollars. Why do I say that? Quick answer: TARP (isn’t it funny how something like a blue piece of plastic used as a temporary measure to keep water out after roof damage is used to name the bailout plan?). Long answer: Deficit spending – taking money from others (children and future generations of Americans in the form of debt) to pay for current programs.

The United States has been unsustainable for some time. Many financial bubbles have been created in the past, only to burst or slowly deflate. I contend that each bubble is a sort of Ponzi scheme. The credit bubble has been one of the worst and the resulting “rescue” plan will only make matters worse. The invented money (speculation on real estate and bad loans) led to more invented money etc. We have seen the effects of that now. All the building and real estate speculation was not sustainable. So now the federal government will “stimulate” the economy to create (invent) jobs and consumer demands etc. in an attempt to keep the bubble from deflating even more. Eventually the bubble created by that will also burst. It seems that the majority of pundits, politicians, and economists fundamentally do not understand or want to accept that there needs to be a severe retraction before everything can start again (even now they are scratching their heads wondering why the infusion of hundreds of billions is not helping – silly humans). Maybe there a good automotive analogy would be flooding the car – you have to wait a bit before trying to start the car again.

By trying to reverse something that was invented we are just setting the system up for yet another failure. Mr. Madoff could not reverse his Ponzi scheme unless he actually invested that money and had real returns on that investment. The federal government will not get away with its own Ponzi scheme unless it rights the fiscal ship. We simply cannot continue to borrow heavily against the future to pay for the present.

Other good reading: Congress in a Glass House

Photo by KCThinker, Blue Door, San Juan

After the Hangover Wears Off

On Wednesday morning, after the long night of drinking to celebrate or lament, we will wake up and guess what – nothing has changed. We are still the same country with $11 trillion in debt and $54 trillion unfunded liabilities. We are still the same country with unpopular wars in the Middle East. We are still the same country with a crumbling infrastructure. We are still a country that sends more than $700 billion a year offshore for its energy. Most importantly, we are still the same country with an egotistical political establishment; one that would prefer to pander than lead.

This was an election about the last 8 years of Bush more than anything else. Let’s be honest, the electorate is not smart enough to actually look at the issues and make an informed decision, they would rather base their selection on emotion. The contradictory political ads make it even more difficult for the shallow to make sense about where the candidates really stand. In the end, America is all about making themselves feel better – whether that be at the shopping mall or in the voting booth.

After the congratulatory back slaps, lip smacking at the new found political power and the statements of an imagined mandate are over, there still looms the 800 pound gorilla in the room. I stand by my belief that no matter who gets elected (I am about 95% certain that Obama will be elected) nothing will really change where it really matters. The only change will be who is called president. Sure there will be some other changes –Obama will change from Bush’s tax-cut-and-spend administration to a tax-increase-and-spend administration. Oh yeah, Obama will enact cap and trade of plant food (carbon dioxide) which will significantly increase all of our energy bills (although, to be honest, McCain is also talking about that).

What really needs to happen? We need a real leader that would present America with a plan that will include touch choices. A real leader will work with Congress to enact those tough choices. What would those tough choices be?

• Balance the budget with the current revenue stream and that includes excluding social security revenue from the revenue stream. That means across the board cuts, including the military.


• A tax increase levied only to pay down the debt and pay back the trillions in IOUs to the social security fund. I propose a modest national sales tax in lieu of increasing income taxes.


• Consolidate government, reduce duplicity, and increase governments’ effectiveness and efficiency.


• Reform Medicare and Social Security. That means cutting benefits and eliminating the maximum earnings amount above which you stop paying the social security payroll tax.


• Reform our education system and invest in math and science education.


• Drill more and invest in renewable energy. We need to be leaders in the renewable energy field.


• Close military bases around the world and pull our military back. We need to defend OUR borders first and foremost.


• Squash the climate change nonsense which would waste trillions trying to reduce global temperatures by a tenth of degree. Taking that money and investing it in math and science education, renewable energy research, and infrastructure would have a far greater impact.

If the $11 trillion in debt and $54 trillion in unfunded liabilities does not say it all, you, quite frankly, are a moron of massive proportions. These two numbers alone provide enough justification for the measures I propose above. These two numbers provide a measure of the precariousness of our situation. Americans need to realize that the run is over. America needs to rethink its priorities. America needs to realize that money does not grow on trees and cannot be printed wantonly without dire consequences. America can no longer enslave on our children and grandchildren with debt. It is time we take responsibility for our actions, at a personal level and at a national level.

Wake up America. Take some aspirin and drink some water. Shake the hang-over off and demand real change, not the change promised in pretty speeches.

Photo by fellow Engineers Without Borders member, Sugar cane fields, road, railroad, and mountains, Dominican Republic

A Simple Request

I only have a few simple requests of our politicians:

1. Please explain to me how you are going to pay for your policies and spending proposals and have a balanced budget without counting the social security surplus.

2. Please justify deficit spending with more than $10 trillion in debt and $54 trillion in unfunded liabilities.

3. Please justify the burden you are putting on my children and their children with reckless policies and spending habits.

4. Please look into my children's eyes and tell them what you just told me.