Welcome to Planet Ponzi

by Mitch Feierstein about 10 months 4 weeks ago

You know that scene in Mr. Smith Goes to Washington? The one where the good guy, Jimmy Stewart, stands up in the Senate protesting the graft and corruption he sees all around him. He’s not as smart as the other Senators. He was only elected by accident and knows that he’s not properly qualified to sit in the legislature of the United States.

But still. He’s Jimmy Stewart. He knows right from wrong and he knows that graft and corruption is wrong, no matter how slick the justification or how nice the suit. He makes a long, wonderful, stirring speech – if you haven’t seen the movie, you ought to – and he keeps coming back the fundamental point of common sense. At one point, he says, ‘Either I’m dead right, or I’m crazy!’

And he’s not crazy.

This blog is the same. I am, as it happens, a hedge fund manager who’s spent nearly forty years working in the financial markets. As a result, I know a lot about the world’s financial system and how it works. But you don’t have to be a technical wizard to understand these things. The government of the United States owes 115% of American GDP. That’s insane.

The Federal Reserve is charged with preserving the value of the currency, but it has printed trillions of dollars in new money. When inflation is galloping away. And the Fed doesn’t even know where those trillions have disappeared to. That’s insane.

The Congressional Budget Office tells us that Medicare spending is going to bankrupt the budget. (You can see their chart of federal debt here.) We’re not talking about a few bucks of overspend, but a cost tsunami which will utterly destroy every fiscal rule ever invented. That’s insane.

The Tea Party crowd want us to cut taxes, even though we don’t have enough revenues to cover our expenses as it is. And a tax cut when the nation is in deficit is really a tax increase, because you have to pay the money back again, and with interest. More insanity.

And Wall Street bosses pay themselves extraordinary bonuses even though their stock prices are tanking. That’s not capitalism as I ever understood it. You can call it insanity if you wish, or criminality if you prefer. Either way, I don’t like it.

But these things aren’t confined to the United States. In Britain, we see the same thing: investment banking bosses trashing their company’s share price, bankrupting the government, causing a massive recession – and walking away as multi-millionaires.

In Italy, we saw how Silvio Berlusconi, one of the political world’s greatest idiots, presented an ‘austerity budget’ to Italy’s Parliament which made him personally €750 million richer.

The Greek government has been obviously bankrupt for years, but it’s taken till now for Europe to recognize the fact.  Defaults are on the horizon…

The European Union announces another ‘rescue plan’ that will impose vast costs on the ‘strong’ governments, but which has obviously failed within a couple of days of the announcement.

It’s all insane. And not just insane – it’s wrong. Ethically, financially, and socially wrong. Much of it is also, in my opinion, illegal and should be punished by long terms in jail.

This blog is about these issues. It’ll shout out when politicians and bankers do things wrong. It’ll cheer on those rare occasions when politicians get things right. We’ll also talk about the dollar in your purse, the pound in your pocket. The value of your savings is under threat and, as a professional investment manager, I’ll share with you my philosophy on how to preserve your savings from destruction. These are dangerous times and they’re only just starting.

17 Responses to: Welcome to Planet Ponzi

  1. Rick Lazio says:

    As a former member of the U.S. House of Representatives, prosecutor and veteran of one of the world’s largest global banks, I’m thrilled that someone like Mitch is using this megaphone to sound the alarm. It takes someone with his background to take us behind the PR spin and superficial headlines to discover the truth.

  2. Matt Kirk says:

    Are you suggesting Austerity? Who was it that said spend your way out of a recession? There are mixed messages everywhere and I cannot make up my mind, I think a lot of people feel this way.

    • Kaycee says:

      I didn’t know where to find this info then kaobom it was here.

    • Jan says:

      Matt, many people ask themselves that question. I did too. But if you really think about it, with 2 feet on the ground, you cant conclude anything else that something is terribly wrong. In 100 years, the USA build up 7 trillion in debt. In the last 5 years only it double to 16 trillion (the real number is much higher if you count all liabilities). Austerity? I simply think it is too late. The QE’s have hardly boosted the economy. Imagine what will happen when tough austerity plans would be in effect. No politician is courageous enough to start it, not in his/her time!. This is going to end with a big bang. Imagine the interest rates going up.
      There are many cycles in life and i somehow believe that we are coming to the end of a 1000’s of years cycle. Compare to the Easter Island story.
      Great site Mitch!!

  3. Mitch Feierstein says:

    Perhaps you were thinking of the John Maynard Keynes quote “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours” I certainly do not believe stacking new debt on top of old debt will provide a growth driven recovery – my book covers many potential solutions and importantly what most people should prepare for.

  4. Brock Mac says:

    Interesting blog. The major issue – apart from how the economic/political elite are truly indenturing the 99.99% of the world’s population – is that the 99.99% of the world’s population have not properly clued into the fact they are being totally screwed by the tiny elite.

  5. Yvonne says:

    Interesting. The truth really can scare you sometimes. It feels like a worldwide depression is approaching. Are there honest politicians or strong and weak ones?

  6. G.Richards says:

    I recall Don Corleone telling his associates, “The best way to rob a Bank, is, to buy one”. this appears to have happened. Seriously; banks are at the hub of organised white collar crime They certainly have the politicians in their pockets; that’s why no-one is jailed.

  7. Paul Dobbs says:

    Hi Mitch, I’ve long since shared your views, to me its common sense and your book hits the nail on the head, thanks very much. I am not a Hedge Fund Manager like you or involved in financial services in any shape or form – the problem I have is that I am aware of the risks facing the global economy but lack the knowledge regarding how I protect myself. So few mainstream economic/financial commentators share your views preferring to ride the wave so its very hard for people like me to know what to do to protect myself – do I buy gold, silver? Do I buy high yield blue chips? Do I put some cash under the mattress – of course I appreciate you can’t give direct financial advice but getting a steer from the mainstream is impossible. I think your book was light on this but I undertsand why.

    • Mitch Feierstein says:

      Thanks Paul,
      Last summer when gold was trading around 1,200 I added to positions.
      Physical gold is always good to have as fiat currency is worthless. That said; here are the banks who disagree with me;
      Jun 25 2013 UBS 1050
      2014 Jan 9 Bank of America Merrill lynch; cuts gold it’s a sell 1150
      2014 Jan 9 HSBC 1292
      2014 Jan 9 Barclays 1050 low high 1375
      2014 Jan 14 Deutsche Bank 1141
      2014 Jan 16 Goldman Sachs – 2014 gold 1050
      2014 Jan 22 Morgan Stanley – 2014 gold 1160
      2014 Feb 14 Goldman Sachs – Reiterates 1050 gold in 2014
      2014 Feb 18 Soc Gen – 1,000 Gold in 2014

      And of course, I’m the only person to have spoken out on the London Ponzi property bubble long before MSM… Cheers, M

      • Paul Dobbs says:

        Thanks Mitch, that was the conclusion I came to last year i.e. buy gold (at nearly four year lows) so directed funds that way – of course, against the advice of MSM. Hasn´t been a money spinner but I sleep better……

  8. Judith Stapleton says:

    The Vancouver, BC housing bubble has been abetted through money laundering as well as the developer/bank/politician relationship. The delusion continues, even in the face of retail closures every week on every downtown block, mill closures leave whole towns unemployed, and everyone in the fossil fuel industry knows they are eating their own children, but can’t stop. Canadian manners will have us left with nothing but another apology, as most of us are forced to sleep in our cars.

    • Mitch Feierstein says:

      I agree, Judith. However, Mark Carney’s property bubble is near it’s end and a massive unwind is coming.
      Todays valuations are not sustainable. We need to hold the central bankers accountable, they caused all these problems and Reckless CB policies make the problems worse. They have saved Wall St and screwed Main St., again.