4 ms·
It is not a Ponzi scheme if it is not always and necessarily growing.
by fiatjaf 11y ago
It is not a Ponzi scheme if it is not always and necessarily growing.
- cm2187 11y agoMost western countries can't even afford paying the interest of their debt. So as it is, it is kinda necessarily growing. But the ponzi scheme aspect is rather the fact that countries can only pay back debt with new borrowing. If investors stop rolling their debt, even the US would collapse within a few months.
- NhanH 11y agoI thought the whole premise of modern economics relies on the assumption that the economy has to grow. Time value of money implies that the money has to create value -- in more specific term, if bank lend out $100 and want $102 back, without the economy growing the money supply can't have the extra $2 (printing more money without the economy growing cause inflation, then the bank will want more than $2 interest and it's the same, so we can ignore that).
- haberman 11y ago> Most western countries can't even afford paying the interest of their debt. If that were true, the countries would be in default. And yet they are not.
- cm2187 11y agoFrance for instance has a primary deficit: https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=325.GFS.A.N.FR.W0.S13.S1._Z.B.B9P._Z._Z._Z.XDC._Z.S.V.N._T https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=325.GFS.A.... I.e. the state budget is in deficit even before the interest on the debt. So it borrows just to repay the interest plus that primary deficit. These countries are not in default but they are definitely broke and reliant on debt to an insane level.
- fiatjaf 11y agoI agree that almost all countries in the world are in an insane situation, but that's still not a Ponzi scheme. They can repay the debt if they want, they have other sources of income other than loans -- and these are still much larger than these loans they take every year plus interest --, namely their taxpayers pockets. I agree that this is not good, not fair, and that it should be a crime to get other people's money like that, but it is not a Ponzi scheme.
- cm2187 11y agoThey cannot repay this debt. France debt to gdp is reaching 100%. They cannot even gather the political steam to stop increasing their debt, and they have a pension wall coming their way, an ageing population, an increasingly illiterate and unemployed youth. This debt will never be repaid. And like all individuals who keep borrowing more to sustain their life style, and who use the credit card to repay the interest on their loan, it stops when creditors loose trust in them and stop bringing fresh money. And then it collapses. It is an almost identical mechanism than a ponzi scheme.
- Phil_Latio 11y agoA GDP growth of 0%, let alone "negative growth" is considered a disaster for any country.
- Tycho 11y agoWouldn't that be a pyramid scheme? A ponzi scheme is fine as long as everyone doesn't want their principal back at once.