Bill Gross: Bernanke Running a Bigger Ponzi Scheme than Charles Ponzi → Washingtons Blog
Bill Gross: Bernanke Running a Bigger Ponzi Scheme than Charles Ponzi - Washingtons Blog

Monday, November 1, 2010

Bill Gross: Bernanke Running a Bigger Ponzi Scheme than Charles Ponzi

Bill Gross writes today:

Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme. Public debt, actually, has always had a Ponzi-like characteristic. Granted, the U.S. has, at times, paid down its national debt, but there was always the assumption that as long as creditors could be found to roll over existing loans – and buy new ones – the game could keep going forever. Sovereign countries have always implicitly acknowledged that the existing debt would never be paid off because they would “grow” their way out of the apparent predicament, allowing future’s prosperity to continually pay for today’s finance.

Now, however, with growth in doubt, it seems that the Fed has taken Charles Ponzi one step further. Instead of simply paying for maturing debt with receipts from financial sector creditors – banks, insurance companies, surplus reserve nations and investment managers, to name the most significant – the Fed has joined the party itself. Rather than orchestrating the game from on high, it has jumped into the pond with the other swimmers. One and one-half trillion in checks were written in 2009, and trillions more lie ahead. The Fed, in effect, is telling the markets not to worry about our fiscal deficits, it will be the buyer of first and perhaps last resort. There is no need – as with Charles Ponzi – to find an increasing amount of future gullibles, they will just write the check themselves. I ask you: Has there ever been a Ponzi scheme so brazen? There has not.
This isn't the first time Gross has called the U.S. economy a Ponzi scheme. He did so in January 2009.

Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky and the Wall Street Journal agree.

Hyman Minsky would agree if he were alive today.


  1. But you don't agree. Right? Aren't you with MMT on this?

  2. Yeah, what JKH said. What creditors does the US govt owe money to?


→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).

→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).

→ The following types of comments will be deleted if we happen to see them:

-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over

-- Comments that explicitly call for violence

→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.