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The Unravelling Of A Ponzi Scheme

Apr 14th 2011 at 8:18 PM

The Unraveling of a Ponzi Scheme 
by Wayne Allyn Root 

This is pretty lengthy, but I beg you to read it through, as it is a bell ringing loudly for all to hear. 

“The news media in this country are in a stupor. Either out of ignorance, or complete leftist bias and fraud to protect their socialist hero Barack Obama, the mainstream media has turned a blind eye toward the enormous disaster facing our economy. The greatest Ponzi scheme in world history is coming to an end, leaving America on the precipice of economic Armageddon. Here are the facts the mainstream media does not want you to see- hiding in plain site just like Osama bin Laden was. 

Bill Gross is the world’s biggest bond trader. He runs the PIMCO bond fund with over $250 billion under management. He recently disclosed through financial filings that PIMCO has sold every single U.S. bond in its portfolio. Local, state, federal bonds- all sold off. Gross knows bonds are about to default in record numbers. And most importantly, he knows that the last resort of the Federal Reserve buying our own government’s bonds at auction is a certain sign of Armageddon. When no one is left to buy your own debt but you, you have reached the end of a Ponzi Scheme. 

Then there is legendary Wall Street investor Stanley Druckenmiller. He, too, is calling the Fed’s bond purchases a fraud and a Ponzi scheme. Druckenmiller says, “There is a phony buyer of $19 billion per week of Treasury Bonds.” The phony buyer he refers to is the U.S. government. Druckenmiller knows that when a country resorts to buying its own debt, we are seeing the last days of the Roman Empire. 

Another Wall Street legend, Jim Rogers, spoke out at a business conference last week. He said he plans to short sell (bet against) U.S. bonds with both hands. Rogers added, “If any of you have bonds, I would urge you to go home and sell them. If any of you are bond portfolio managers, I would get another job…if I were you, I would think about becoming a farmer.” 

Finally, we have the opinion of municipal bond expert Meredith Whitney, named by Fortune magazine as “one of the 50 most powerful women in business,” and by Time magazine as “one of the 100 most influential people.” She sees America in financial ruin with 50 to 100 cities defaulting on their debt in the next year. 

What do these financial legends know that the rest of us do not? 

First of all, reality is catching up to America. The Ponzi scheme of printing fake money to pay real bills is coming to an end. The jig is up- there is no way to sustain America’s massive welfare state anymore. When the Stimulus runs out, states will face disaster. The federal government currently pays for 30% of the states’ bills. Without that welfare from the feds, the game is over for the states. 

But that is just the start. The states pay 40% of the bills of their cities. As soon as that welfare ends, look for mounting numbers of municipalities to declare bankruptcy and default on their debts. The vicious cycle is only getting started. 

On the federal level, the trustees of both Social Security and Medicare admitted just this past week that their massive Ponzi schemes are running on empty. Both funds are running out of money far sooner than projected. Social Security will now run a permanent deficit. It is also important to remember there is no money in the “lock box.” All that is in the lock box is worthless paper IOU’s. It has all been spent. The Ponzi scheme is unraveling. 

The list goes on. The country’s annual deficit approaches $2 trillion. The national debt approaches a staggering $15 trillion. The debt plus unfunded liabilities approaches an unimaginable $100 trillion. The debt-to-GDP ratio approaches the 90% number- a figure that few countries have ever recovered from. One of every seven Americans is on food stamps. We are fighting three expensive wars with no purpose, and no end in sight. 

Every economic recovery in modern history has been led by a residential real estate boom. Yet today, the real estate crash is accelerating. The current real estate implosion is now worse than the Great Depression. 

But I have saved the worst for last. The two scourges of any economy are unemployment and inflation. That is why those two statistics make up the entire “Misery Index.” The only expert I trust to give the true figures is John Williams of He calculates those numbers the way our own government did until 1990, when they decided to rig the system to prevent panic and unrest. Based on pre-1990 calculations, today’s CPI inflation is now over 10% and unemployment is 15%. This 25% Misery Index is, by far, the highest in modern history. 

Even more foreboding, 10% inflation is a leading indicator of hyperinflation on the way. Any rise in inflation would force dramatic raises in interest rates, which would eat up the entire budget. Game over for America. 

History always repeats. This vicious cycle of misery will force massive layoffs of government employees, and massive cuts in entitlements and social services. This will result in Greece-like levels of protests, government employee union strikes, unrest, and riots. 

The ancient Chinese proverb says, “May you live in interesting times.” We are all watching history. This is the unraveling of a Ponzi scheme.” 

My first warning shout about this was in Aug '09 when real buyers for US Treasury bonds disappeared and the FED bought up the remainder of auction (printed worthless paper to cover). It is happening at every auction in ever increasing amounts, and NO ONE in the media is saying a word. Can they ALL be so ignorant. I think not. They are going go to the wall to protect Obama and his administration from adverse publicity as long as they can. BUT, a very bad day is soon coming and they will have no choice but report the facts as they unfold. 

My voice is almost gone from all the shouting. I have been called a scammer, profit of doom, among the more acceptable names, but all that does not change for one iota, the economic upheaval headed our way. If you haven’t heeded my, or for that matter, anyone’s warning directing you to protect your wealth with gold or silver, it’s not too late, but believe those quoted in the article, delay WILL be very expensive. 

Be prepared folks, this is not an option if you have any hope of surviving what is headed our way. Reply

Please to comment
Apr 18th 2014 at 10:13 AM by dion77
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Dec 4th 2013 at 2:45 PM by marty
Great article. Thanks.

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