The biggest pyramid scheme ever!

Have you ever heard of a ‘pyramid scheme’?  One of those ‘get rich quick’ scams that work as long as new people keep entering the system at the bottom, pouring in cash, which is used to pay the upper echelons, instead of buying product, paying bills, or whatever.  The United States economy is starting to look like a pyramid scheme that is going bust, because the steady inflow of cash has finally come to an end, and people are demanding their money back right and left.  Where did the idea that investing is risk free come from, by the way?  When strategies involving billions of dollars have absolutely no provision for a downside, for shrinkage, for deflation, doesn’t that practically guarantee that the strategy is going to implode at some point?

Money that was owed people was lent out again, or put into a stock, in the hopes that it could make even more profit before it was paid back.  That can work once in a while, but when it is a constant practice, the bottom will fall out.  Investment used to be done with long-term goals, and no expectation of immediate returns.  Nowadays, Greed wants big payoffs the moment it lets go of its money, perhaps because there were so many positions to cover, and not enough cash.  And Greed will always try to cover itself before worrying about anybody else, even if that means pushing the whole system under.

As long as lots of cash was flowing through the system, the shaky deals, the hidden payoffs, the transactions kept off the books could all continue without much fear.  There was always somewhere to get the cash from on short notice to cover a position for a little while.  But with no cash available, there are so many positions being left open that the shell game is no longer possible.  Merely inflating the value of some transaction is no longer enough to offset the payouts that have to be made.  We have made so much money that we don’t have any anymore, because it was mostly an illusion.

There has been no fundamental or significant change in the means of production, the cost of materials, the productivity of labor, or the margin of profit, yet, somehow, a whole bunch of companies suddenly became worth a lot more.  We were counting the same dollar over and over again, pretending that each one was real.  Greed became the driving force in the financial markets, overshadowing sensible growth, honest returns, and sustainable profits.  For a little while, a small number of people made out like bandits.  But now, the rest of us are going to have to pay over and over again for the profits of a few.

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