Ponzi schemes rely on people falling for promises that are literally too good to be true – but the outcomes are never really in doubt for the perpetrators of these scams, are they?
First they are playing with money that does not belong to them – which means they cannot lose. Also, when the scams finally unravel, the perpetrators have invariably moved on to their next group of unsuspecting victims –where the fleecing begins anew.
Sound familiar? It should. This is the modus operandi of governments all over the world in our current era of Keynesian excess – an era in which new taxes, fees and fines must be continually created and levied in order to pay for promises made in previous years. Of course these government promises are never actually “paid for,” the IOUs just keep mounting as the burden of repayment is extended further down the line to future generations of taxpayers.
Crisis compels the scammers to grow even bolder in their efforts to fleece the taxpayers. In fact, these “too good to be true” scams have only grown more expensive in response to the recent economic downturn.
Take the ongoing financial crisis in Greece, which has prompted a $144 billion bailout from the European Union and International Monetary Fund. This EU/IMF bailout – part of a larger $1 trillion “rescue” plan for the Euro – is nothing but a massive Ponzi scheme, as the leaders of fiscally reckless nations are basically saddling their debt onto the shoulders of their more responsible neighbors.
Not surprisingly, the root cause of the crisis that is threatening to bring down the global economy lies in the unsustainable expansion of the welfare state – which should be a lesson for American politicians of both parties.
First, let’s look at what’s happening in Greece.
“Greek governments have spent years buying social peace and votes with public spending, generous pensions, tax breaks, EU money and jobs for life, directed to an array of rent-seeking interest groups,” The Economist noted last month. “This sort of social contract, lubricated by endemic corruption and lax law-enforcement, has evolved to suit a country emerging from a vile civil war and years of dictatorship in which consensus was painfully absent.”
Also, let’s not forget that Greece sought for years to hide its growing debt problem from the rest of the world, paying hundreds of millions of Euros to various financial institutions in an effort to conceal the extent of its profligate borrowing.
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