Home > Austrian School, Fiscal Armageddon, Fractional Reserve Banking, Mainstream failure, Money As Debt > Is the American economic model a sustainable Ponzi scheme?

Is the American economic model a sustainable Ponzi scheme?

“Trader Mark” poses this interesting question:  Is America a Ponzi scheme that works? 

To quote from the article:

America is a uniquely attractive place to live: a lifestyle superpower. But it cannot afford to be complacent, for three reasons.

First, other places, such as Australia, Canada and parts of Western Europe, have started to compete for footloose talent.

Second, rising powers such as India and China are hanging on to more of their home-grown brains. There is even a sizeable reverse brain drain, as people of Indian or Chinese origin return to their homes. But neither India nor China attracts many completely foreign migrants who wish to “become” Indian or Chinese.  

Third, since September 11th 2001 the American immigration process has become more security-conscious, which is to say, slower and more humiliating. Even applicants with jobs lined up can wait years for their papers. Many grow discouraged and either stay at home or try their luck somewhere less fortress-like.

The stakes are high. Immigration keeps America young, strong and growing. “The populations of Europe, Russia and Japan are declining, and those of China and India are levelling off. The United States alone among great powers will be increasing its share of world population over time,” predicts Michael Lind of the New America Foundation, a think-tank.

By 2050, there could be 500m Americans; by 2100, a billion. (I am not sure how Earth would support 500M or 1 billion Americans consider 300M use 25% of all it’s resources!) That means America could remain the pre-eminent nation for longer than many people expect.

My take on this article: The question is not whether a Ponzi scheme can work (all Ponzi schemes that get off the ground work to some degree).  The essential questions are (1) can a Ponzi scheme work indefinitely (answer: no, no Ponzi scheme has ever worked indefinitely) and (2) has the U.S. Ponzi scheme just irreversibly burst (answer: yes, immigration levels are falling dramatically if you count illegals and, incredibly, net repatriations of money to Mexican relatives have in many cases reversed – poor Mexican relatives are now in many cases giving money back to newly homeless Mexican families living in the US!).

Once a Ponzi scheme bursts, you cannot ever put it back together because the suckers have dried up and are unwilling to finance the earlier entrants. The latter entrants always have to subsidise the earlier entrants.  Once there are no more “latters” the whole thing blows up. 

The U.S. is simply running out of “latters”.  It’s over, in my view.

The new Ponzi schemes will continue in places like Cambodia, Vietnam and (perhaps) Australia and New Zealand.  Until environmental and population problems mean the “latters” again have to go elsewhere.

But the U.S. in my view has just run out of suckers.  The price for entry into the scheme is too high and the rewards too low.  Everyone sees the Ponzi scheme is a fraud and once that’s exposed it’s all over for any Ponzi scheme.  The illusion is shattered – and once the love’s lost, there ain’t no goin’ back.

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