A Ponzi Scheme merely represents an accumulating liability, with no corresponding asset.
The fact that there are no assets backing the developed world's debts should have been the greatest warning sign to EVERYONE involved that globalization is a Ponzi Scheme. It's blatantly obvious.
Debt borrowed for investment involves an asset and a rate of return from that asset. So long as the rate of return and/or liquidation value from the asset exceeds the debt service costs, then the debt is solvent.
Debt borrowed for consumption, which comprises the vast majority of debt conferred from globalization, is backed merely by an IOU. The money gets spent, but there is no productive asset. Once any economy begins down this path of borrowing to consume, it's extremely hard to get off of it, because at that point the deficit becomes baselined into GDP. It should have occurred to developing nations a long time ago that they were already being paid interest with their own money i.e. the sheer obvious fact that without new borrowings, the developing nations would have no way of making debt service. Even during "expansion" all of the developed nations are incurring new debt. Debt is now GDP. It should have already occurred to billionaires as well, who think their paper assets are safe merely because they are not domiciled in their home country.
Ponzi schemes collapse at the exact moment at which new inbound cash flows can no longer cover liability outflows. The longer the accumulation of debt continues of course, the larger are legacy debt service costs in relation to inbound cash flows. The leverage ratio grows inexorably over time. The point of collapse arrives when inbound cash flows are no longer sufficient to cover legacy debt service.
Conning The Masses Is Easy - They Want to be Conned
Conning The Masses Is Easy - They Want to be Conned
It's the ebb and flow of money that cons the majority into believing that the entire scheme is solvent. As long as there is no mass withdrawal, the illusion can persist. The longer the scheme continues however, the greater the leverage, until eventually even a small capital withdrawal can trigger collapse. Which is what happened to Bernie Madoff in the fall of 2008. Regardless, today's comfort-seeking masses desperately want to be lied to, so conning them takes literally no effort whatsoever.
To date, miraculously today's "investors" have only required debt service in the form of interest repayment. There has been no mad dash to liquidate principal even for the most dubious of borrowers. There has been no global "risk off" event for two and half years now, since October of 2011. Since Draghi said he would do "whatever it takes".
Upon the next "risk off" event, the capital call will come and then EVERYONE will realize at the same time that "the bank" has no money, only unsecured IOUs backed by counter-parties with varying abilities to repay - mostly none.
THIS WILL ALL END WITH EXTREME DISLOCATION.
