Commentaries

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from Rolfe Winkler:

Sprott: Is it all a Ponzi?

In his latest missive to investors (pdf link here), Eric Sprott asks if our Ponzi economy is at risk of collapse. In fiscal 2009, foreigners scooped up $698 billion of Treasuries while the Fed upped its holdings by $286 billion. But the public debt increased $1.9 trillion. So who bought all the rest? According to Treasury, "other investors" bought $510 billion, up from just $90 billion in 2008. With the Fed's printing press turned off, the question for next year is whether "other investors" can buy more Treasuries than they did this year...

As we have seen so illustriously over the past year, all Ponzi schemes eventually fail under their own weight. The US debt scheme is no different. 2009 has been witness to spectacular government intervention in almost all levels of the economy. This support requires outside capital to facilitate, and relies heavily on the US government’s ability to raise money in the debt market. The fact that the Federal Reserve and US Treasury cannot identify the second largest buyer of treasury securities this year proves that the traditional buyers are not keeping pace with the US government’s deficit spending. It makes us wonder if it’s all just a Ponzi scheme.

Sprott has over $4 billion under management, the majority of which is in physical bullion, both gold and silver.

This blog has also argued that the American economy is a pyramid scheme:

At the end of the day, flushing more debt through the system is the only lever policy-makers know how to pull. Lower interest rates, quantitative easing, deficit spending, it’s all the same. It’s all borrowing against future income. Each time we bump up against recession, we borrow a bit more to keep the economy going. With garden variety recessions, this can work. Everyone wants the good times to continue, so no one demands debts be paid back. Creditors accept more IOUs and economic “growth” continues apace. If it sounds like Bernie Madoff’s Ponzi scheme, that’s because it is.

Finra messed up, what a shock

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The report by Finra on its failure to detect the alleged Ponzi scheme at Allen Stanford’s offshore bank is no shock.

Finra makes the SEC look like an agressive regulator. And this should give anyone reason to pause when you consider that Mary Schaprio, the current Securities and Exchange Commission chairman, most recently headed-up Finra.

Kroll’s roll in the Stanford muck

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Kroll Associates is the big name in the world of corporate investigations. But a former top gumshoe at Kroll has mud on his feet as a result of the firm’s past involvement with accused Ponzi mastermind Allen Stanford.

In the late 1990s, Stanford hired Kroll’s Miami office to help with a number of internal investigations. But more important, Stanford retained Kroll to help smooth the waters with a parade of federal investigators who were raising questions about Stanford’s growing banking empire on the Caribbean island nation of Antigua.

Madoff verdict: The SEC is plain incompetent

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A lengthy report examining the many ways the Securities and Exchange Commission botched its investigations of Bernie Madoff tells us something we already knew: the SEC can be awfully incompetent.

The report by the SEC Inspector General quickly dispenses with the notion that regulators either protected Madoff or covered-up their investigatory failures. But that’s the best that can be said for the SEC in this massive undertaking.

Stanford receiver calls out Libya and rich ballplayers

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The court-appointed receiver, defying the wishes of securities regulators, is going ahead with a lawsuit seeking to recoup $925 million from investors and former employees of indicted Ponzi schemer R. Allen Stanford.

The Securities and Exchange Commission went to court last week seeking to block the receiver from “clawing back” early redemptions paid to “innocent investors.” The SEC said it had no problem with the receiver targeting brokers who benefited from selling some $7 billion of Stanford’s bogus certificates of deposit.

Stanford investors get fleeced again

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It’s bad enough being a victim of a Ponzi scheme. But it’s rubbing salt in the wound when the court-appointed receiver charged with cleaning up the mess makes things worse for investors fleeced in the scam.

Yet that’s just what the receiver appears to be doing in the case of R. Allen Stanford, who has been accused of running a $7 billion Ponzi scheme.

Petters, the forgotten Ponzi

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The alleged $3 billion Ponzi scheme involving Tom Petters has never gotten the attention it deserved.

Some of that is because the case broke open right around the time Lehman Brothers was filing for bankruptcy. And given that the scandal took place in Minnesota and involved mainly midwestern hedge funds funneling money to Petters operation, it didn’t galvanize the attention of the East Coast media.

What sentence should a Ponzi get

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Federal prosecutors are sort of boxing themselves in when it comes to sentencing requests for big Ponzimeisters.

Bernie Madoff, the king of Ponzis, got 150 years. And now federal prosecutors in NY are seeking an almost equally as punitive 145-year sentence for Marc Dreier, the mastermind of a much, much smaller Ponzi that fleeced some hedge funds out of some $400 million.

Stanford gets Madoffed

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It appears the punishing 150-year sentence meted out by a federal judge to Ponzi king Bernie Madoff is already having legal reprecussions.

A day after Madoff was sentenced to spend the rest of his life and then some in a federal prison, another federal judge in Texas sided with prosecutors in ordering R. Allen Stanford to remain in jail pending a trial on his own Ponzi-related charges. Now there’s no definitive connection between the Madoff sentencing and the ruling in the Stanford case, but it’s hard not to see some cause-and-effect.

Tough questions after Madoff

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Even as Ponzi king Bernard Madoff goes away to prison for the rest of his life and then some, there are still so many unanswered questions — both big and fundamental.

Were Madoff’s sons involved? What did his wife Ruth know? Were the operators of the giant feeder funds that sucked in tens of billions of dollars in investor money in on the charade?

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