Just One BIG Ponzi Scheme!!!!!!!
``The fear is that we really may be in a long, continuous financial crisis,'' said Stephen Lieber, who oversees $9 billion as co-chief executive officer of Alpine Woods Investments in Purchase, New York. ``When you have no sense of certainty as to what will happen tomorrow, it's nerve-racking.''
The above from Bloomberg.
Mr. Lieber, you should have a sense of certainty. Revenues are evaporating. More loans are going to default. More companies are going to lose money and go out of business. More people are going to be unemployed. That is what happens when there is too much debt and too little income to pay it back. Just like a Ponzi scheme, you borrow from the many to pay the few until you can't borrow any more.
Now Ford, GM and Chrysler want to borrow $50 Billion dollars???? You gotta be kidding. In the last quarter alone Ford and GM lost $25 Billion. How far do you think $50 Billion will go to developing new technology when they were even borrowing billions selling gas guzzlers at enormous profits a few years ago?
The entire American auto industry has been a Ponzi sheme for the past 20 years. If they couldn't make ends meet selling huge numbers of very profitable SUVs, how do you think they are going to cash flow selling scooters for a fraction of the profit margin????????
The total cost of the Chrysler bailout in 1980 was $1.5 Billion. Today, just the interest payments of the Big Three is probably over $50 Billion per year....discounting any pension liability. Can you imagine how much money these guys have borrowed since 1980 just to make ends meet.
Sure let's lend the big three another $50 Billion so they can make one more year of interest payments.........what about next year.......another $55 Billion?
Until the Big Three are restructured, debt brought into line with revenues, they will never be able to compete with their more efficiently capitalized foreign competitors. By loaning money under current conditons, we are only fertilizing a much bigger problem next year while putting our country and businesses into even more debt.
If we are going to lend $50 Billion, let's make sure all of it goes into new technology.......the only way this will happen is if we restructure our auto companies and eliminate much if its debt.
The Big Three are simply the most obvious example of Ponzi sheme financing Wall Street has utilized to make big profits over the past seven years.
The housing industry with its toxic debt is even larger. Sure, we will loan you money so you can go out and pay twice as much as the house is worth.....then we will package it up and sell it to your pension fund for a BIG profit.
As long as people could keep borrowing, they kept spending, builders kept building, and prices kept rising creating more and more leverage.
Just like a ponzi scheme where the scam keep working as long as you can lure in new players, leverage without income keeps functioning as long as you can tap new credit.
Now everyone is realizing that few are really making anything and making much of productive income. In the recent past, many were simply borrowing and paying each other......its just few really saw the picture. Once credit started drying up.....so did revenues....but the debt remained consuming a bigger and bigger percentage of revenues.
It is not much different than a Ponzi scheme. As long as you were in early and got your money out.....everything was fine....but if you were one of the many at the end......the entire pyramid collapses upon you.
Now people are finally waking up and asking where is the money. Savings is running out. People, business, and government are tightening up and office buildings and retail centers are being vacated faster than a teenager and his first fantasy. Good luck trying to sell your commercial space today. Same with your corporate debt or multi million dollar vacation home.
Pretty soon people will start to unload their stock porfolios........the question will be will there be anyone to buy with the DOW's trailing 12 month PE now nil and a negative outlook going forward?????
Until we restructure America's debt quickly, just like unwinding a Ponzi scheme, the distress is only going to get worse for the foreseeable future.