A ponzi scheme is the use of new investor money to pay old investors. As soon as new money stops coming in, everyone loses - well, except for the guy who made a commish selling the fund manager his beluga, Dom Perignon and Maserati.
As I watch stocks crater on global economic fears I wonder just who in their right mind thinks loaning Uncle Sam more money is a good idea? True, as long as there are suckers to buy up each auction, money will flow in and old investors, including government workers, the army and social security, get paid. Everybody is happy! Whoo hoo!
Am I alone in getting a bad feeling about this? Yes, I know treasuries give you at least a tiny yield instead of losses in stocks and commodities. But at what cost? If we consider risk and reward, I think the risk is getting way out of hand.
Default risk? The US is not going to default but never before has there even been a chance. Now there is.
Interest rate risk? Maybe not right now but do you really want to lock up you money for 10 years at 1.7%? And that is before taxes, you evil rich people.
I'd rather take the money and invest it in a small business. The risk may be higher but the reward is exponentially higher.
So for now, treasuries are the only game in town. But Congress has not passed a law requiring citizens to buy them - although you never know.