Thursday, December 31, 2009

Money Managers: U.S. Debt Is Giant Ponzi Scheme

Eric Sprott and David Franklin, of Sprott Asset Management, say that government debt issuance is turning into an investment scam.

“Our concern is that this is all starting to resemble one giant Ponzi scheme,” the two write in a report to customers.

They note that the Federal Reserve bought $286 billion, or 15 percent, of the new Treasurys issued in fiscal 2009.

“We are now in a situation . . . where the Fed is printing dollars to buy Treasurys as a means of faking the Treasury’s ability to attract outside capital,” Sprott and Franklin write.

Meanwhile, buyers the Fed calls “The Household Sector” purchased $528 billion of Treasurys in the first three quarters of fiscal 2009. (more)

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