Finance on the Ponzi Installment Plan

The budgeting process in America has evolved into a legalized Ponzi scheme. Federal and State Congresses, County Boards of Supervisors, City Councils all rob Peter to pay Paul without a sincere thought of reducing their deficits.

The citizenry has even gotten in on the game. They buy a McMansion on the gamble it can be flipped before the next mortgage payment is due. Without means to repay, they assume sub prime mortgages in the sheep’s clothing of Adjustable Rate Mortgages on the hope of re-financing before payments at higher interest rates come due. Re-fi sub prime ARM is the prayer uttered at the moneychangers’ tables throughout temples of finance.

They apply the same logic to credit card balances. Whatever is worth having is worth having now - until the next gotta-have-it hype comes along. It’s one thing to stand out from the crowd by being the first to own it. A far worse fate is to stand out by not being like everyone else who owns one. Far worse is humiliation from waking up to find oneself in possession of the latest hype rendered passé overnight by a new version of gotta-have-it. Self-esteem is just too big to be allowed to fail. The lifestyles of the rich and famous are but a card swipe away. The credit-challenged are now faced with the task of living with what they couldn’t live without. Instead of the check, it is the new card that is in the mail.

Wall Street is no stranger to the financial feeding frenzy. Along side venerable pork bellies appeared hot Cinderella commodities: the CDO and the credit default swap. Banks that made these loans ended up finding themselves trading pigs in pokes containing no bacon. The credit default swaps they created to minimize their exposure to risk eventually became ineffective once the toxicity of their assets reached near fatal levels in 2007. Still, their risk is minimal; these financial houses are too big for Congress to allow to fail. Wall Street has made sure of this through heavily investing in campaign contributions.

        People may wonder how Congressmen, Supervisors, and Councilmen, blind sighted as well as complicit, manage to look at themselves in the mirror each morning. They don’t have to. Make-up artists are but a line item in their campaign ad budgets.