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The Fed chase after fresh cash is not Ponzi scheme
It’s in mayonnaise jars in the attic
Dear Matthew Alice: A few years ago, some of our socially prominent La Jolla citizens were sent to the slammer for running a Ponzi scheme, which pays off early investors with money from new investors. The enclosed clipping from the Wall Street Journal says the U.S. Treasury plans to raise $4.75 billion in fresh cash from investors and use some of the proceeds from the sale of $27 billion in notes to these investors to pay off previous investors to the tune of $22.58 billion. Aren’t these two schemes the same? By the way, what is “fresh cash”? — Fearless Fred, Pacific Beach
“Well-laundered” comes to mind. But no, in this case it means cash that’s not already in the T-note market; it’s in mayonnaise jars in the attic or invested in pineapple futures or something. If you buy new T notes with money obtained by selling off old ones, that’s stale cash, I guess. As for the legality of the Treasury’s scheme, there are things that apparently make sound fiscal sense for the guv’mint but would land us behind bars in a hurry if we did it. Running a lottery, f'rinstance. But this is no Ponzi or pyramid scheme, because the feds are buying out one set of investors who hold notes promising X percent return by bringing in investors who will get Y percent. Rates of return and due dates are known at the time the investment is made. It’s like a contract. In a Ponzi, late investors lose because the scheme inevitably collapses when the pool of new money dries up.
Here's something you might be interested in.
The Fed chase after fresh cash is not Ponzi scheme
It’s in mayonnaise jars in the attic
The Fed chase after fresh cash is not Ponzi scheme
It’s in mayonnaise jars in the attic
Dear Matthew Alice: A few years ago, some of our socially prominent La Jolla citizens were sent to the slammer for running a Ponzi scheme, which pays off early investors with money from new investors. The enclosed clipping from the Wall Street Journal says the U.S. Treasury plans to raise $4.75 billion in fresh cash from investors and use some of the proceeds from the sale of $27 billion in notes to these investors to pay off previous investors to the tune of $22.58 billion. Aren’t these two schemes the same? By the way, what is “fresh cash”? — Fearless Fred, Pacific Beach
“Well-laundered” comes to mind. But no, in this case it means cash that’s not already in the T-note market; it’s in mayonnaise jars in the attic or invested in pineapple futures or something. If you buy new T notes with money obtained by selling off old ones, that’s stale cash, I guess. As for the legality of the Treasury’s scheme, there are things that apparently make sound fiscal sense for the guv’mint but would land us behind bars in a hurry if we did it. Running a lottery, f'rinstance. But this is no Ponzi or pyramid scheme, because the feds are buying out one set of investors who hold notes promising X percent return by bringing in investors who will get Y percent. Rates of return and due dates are known at the time the investment is made. It’s like a contract. In a Ponzi, late investors lose because the scheme inevitably collapses when the pool of new money dries up.
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