Why our economy is a giant Ponzi scheme

In trying to maintain the status quo, central banks and governments are storing up trouble for investors, says Tim Lee.

Bernard Madoff
We are in a fraud that’s bigger than Bernie Madoff’s
(Image credit: © Shutterstock)

The rapid recovery of equity and credit markets has surprised most investors and commentators. It is due to the extreme measures implemented by central banks and governments to support their financial markets and stimulate their economies. This has allowed prices for risk assets to become detached from underlying trends in the global economy. This is not a new phenomenon. For about 30 years central banks have become increasingly active in financial markets. Central bank activism has been instrumental in suppressing financial market volatility. This has made financial assets seem less risky than they otherwise would be, driving prices higher and encouraging excessive accumulation of debt.

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Tim Lee is an economist and a co-author, together with Jamie Lee and Kevin Coldiron, of The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis (McGraw-Hill, 2019)