Roubini: America One Big Ponzi Scheme

Thursday, March 19, 2009 9:48 AM

By: Julie Crawshaw

For more than 10 years, millions of Americans ran their own personal Ponzi schemes, says NYU economist Nouriel Roubini.

"When you put zero down on your home, and you thus have no equity in your home, your leverage is literally infinite and you are playing a Ponzi game," Roubini writes in Forbes.

It’s a game virtually everyone played, Roubini notes. That’s how we became the United States of Ponzi.

Banks made interest-only, zero down payment liar loans to NINJA (no income, no jobs and assets) borrowers at initial teaser rates.

Private equity firms did over a $1 trillion of leveraged buyouts with a debt-to-earnings ratio of 10 or above.

Consumers allowed their debt relative to income to soar to 135 percent today from 65 percent in 1994.

“An economy where the total debt to GDP ratio (of households, financial firms and corporations) is now 350 percent is a Madoff Ponzi economy,â€