2018 turned out to be a critical year for Sands China’s books. Over the course of a few months, Sands was able to completely refinance by shuffling around about $7.3 billion. They extending maturities and rolled over debt at reasonable fixed rates while protecting exposed portions with interest rate swaps. We’ll get into the numbers and repayment schedules, but in order not to lose the forest for the trees, here’s the basic point. While the moves Sands China has made were the correct and legitimate under the current circumstances, they expose the current fragile nature of the debt-fueled global economy. Rolling over debt is fine as long as you can keep doing it. But once you can’t anymore, then there’s a big problem.

The following statement may sound controversial, but it is nevertheless true: There is little structural difference between rolling over debt and running a Ponzi scheme. Meaning, just looking at the dry money flows, the two are basically the same. In both cases you are borrowing from a new creditor to pay back an old one. The only difference is that rolling over debt is consensual while a Ponzi scheme is fraud. In one case the rollover is transparent and in the other case it’s hidden because you’re lying to your creditors about whose proceeds are paying what. But whether you are legitimately rolling over debt or running a bona fide Ponzi scheme, either a deflationary crunch or an inflationary crack-up is going to kill you and your creditors. Just ask Bernie Madoff.

Looking deeper though, there is even less of a difference between legitimately rolling over debt and running a Ponzi scheme than it may seem on the surface. How so? In a Ponzi scheme, the people running it are telling outright lies, namely that profit is coming from investment rather than from capital provided by new creditors. These new creditors in turn also believe they will be paid back from the proceeds of investment rather than from capital obtained from yet new creditors and so on.

When rolling over debt though, at the point of transaction between the parties themselves it is legitimate. It’s just that the lie is rooted deeper in the fabric of the entire system at the highest levels, that neither creditor nor debtor really understands. Really, in the case of a legitimate debt rollover, it may seem that the creditor will be paid back with income generated by the debtor, in Sands China’s case proceeds from its Macau operations. However, what’s really happening is that the creditor is being paid back ultimately with expanded credit from central banks. As long as central banks keep feeding liquidity into the system, it can continue, exactly like a true Ponzi scheme can continue for as long as new creditors keep feeding it. But just like a Ponzi scheme needs ever larger new creditors to keep going as the pyramid gets larger and larger, so, too, an economy based on the constant rollover of debt needs larger and larger influxes of credit to keep going just the same. Again, structurally we see that Ponzi schemes and debt rollovers are the same thing.