Comments on: Ponzi Schemes in Ponzi States http://www.seniormoneymemos.com/2009/03/19/ponzi-schemes-in-ponzi-states/ Personal Finance From A Senior Perspective Fri, 23 Dec 2011 13:19:04 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Dan Alvarez http://www.seniormoneymemos.com/2009/03/19/ponzi-schemes-in-ponzi-states/comment-page-1/#comment-307 Dan Alvarez Mon, 06 Apr 2009 14:00:04 +0000 http://www.seniormoneymemos.com/?p=699#comment-307 I agree with the fact that the overextension of and overreliance on credit are primary factors in the collapse of the US financial and real estate markets. Add to this a blind dependency on the fallacy that a traditional financial market will always produce above average returns of X% a year, and you get the inevitable creation and destruction of a nasty bubble. The Madoff Ponzi Scheme is just a natural byproduct of the cash shortage that this financial collapse, and all other major collapses, cause. When enough people redeem their investments from Ponzi and Pyramid Scheme outfits, they inevitably collapse and their fraudulent veils are lifted. The US is not alone in this game. On February of this year, Allen Stanford's $8 billion Ponzi Scheme hit the wires. This scam involved the sale of bank CD's through his Antiguan-based Stanford International Bank. The main culprit here is not the US, the greedy bankers, or the regulators who [purposefully or not] fell asleep at the wheel; it is INVESTOR GREED. It was greed that made Madoff's investors overlook important facts before riding the fraudster's merry-go-round. In addition to acting as the investment manager, Madoff was also the custodian and administrator of the program. This is a no-no in the world of investment transparency and due diligence. Before investing in anything, each investor has to make sure that the money manager is separate from the custodian (holder of the funds) and the administrator (the one that verifies where the funds are held and does the accounting and reporting for the customers). A third-party administrator is a must. Amidst all the finger pointing and name-calling will investor's learn their lesson? Time will tell. Investors have a long and painful recession ahead of them to reflect on the consequences of their actions. I agree with the fact that the overextension of and overreliance on credit are primary factors in the collapse of the US financial and real estate markets. Add to this a blind dependency on the fallacy that a traditional financial market will always produce above average returns of X% a year, and you get the inevitable creation and destruction of a nasty bubble.

The Madoff Ponzi Scheme is just a natural byproduct of the cash shortage that this financial collapse, and all other major collapses, cause. When enough people redeem their investments from Ponzi and Pyramid Scheme outfits, they inevitably collapse and their fraudulent veils are lifted.

The US is not alone in this game. On February of this year, Allen Stanford’s $8 billion Ponzi Scheme hit the wires. This scam involved the sale of bank CD’s through his Antiguan-based Stanford International Bank.

The main culprit here is not the US, the greedy bankers, or the regulators who [purposefully or not] fell asleep at the wheel; it is INVESTOR GREED. It was greed that made Madoff’s investors overlook important facts before riding the fraudster’s merry-go-round.

In addition to acting as the investment manager, Madoff was also the custodian and administrator of the program. This is a no-no in the world of investment transparency and due diligence. Before investing in anything, each investor has to make sure that the money manager is separate from the custodian (holder of the funds) and the administrator (the one that verifies where the funds are held and does the accounting and reporting for the customers). A third-party administrator is a must.

Amidst all the finger pointing and name-calling will investor’s learn their lesson? Time will tell. Investors have a long and painful recession ahead of them to reflect on the consequences of their actions.

]]> By: David Leonhardt http://www.seniormoneymemos.com/2009/03/19/ponzi-schemes-in-ponzi-states/comment-page-1/#comment-282 David Leonhardt Thu, 19 Mar 2009 19:52:47 +0000 http://www.seniormoneymemos.com/?p=699#comment-282 Wow. I had never thought of it that way before, but that's what credit is all about, especially when you both pay on credit and accept credit from people who pay you (or your employer, same thing). Wow. I had never thought of it that way before, but that’s what credit is all about, especially when you both pay on credit and accept credit from people who pay you (or your employer, same thing).

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