Bernard Madoff just played the game like everybody else did
December 16, 2008 · By Charles Anthony
When things started to crumble, Bernard Madoff revealed that his whole business was a nothing more than a ponzi scheme. He promised returns to customers that were paid from the money given to him by new customers. Like all ponzi schemes, new customers kept the ball rolling and as long as new customers kept joining, nobody would know the difference. The scheme fails when the flow of new customers slows down.
I have a hard time sympathizing with his customers. They have thousands (sometimes millions) of dollars and they want to make more — nothing wrong with that. However, instead of working to earn more money, they handed it over to somebody without knowing his methods and they trusted his promises. They took a stupid risk. I think such greedy and blind trust fuels most of the evil commercial practices in this world. If people were more informed about the production processes, they would think twice before buying most of the junk they buy.
Bernard Madoff just played the same game that most other financial institutions play. His ponzi scheme is not the only sham currently in operation. There are others that are accepted practice. The main thing about his ponzi scheme is that it has few branches in the pyramid. Thus, it is easy to point out the sham. However, old age security, Canada Pension Plan and employment/unemployment insurance are ponzi schemes too. We simply accept those as normal practice.
The entire “credit crunch” is the failing of a massive ponzi scheme: fractional reserve banking backed by central banking of fiat money. Everything rolls along under the radar — we are cultured to think that low levels of inflation are normal and healthy — as long as the banks are able to continue making loans. The whole thing comes crashing down when the bank runs out of credit-worthy customers. Nobody ever looks at our centralized banking system as a ponzi scheme because when all else fails, the central bank can print more money! If Bernard Madoff had the backing of a central bank — the way the commercial banks do, his business plan would succeed.
“Anybody who wants to preserve any savings they may have should get out of the US dollar. Buy gold or silver instead. Buy anything that is real. If you want stocks, buy something that everybody wants — like beer. If you want a fiat currency, I would recommend converting into Euro because that place seems to have a predictable track record and more of the oil suppliers are moving towards the Euro too — that is a good sign. ”
– Charles Anthony, July 2008.
Value of an ounce of gold then : $960.
Value of an ounce of gold now: $840.
Value of an ounce of silver then: $19.
Value of an ounce of silver now $10.
Value of 1000 euros then: $1570.
Value of 1000 euros now : $1380.
“they handed it over to somebody without knowing his methods and they trusted his promises. They took a stupid risk. I think such greedy and blind trust fuels most of the evil commercial practices in this world. If people were more informed about the production processes, they would think twice before buying most of the junk they buy. ”
– Charles Anthony, December 2008.
Mr. C,
I must have told you a long time ago to go take a high school economics course, right?
I guess you must think that a short term change is indicative of a long run trend.
Anyway, here is your high school economics lesson for the day: currencies change in value over time.
What you can buy with $1US today is not the same as what you can buy with $1US in the past. You are using a unit of measurement that is not constant. Therefore, your chart here is meaningless and you never would have known.
Nice try though. Have you been checking those charts daily until you can post your nonsense? You probably have been. Thanks for giving me your undivided attention. I am enjoying it.
“Anyway, here is your high school economics lesson for the day: currencies change in value over time.
What you can buy with $1US today is not the same as what you can buy with $1US in the past. You are using a unit of measurement that is not constant. Therefore, your chart here is meaningless and you never would have known. ”
You’re absolutely right. I was being unfair. I should have used a constant unit of measurement. Let’s take it month by month.
Price of gold per ounce on the date you suggested we should buy: $960.
Price of gold on the 1st of August: $910.
Price of gold on the 1st of September: $815.
Price of Gold on the 1st of October: $850.
Price of gold on the 1st of November: $730.
Price of Gold on the 1st of December: $780.
It should perhaps be noted that the only point at which gold has been higher than the price on the day you suggested buying was on the subsequent day.
You were not being unfair. Rather you were just displaying your ignorance of economics. Lesson #2: economics is not accounting.
You are just continuing to display your ignorance because the value of gold is not constant either. Keep trying.
[...] and George Hay. “The Bernie Madoff Morality Tale” at forbes.com by Andy Kessler. “Bernard Madoff just played the game like everybody else did” at thepolitic.com by Charles Anthony. “Criminal COmplaint Against Bernard [...]
Hey, Mr. C!
Did you hear the news? The dollar fell to a 13-year low against the yen and the weakest versus the euro in 11 weeks.
Maybe you can team up with a political genius and try to score some points with the electorate.
I suppose one difference between Charles’ advice and Madoff is that you’d only have lost a portion of your money.
“Hey, Mr. C!
Did you hear the news? The dollar fell to a 13-year low against the yen and the weakest versus the euro in 11 weeks. ”
I’m not entirely sure why you’re mentioning the yen at all. it’s certainly not a currency you suggested investing in. The currency you suggested investing in was the Euro. The Dollar is indeed running at an eleven week low against the Euro. Sadly, you suggested investing in the Euro (and only then after Gold and silver) more than eleven weeks ago, and anyone taking your advice would still be running at a loss.
Mr. C,
Your next economics lesson will require that you do a little bit more work: go look up the difference between nominal rates of return/exchange and real rates of return/exchange then report back.
You repeatedly fail to understand that comparing a variable unit of measurement to an other variable unit of measurement is meaningless. Some go up and some go down. They may have both changed in tandem or they may have diverged.
One thing that is most shocking is that you fail to understand an even simpler concept: a six-month change is not a long term trend. I am not offering a get-rich quick consulting service for a parasitic money trader. Even your accountant could understand that much.
We are in a deflationary period because the banks have suddenly stopped lending any money. Of course we are going a sudden change in exchange rates. That means nothing in the long run. In response, the Fed is now lending money at a virtual non-existent interest rate. Failing that, the Fed has announced that it will buy up anything it can to increase circulating credit. That will inflate the money supply and the value of the US dollar will only drop.
The real value of a fiat currency is NOT measured by its exchange rate with an other fiat currency. It is measured by what you can buy.
If their business plans last no more than six-months or if their ability to count beans is as flighty as your myopic understanding of economics, you would be right. Good for you.
Keep taking notes of my posts but if you want to continue discussing a different post from this one, take it here:
Get out of the US dollar before it is too late!
or stay under your own little bridge/blog where you belong.
Your article is not bad but I disagree about the victims taking stupid risks and being greedy.
I know some of the victims and they are as fine a people as you would want to meet. People are victimized in crime all the time and we don’t call them names.
Many of these people are facing personal tragedy and while they admittedly made a bad mistake, there is no reason to dump on them – you don’t know the circumstances fully.
They suffer enough without the extra critiques.
Barry,
Maybe you are right. It would have been more sensitive to simply say that the “victims” did not do enough due diligence in their investments.
I think we are commonly cultured to take too many things for granted and these “victims” are no different from the rest of us — other than they may have had access to a hell of a lot more money. My honest goal with this post was to offer logical parallels:
1) Honest people trust investors like Madoff and they get ripped off.
2) Honest people trust their government and they get ripped off too.
3) Madoff operated a phoney pyramid scheme.
4) Most government institutions that we take for granted — i.e. social security, fiat currency and public debt — are also economic pyramid schemes.
If more and more people recognize that they are also regular victims of government pyramid schemes, we would see more and more people demanding more responsible government — whatever that may be.
I am sorry if I was too harsh. However, I do not believe greed is a bad thing in and of itself. I am here to discuss politics and the “victims” of Madoff are not the only people who are suffering in this world. There are a lot of people who are victims of war, torture and forced starvation. Some of them were my relatives. So, you are right, I do not know the circumstances fully but I do know this: I could never have afforded to be one of Madoff’s clients and I doubt that I ever will in my life.
I believe the institutionalized pyramid schemes of government make victims out of poor people and create market forces that keep the poorest of the poor at an artificial disadvantage while putting the richest of the rich at a subsidized advantage.