Is there no end to this chicanery? Is there some fairly prominent recessive gene that just needs the right lighting, the right Pinot Noir, and the right blatantly faux promises of undying fidelity to surface in some inbred blueblood?
The footprint of these schemes is growing so wide that I think just about everyone knows at least one person directly affected by Ponzi schemes. I have a good friend who lost a six-figure chunk of his savings to one of these charlatans. (I feel like a victim myself, but it’s a bigger challenge to litigate when your grifter was a publicly-traded, federally-regulated financial services company.)
All businesses are Ponzi schemes, of course, to one extent or another. It’s all about the level of misrepresentation. The prize winners have no intention of trying to earn their way out of the hole, but I’m sure many of them start with a misstep that puts the proprietors on a slippery slope to felony. Other businesses put up a tangible attempt at the appearance of enterprise, but in retrospect, I gotta believe that, for example, a lot of GM bondholders feel like they were dealing with Bernie rather than Rick. Was there ever a credible plan to pay that money back?
Banks take your money, pay you interest, and where is that interest coming from? It’s coming out of the expectation that the bank will earn enough money in the future to cover the interest. If they take a big yo with your deposits (on real estate, or credit card loans, or private equity investments) and it doesn’t work out, was that just bad luck or was there something Madoffian in that? And what if further investigation reveals that this is what Bernie did with most of the money — made huge bets on exotic assets and got crushed? The differences get subtler and subtler.
I’m not really sure where I’m going with this. There are a lot of places it could go. One that interests me is the notion that, in a real sense, most of the world’s companies are insolvent right now. Their assets, on a dump-it-by-lunchtime basis (i.e. our current accounting system), do not cover their liabilities. Is it a matter of time before we drag them all into bankruptcy court, or do we come to our senses and let the soft Ponzi scheme that all businesses are based on be re-established?
Food for thought on this last day of a genuinely awful February.