How We Can Avoid Another Tragic Ponzi Scheme 36 comments
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“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.” (Joseph Goebbels)
Truth is the mortal enemy of the lie. This is a profound observation from such an evil man. The definition of truth is being in accordance with fact or reality. The Nazis were masters of using propaganda to manipulate facts and produce the reality that suited their wicked purposes. Other states have attempted to repress dissent and rule by using the Big Lie. The Soviet Union and Communist China come to mind.
Our country was created with a Constitution that attempted to insure tyranny that occurred under British rule could not happen in the United States. Truth and freedom of speech are essential for a Republic to thrive. In the last two decades, facts and reality have been obscured, twisted, manipulated and obfuscated by our government, corporations, investment professionals and media. The Big Lie can be perpetrated by states, corporations, or individuals. The multitude of lies has made Americans increasingly dependent. The State gains more power as citizens become more dependent.
The following quote attributed to Scottish history professor Alexander Tyler in 1787, seems to portray an accurate reflection of what has occurred during our 200+ years of existence as a democracy.
A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.
The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
- From bondage to spiritual faith;
- From spiritual faith to great courage;
- From courage to liberty;
- From liberty to abundance;
- From abundance to complacency;
- From complacency to apathy;
- From apathy to dependence;
- From dependence back into bondage
These words were written two years before George Washington became our first President. There is so much truth in these words it makes me shudder, especially since we are clearly in stage 7. An honest appraisal of our country’s downward spiral is necessary to begin the process of redemption. We have continually voted ourselves increased benefits, dependent upon the printing presses of the Federal Reserve to sustain our country’s ponzi scheme. We have pawned our future and the bill will eventually come due.
The Great American Republic
My assessment of the chronological sequence our democracy has progressed through, follows.
From bondage to spiritual faith (1760 to 1769)
- King George III becomes King of England
- Currency Act, Sugar Act, Stamp Act, Quartering Act, Townshend Act passed by Parliament
- Sons of Liberty formed by John Adams, Samuel Adams, Paul Revere, John Hancock, Patrick Henry, among others.
From spiritual faith to great courage (1770 to 1783)
- Boston massacre
- Samuel Adams organizes the Committees of Correspondence
- Parliament passes the Tea Act
- Boston Tea Party
- The First Continental Congress
- Battle of Bunker Hill
- Thomas Paine publishes Common Sense
- Revolutionary War rages for six years
- British surrender at Yorktown
- Treaty of Paris ends Revolutionary War
From courage to liberty (1784 to 1865)
- Constitutional Convention
- Constitution ratified by 13 states
- George Washington elected President
- Bill of Rights passed
- Fugitive Slave Act passed
- Louisiana Purchase
- Robert Fulton invents steamboat
- War of 1812
- Monroe Doctrine
- President Andrew Jackson battles bankers which leads to the Panic of 1837
- U.S. Mexican War
- California gold rush
- Compromise of 1850
- Dred Scott Decision
- Abraham Lincoln elected President
- Confederate states secede from the Union
- Emancipation Proclamation
- Civil War rages for four years
- Union is restored
- 13th Amendment abolishes slavery
From liberty to abundance (1866 to 1969)
- Civil Rights Act of 1866
- First Trans-Continental Railroad
- Alexander Graham Bell invents the telephone
- Industrial Revolution
- General Electric founded
- Spanish American War
- U.S. Steel founded
- Airplane invented
- Automobile invented
- Federal Reserve created
- World War I
- Great Depression
- New Deal programs implemented by FDR
- Golden Gate Bridge completed
- World War II
- Holocaust
- Atomic bomb used to end war with Japan
- Marshall Plan rebuilds Europe & Japan
- US emerges from the war as the only great economic power
- Cold War
- Korean War
- Interstate highway system built
- Civil Rights Movement
- John F. Kennedy assassinated
- Vietnam War
- Great Society programs implemented
- Civil Rights Act of 1964
- Martin Luther King assassinated
- Neil Armstrong walks on the moon
From abundance to complacency (1970 to 1989)
- Roe vs Wade
- President Nixon resigns in disgrace
- Oil embargo
- Ronald Reagan elected President
- Military buildup and tax cuts
- Fall of the Soviet Union
From complacency to apathy (1990 to 2000)
- Gulf War
- Bill Clinton elected President
- Stock market boom
- Gridlock between Congress & President leads to budget surpluses
- President Clinton acquitted in impeachment trial
From apathy to dependence (2001 to 2007)
- George W. Bush elected President
- Nasdaq stock bubble bursts
- 9/11 attack
- Alan Greenspan lowers rates to 1%
- Invasion of Afghanistan
- Department of Homeland security created
- Invasion of Iraq
- Hurricane Katrina
- Home prices double
- Financial derivatives grow to over $100 trillion
From dependence back into bondage (2008 to ????)
- Housing prices collapse
- Financial firms collapse
- Government and Federal Reserve intervene to prop up the worldwide financial system
- Government bailouts of financial firms and auto manufacturers
- Federal Reserve & U.S. Treasury commit over $8 trillion of taxpayer funds
- Barrack Obama elected President
- Immediate borrowing & stimulus packages exceeding $1 trillion are discussed
- Federal Reserve lowers rates to below 1%
Fact is Fiction and TV Reality
"I can't believe the news today
Oh, I can't close my eyes
And make it go away
And it's true we are immune
When fact is fiction and TV reality"
U2 – Sunday, Bloody Sunday
The greatest fraud in the history of our country was exposed in the past week. Bernie Madoff perpetuated a $50 billion ponzi scheme fraud on his formerly wealthy investors. The size of the losses is mind boggling, three times the size of the proposed bailout of the US automakers. His entire investment fund has been a big lie for decades. The immorality of his actions is incomprehensible. Charities have been wiped out, the life savings of entire families have been lost, and innocent lives have been ruined.
The potential sentence of 20 years in a country club prison and a $5 million fine is not nearly equal to the pain caused by this man’s immoral evil actions. This man was well respected by the Wall Street investment community, a prominent Jewish philanthropist, and part of the wealthy high society crowd located in West Palm Beach. This begs the question, if this man has been running this type of scam for decades, how many more cockroaches are out there on Wall Street? After a year of never ending tales of scandal, fraud, lies, greed and mismanagement, this episode should be the final straw which convinces the American public the investment game is rigged and they do not have a chance.
This tragedy is a failure of morality, a failure of regulation, failure of unbridled capitalism and a failure of common sense. Bernie Madoff started his firm Bernard L. Madoff Investment Securities in 1960 with $5,000. It started as a classic American success story and is ending as an American tragedy. Mr. Madoff had a spectacular rise on Wall Street. His firm was one of the founding members of the NASDAQ. He emerged as one of the key leaders in the rise of the NASDAQ and eventually became Chairman of its Board. Madoff served as the Chairman of the Board of Directors of the Sy Syms School of Business at Yeshiva University, as well as Treasurer of its Board of Trustees. A college class in ethics in his youth may have benefitted Mr. Madoff’s clients. His firm was one of the top market makers on Wall Street. His estimated net worth grew to between $200 and $300 million.
He adapted easily to his rise from humble beginnings to immense wealth. He owns estates in Roslyn, N.Y., Montauk, Long Island, a luxury apartment that occupies the entire12th floor on Manhattan's Upper East Side valued at more than $9 million. He also owns mansions in Palm Beach and France and is a member of the Palm Beach Country Club. He also possesses a 55-foot fishing boat named "Bull." After this week’s revelations, it seems appropriate that one of George Carlin’s words you can’t say on TV should have been added to “Bull.” His offices were located in the famous “Lipstick” building in NYC. The building is famous for being shaped like a lipstick case. The building could be considered shaped like a less flattering sexual object, and is more fitting to what Mr. Madoff did to his investors.
Source: Wikipedia
The words on Mr. Madoff’s website now seem gravely ironic.
In an era of faceless organizations ... Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door. Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark.
It is doubtful that the words “high ethical standards” will grace Mr. Madoff’s gravestone. Even as his ponzi scheme was unraveling, his high ethical standards led him to try and distribute his $200 to $300 million to family, friends, and employees before the victims of his crimes could attempt to recover some of their money. It is too soon to conclude what the long term effects of this scandal will have on our financial system. It is likely that the name Bernard Madoff will go down in the history of ignominy with Michael Milken, Ivan Boesky, Ken Lay, Bernie Ebbers, and Dennis Kazlowski as examples of the most disgraceful behavior in the history of our financial markets.
How can a man live such a Big Lie for decades and sleep soundly at night? Aspects of Theodore Dreiser’s classic novel An American Tragedy are evident in this heartrending story. Dreiser’s theme of the desire to rise up socially and financially in modern America holding the very seeds by which such desires are denied is clearly apparent in this tale of woe. The lure of materialism isn't solely the acquisition of wealth and goods, but the attraction such wealth and goods holds over people, often at the expense of other values.
As Mr. Madoff’s success grew, his desire to attain ever higher social status must have led him to take more risk and use illegal means to continue up the social ladder. This overwhelming aspiration for acceptance and accolades in the wealthiest high society of Manhattan and West Palm Beach led this man to risk everything. The result has been a tragedy of epic proportions. This fraud is reminiscent of the 1938 indictment of the respected former President of the NYSE Dick Whitney for looting his firm, friends, relatives, and charities of millions to fund his high society lifestyle. Those who forget the past are condemned to relive it.
The definition of a ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from net revenues generated by the business. Mr. Madoff’s investment firm ponzi scheme was incredibly unsophisticated. He was spectacularly successful at marketing his fund to the ultra-rich Jewish communities in New York and Florida as well as Europeans at ski competitions attended by the rich ruling elite. His fund generated returns of 12% to 13% per year consistently for decades. The fund only had five losing months since 1996.
The market has had dramatic monthly moves over this time. It is a virtual statistical impossibility for an investor to have such a consistent record through bull and bear markets. Madoff refused to provide his clients online access to their accounts. He sent out accounting statements by mail, whereas most hedge funds email statements and allow them to be downloaded via computer for easier analysis by investors. His books were audited by a three-person accounting firm, Friehling & Horowitz, operating out of a 13-by-18 foot location in an office park in New York City’s northern suburbs. A $17 billion fund could not possibly be audited by one partner and one accountant. These facts were all warning signals that many skeptical investment analysts had pointed out years ago to the SEC and in articles in Barron’s.
It was not topnotch undercover investigating that revealed this fraud. The SEC investigated Madoff’s firm twice in the last eight years and found nothing. Madoff’s son-in-law was an SEC official. The SEC has an annual budget in excess of $900 million and has failed miserably in its mission to protect investors. The oversight of hedge funds has been virtually non-existent during the Bush administration. Again, Alan Greenspan, the patron saint of free markets, proved his prescience in 2000 when he campaigned before Congress to not regulate hedge funds. He described hedge funds as
a vibrant trillion-dollar industry dominated by U.S. firms. They are essentially free of government regulation, and I hope they will remain so. Why do we wish to inhibit the pollinating bees of Wall Street?
These killer bees have contributed greatly to the biggest financial destruction of wealth in history. What are the odds of one man being on the wrong side of every major financial debacle in our country in the last ten years? Mr. Greenspan wins the grand prize again.
What brought down Bernie Madoff was not his guilty conscience, but redemptions of $7 billion from investors that overwhelmed his ability to pay them from new funds. The story that he wants everyone to believe is that he was the only one who knew about the fraud. His brother, two sons, niece, and other family members held high level positions in the firm. It is beyond believability that none of these people knew what was going on. A $50 billion fraud can not be perpetuated by one man acting alone. It certainly appears that as a 70 year old man, he is attempting to shield his family members who should also be spending 20 years in prison. If he was truly remorseful, he would have done the world a favor and taken a swan dive off his 12th floor balcony. Instead, he will hire high powered lawyers, using his phony wealth, to extend his life of luxury secluded in his 12th floor hideaway. This is a man who gives Ponzi a bad name.
Ultimately, Mr. Madoff will be judged by his Maker. A special place in Hell awaits him, next to Hitler, Stalin, and Timothy McVeigh. The victims of his crimes are many. The Robert I. Lappin Charitable Foundation has lost its entire $8 million endowment; The North Shore-Long Island Jewish Health System and the Texas-based Julian J. Levitt Foundation have lost millions; the town of Fairfield, Conn. has seen 15 percent of its retiree pension fund totaling $42 million vanish; Maxam Capital Management run by Sandra Manzke has been wiped out; Tremont Capital Management has lost millions; and thousands more have lost their life savings. A personal story told by Minyanville writer Justin Rohrlich about his grandfather addresses the true heart breaking tragedy of this man’s immoral actions.
Last night, it happened to my 88 year-old grandfather Carl. World War II veteran, Captain in the Army, saw combat in the Philippines. His father was a dry-cleaner, his grandfather was a fabric dyer on the Lower East Side at the turn of the century. My granddad was scheduled to go into the invasion of Japan before we dropped the bomb. Instead of going into certain death, he came home and went to the City College of New York on the GI Bill.
Armed with a mathematics degree, my Grandfather eventually landed a job at Neuberger Berman. Became a CFA. Was a director of Tishman Speyer. Helped build Roosevelt Raceway. Ran the pension fund for Price Chopper supermarkets. I had dinner with my grandfather on Wednesday night. Over sushi, he told me about how amazing Bernie Madoff was. This was a common refrain in our conversations. “While the rest of the market is tanking, Madoff is up for the month.” Today, I bought the New York Post on the way to the subway. Bernie Madoff was on the front page. His fund was described as a “Ponzi scheme” that lost $50 billion. My phone rang. It was my mother.
“Your grandfather just lost everything,” she said.
This blackest of marks in investment history will forever alter the faith that investors have in investment managers, financial advisors, mutual funds, and hedge funds. Americans are being buried under a blizzard of lies. This is truly an American Tragedy.
The Sun Will Set For You
"And the shadow of the day
Will embrace the world in grey
And the sun will set for you"
Linkin Park – Shadow of the Day
There is a reason old sayings become old sayings. They have an underlying truth that spans the test of time. Some old sayings that apply to our current economic and investment environment are:
- If it seems too good to be true, it probably is.
- Don’t put all your eggs in one basket.
- The cards are stacked against you.
The Madoff affair illustrates that rich people can be just as gullible and foolish as poor people. In their quest for social status and fitting in with the “smart” money crowd, affluent people all over the country put their life savings into the hands of this criminal. No investor can generate positive returns using the same strategy through all market cycles. Warning bells should have been going off. Diversification is the golden rule of investing. The foolishness of these people putting every dime with one man is maddening. Mr. Madoff’s nickname, “the Jewish T-bill”, is fitting today with T-bills providing negative yields.
Another American Tragedy is in the making. A much bigger Ponzi scheme that will shock every person in America is still operating. It is being conducted by the U.S. government and your elected politician leaders. It is called our National Budget. With most of our spending on automatic pilot, the aging of the baby boom generation will put tremendous strain on our economic system in the coming years.
As you can see, Medicare costs will explode over the next 40 years. The increasing debt will result in interest payments on the debt becoming the largest expenditure in the federal budget. The longer we wait to address this unavoidable train wreck, the more likely it will result in generational war between the baby boomers and younger generations. Mandatory spending for agriculture subsidies, unemployment benefits, civilian and military pensions and health benefits continues to grow. The ponzi aspect of this system is that we continue to pay out benefits by printing money. We are obligated to pay $53 trillion that we do not have. Social Security has run at a surplus since its inception. The money is not in some lockbox. Your trustworthy leaders have spent all of the surpluses ever generated by Social Security to keep the ponzi scheme going.
click to enlarge
The following chart proves beyond a shadow of a doubt that we cannot use the Republican Big Lie of growing our way out of this problem. As entitlements and net interest grow, discretionary spending gets squeezed. Non-defense programs, which include activities related to children, transportation infrastructure, education, training and research that should promote future economic growth and prosperity, are crowded out. We are forced to pay no heed to investments in the future in order to honor commitments made decades ago. The short term focus of Washington politicians has ruined our fiscal future. Children don’t vote, and younger people are less involved in the political process. As a result, the political gain from immediate increases in spending or reductions in taxes outweighs the eventual economic benefits of more politically costly but fiscally responsible choices. This is a criminal and immoral act upon our future generations. President-elect Obama is about to embark on the largest unfunded expenditure program in the history of our country. This will move us closer to the point of no return where the ponzi scheme implodes.
The Government Accountability Office provided a troubling deficit forecast in January 2008 which showed we would reach a fiscal deficit of $1 trillion in 2016. Democrats and Republicans have proven that when they truly work together they can accomplish anything. The $1 trillion deficit will be reached 7 years early, in 2009. Adding enormous new spending programs is like being trapped in a deep hole and deciding to dig deeper. Something called shared sacrifice for the benefit of future generations is essential to avoid another American Tragedy. Shared sacrifice is something that hasn’t been asked of U.S. citizens since World War II. They are known as the Greatest Generation. Now is time for the Next Great Generation.
Bernie Madoff’s ponzi scheme came crashing down when investors requested their money back and no one was willing to give him the funds to pay them off. The American ponzi scheme will come crashing down when our foreign creditors decide to no longer fund our foolish ventures. Foreigners own more than 50% of our existing government debt and have been buying 70% of our new issuances. The Treasury bills and bonds are paying less than 2.5%. Our unfunded liability of $53 trillion increases by $3 trillion per year. Our National Debt exceeds $10.6 trillion. In 2009 and 2010 we will run annual deficits in excess of $1 trillion. The Federal Reserve is printing dollars as fast as humanly possible. Every dollar printed makes the previous dollars less valuable. As our currency is debased, it will eventually collapse. Foreigners will refuse to pour more money down this rat hole. The biggest ponzi scheme in the history of the world will be over.
Friends ask me why I’m such a pessimist. These questions made me consider what I thought would happen over the last few years. I thought that the housing market would decline 10% to 20%. It has declined 30% to 50%. I thought the stock market could decline 30%. It has declined 40% to 50%. I thought our deficits due to wars could reach $500 billion. The deficits will easily exceed $1 trillion. I thought gold might reach $600 an ounce. It reached $1,000 an ounce and is poised to go much higher. All of my pessimistic projections have been surpassed to the downside. Examining Alexander Tyler’s stages of democracy, I am optimistic we can avoid the final stage of Dependence back into Bondage. It seems inconceivable to me that our country could fall under the rule of a dictator. But in the midst of a total economic collapse, I guess anything is possible. Let’s hope my worst fears are not realized. If enough Americans seek the truth, the Big Lies can be exposed before it is too late. Truth is the mortal enemy of the lie.
Disclosure: I have no positions in any stocks mentioned.
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This article has 36 comments:
As you all know the world is throwing stones at the US, and you call them terrorists and criminals. We always believed that the US was the criminal.
If the US want to get back to their reputation Bush must stand trial, like you did it with Sadam. The war has apparently killed over 50.000 civilians, in the name of peace, was no weapons of mass destruction, and much more people killed than by Sadam. Or was it really weapons and the oil industry as many people believed.
Bush deserves the same treatment as Sadam. One way to stop it.
I did look at Michael Moors films, and it seems he was right after all, when you where still telling the world how stupid they are and giving us lessons on how to do big business.
One thing is for sure, US people where never treated with great friendship here. It surely won't be better now, and if one US person tells me once more how things work I will kick him in the Ass.
This is how you stop the Ponzi scheme the next way.
when health care grows to 100% of GNP it's all over. compare the two growth curves.
> jack
(Grandma Got Run Over By a Reindeer)
WilliamBanzai7
(chorus)
Palm Beach got run over by Bernie Madoff's Ponzi reindeer
Just two weeks before Christmas Eve
You can say there's no such thing as a Wall Street scamster
But as for we in America, we believe
He'd been chalking up bogus Alpha
So the SEC said he had to go
And as he waltzed out of his lair on Third Avenue
Defiant as he was, he said, "Positive returns, hell no!"
When they woke up yesterday morning
It was clear the Palm Beach clique had been attacked
May as well stick a note to their own foreheads
Saying, "Oh Lord, please give us our money back!!"
(repeat chorus)
Now we're all so proud of our regulators
They've been taking this so well
See them crammed in Madoff's office
Knowing that SEC Chairman Cox will soon be sent to pink slip h-e-l-l
It won't be a Merry Christmas thanks to Madoff
Nor a Happy Hannukah as well
And we just can't help but wonder
Dosn't all of Wall Street have that pungent Ponzi smell?
(repeat chorus)
Now that Madoff's books are on the table
See all the other asset managers dance a jig (Ah!)
And the bogus billion dollar earnings
That not surprisingly had been rigged!
Be forewarned all you rich country club investors
Better watch out for yourselves!
You should not be dreaming of serial Alpha
With hedge fund goofs who play golf better than yourselves!
(repeat chorus)
Maybe we should stick to economic and financial themes, don't you think? Let the moral conclusions be brought about by each one privately.
The Federal Reserve bank, whose private shareholders like Goldman Sachs, Lehman et al, just ripped off Americans off or another $800 BILLION dollars.
Funny how i never hear much shrieking and crying over this, but over the poor little rich folks...how ironic.
I found, being the typical foolish and half educated American that I am, the arguments astonishing and dismaying. But convincing, so convincing.
So, it is getting to be the time, my countrymen, to embrace the good and ancient advice, "In a democracy, bleat with the sheep. In a tyranny, howl with the wolves."
Always remember that courage is the basis for all worldly virtue.
Those with the keen and invaluable skills to acknowledge, assess, distill and clarify are doing us all a great service and are requested to continue this service with all the enthusiasm and robustness that they can possibly muster. The author of this artcle leads the way in this regard, and I continue to be grateful.
There is so much already baked into the cake, that years of unnecessary suffering are unavoidable, but the goal of establishing effective and timely accountability must go on and be greatly intensified and James Quinn continues to carry that banner forward with great distinction and high honor.
A century of progress is going to be "reset" in a matter of 9 years starting with the tech meltdown of year 2000 and now the housing meltdown of 2006 as catalysts to a host of mistakes committed during the last few decades (from years 1980 to 2000 specifically when the stock markets going straight up dramatically from 1,000 to 12,000 in a very short period of time with practically no major correction that was necessary in order to uncover major flaws that can cripple the economy during the growth phase).
Danger is if this correction become systemic and the whole world got trapped in deflation and/or depression that can last for decades.
The next 100 years of rally should be bigger and more progressive and less immature and more cautious than the last 100 years to pay up for the pain and suffering this "once in a century" global destruction of wealth is going to inflict to many people around the world.
I, for one, do not object to moral and ethical issues in these posts. I think they are appropriate for discussion (as opposed to religious beliefs and statements of political ideology). I do not think keeping opinions about moral and ethical issues private offer any chance of improving the human condition.
On Dec 16 10:21 AM Flav wrote:
> "Ultimately, Mr. Madoff will be judged by his Maker. A special place
> in Hell awaits him, next to Hitler, Stalin, and Timothy McVeigh.
> The victims of his crimes are many."
> Maybe we should stick to economic and financial themes, don't you
> think? Let the moral conclusions be brought about by each one privately.
>
>
I look forward to every article you publish. This is one of the best.
Now, let me criticize what you have said. You lay out an eloquent review of how we got to where we are. You have an accurate assessment of the current condition. You say at the end that you are optimistic (incredible after what preceeded). The only basis for optimism based on what you have written is the fuzzy concept of hope that "...enough Americans seek the truth".
Such an eloquent article deserves a better conclusion. Maybe what this really needs is a Part II, defining some truths and the implementation of truth that can reconstitute our economy and society. Otherwise, we are left with the thought that the only solution is destruction of everything and starting over from scratch. Now let me put it my "hope" that we will not come to total destruction.
www.snopes.com/politic...
Interesting anaysis of history though, maybe suffering a bit from confirmation bias.
And I too honor your right to inject moral judgements. To me it just takes away from your otherwise convincing argument.
As far as the appropriateness of introducing morality onto the site is concerned, I agree entirely with those who have commented that its absence from the heart of our banking systems is one of the root causes of the current situation. Lack of morality in the financial system has stuffed us - that's a fact, and of course it deserves comment; lack of morality in the political sytem is in the process of stuffing us even more - that's an opinion, but no apologies for proffering it.
I'd also like to comment on the remarks made above by our friend from Austria. Whilst I share his feelings with regard to Iraq, Bush, and the constant lecturing we in Europe have been subjected to about the supposed weaknesses of our economic models relative to America's 'purer' form of capitalism, I think a longer perspective is necessary. Being a 'Boomer' who grew up in Europe aware of a very dominant America, I could see its flaws (e.g., Vietnam, Nixon generally and Watergate in particular, Reagan's facile economics, the constant desire to impose 'democracy' on people who were doing fine by themselves, and more generally a rather quaint belief in the inevitability of happy Hollywood endings to any venture). But I was also well aware of how much we owed to its dynamism and its promotion of freedom. Having lived in both Berlin and Korea under the direct protection of young American soldiers, I know very well the size of debt the rest of the world owes to the United States. My own personal reaction to what is going on is not anger at what America has perpetrated - because, let's face it, we've all got crooked bankers and politicians - it is sadness that such a great country with on the whole such fine people should find themselves in the unmitigated mess they're in. I truly hope that my early impression of the incoming administration is wrong; from my side of the Atlantic it looks like it's shaping up as business as usual, albeit with a fresh rhetorical spin. America, for all she has given the world, deserves much better than that at this utterly critical juncture in her history.
Forget for a minute that hedge funds are speculative, geniouses. They're also UNREGULATED. The easiest place for a crook to hide is behind a unregulated entity. Promises of ultra superior returns should have been the first sign ... STAY AWAY!!!! This is not the first and certainly won't be the l;ast hedge fund to bilk hard working folks' savings dry.
What this slug did was unforgiveable ... but what 90% of his customers did was just plain stupid.
This country’s pattern of civil and fiscal decline echoes the warnings issued by David Walker, of the Peterson Foundation, an organization that has been trying to educate America about the fiscal emergency we face due to reckless borrowing.
As noted in Barron's this week:
Walker compares our nation’s fiscal morass to the one that helped topple the Roman Empire. In one speech he argued, “Rome fell for at least four reasons, and please listen carefully: A decline in moral values and political civility at home, an overconfident and overextended military, fiscal irresponsibility by the central government and inability to control one’s borders. Does that sound familiar?”
Is this democracy at its worst with a betrayal by our elected leaders, or is it a failure equally shared by both the voters and its elected leaders?
I am 47 years old, the tail end of the God-Damned “Baby Boomers” – 75+% of whom deserve to rot in Hell along with Bernie Madoff. While I am technically part of this group of selfish babies, in reality I am not. For most of my adult life, I have felt like the end person in a generational game of crack-the-whip. Too young to make a difference, but old enough to see what is coming, I am ineffective and can only watch helplessly as my 'elders' take and take and promise and take some more.
You don't know the frustration I feel when I KNOW that Social Security is a cruel joke perpetuated on me and my children, when the AARP-led masses continue to vote for MORE and MORE benefits, knowing full well that they won't be around when the shit hits the fan. Same for the latest batch of politicians of a similar age.
The good news is that when I read an article like this - one with ideas that I have been trying to articulate for years to people who only seem to look at me with a contemptuous smirk - I know that there are others out there who 'get it'.
As a libertarian leaning independent who voted for Obama, I can only hope that he is the man that I think he is and will become, that he also 'gets it'.
Bravo for distilling where we have been and where we are going into such a clear, concise article. I am not a praying man, but Lord, have mercy on us all.
If we shut down the Fed, arrest Bernanke, Greenspan and their cronies for high treason, Walla!... the world markets will take heart and rebound.
St. Pope Pius V, pray for us!
On Dec 16 08:13 AM Vienna wrote:
> I wonder if Bush will also receive the treatment Clinton got for
> what we heard was a blow job.
>
> As you all know the world is throwing stones at the US, and you call
> them terrorists and criminals. We always believed that the US was
> the criminal.
>
> If the US want to get back to their reputation Bush must stand trial,
> like you did it with Sadam. The war has apparently killed over 50.000
> civilians, in the name of peace, was no weapons of mass destruction,
> and much more people killed than by Sadam. Or was it really weapons
> and the oil industry as many people believed.
>
> Bush deserves the same treatment as Sadam. One way to stop it.<br/>
>
> I did look at Michael Moors films, and it seems he was right after
> all, when you where still telling the world how stupid they are and
> giving us lessons on how to do big business.
>
> One thing is for sure, US people where never treated with great friendship
> here. It surely won't be better now, and if one US person tells me
> once more how things work I will kick him in the Ass.
>
> This is how you stop the Ponzi scheme the next way.
>
Great Society - LBJ, Democrat
War on Poverty - LBJ, Democrat
Privatize Retirement Accounts - Republicans.
Privatize health care - Republicans.
Redraw that CBO graph without those Dem programs and see how it looks.
After more and more sheeple realize that the our ship the Titanic is sinking and there are not enough life boats, the proverbial shit "shall" hit the fan...
Schneidehouse ... I can relate to the "contemptuous smirk"...
The thing is Mr Quinn, each one of us (human beings) have a different conception on what regards to morality. Maybe some person believes that though Madoff did scam his investors, he should be punished, but in a different way than "a place in hell with Stalin". Maybe other person (like me) thinks that in an economics and financial blog, that kind of statements are a little out of place, and involve subjects that are far from the main objective of the blog.
Another quote from Mr Quinn: "I'll stick to whatever themes I want to discuss. You are free not to read my articles"
Of course, you can (and i think you will) discuss everything you want. I was just suggesting that maybe, asserting that divine punishment will be imposed to someone is a little out of order in a financial blog.
Again, of course i'm free not to read your articles; as a matter of fact, i won't do it. The lack of economic subtstance of them are a convincing proof that you're an accountant (hope a good one) and not an economist
On Dec 16 11:54 AM Toddh5220 wrote:
> I read your article, and I wonder why the Federal Government just
> doesn't get it. Why is it that we continue to rely on a system of
> raising money, that simply DOES NOT work? Warren Buffet was straight
> to the point in a recent interview; there is a fundamental flaw in
> a tax system that allows me to pay less in income taxes, than my
> $60,000 a year assistant. Why is it that the government refuses to
> look at different ways of collecting taxes, which are equal, and
> would allow funds to flow into the system much easier, like say a
> federal sales tax in lieu of the income tax? In today's environment
> it would do two things. Fist by giving back the income tax, it would
> stimulate spending and investing (probably more spending, based on
> our current habits). Second, it would create equality amongst the
> income classes, and fund the system equally. Why is this so difficult
> for our leaders to see? Or do we just not want to see it?
Oh I know. The selfishness of the borrow-and-spend baby boomer generation and the so-called greatest generation is legendary among their children. Since old folks are more likely to vote than young people, and because this generation has always acted selfishly in the past, we can expect massive tax increases as soon as they retire, or massive inflation if the taxes don't pass.
Agustus wrote:
"Redraw that CBO graph without those Dem programs and see how it looks."
That big yellow lemon wedge is largely the result of Republican Bush and the Republican congress passing the prescription drug benefit, in an obvious ploy to get senior citizen votes. That big purple wedge - "interest" will be paid on the trillions in national debt built up by their wars in Iraq and Afghanistan and their thousands of pork-barrel bridge-to-nowhere projects. Both parties spend like drunken sailors, but Bush maxed out the credit card. Look at a national debt chart sometime and tell me who was in charge when it went exponential.
On Dec 16 10:49 PM shemp wrote:
> One way to insure Madoff receives his comeuppance is to get the NYPD
> "narc" squad involved and have them plant some crack on him. That's
> a guarantee 20 years without parole!!!
On Dec 17 05:31 AM O-B-WON wrote:
> Oustanding article..
>
> After more and more sheeple realize that the our ship the Titanic
> is sinking and there are not enough life boats, the proverbial shit
> "shall" hit the fan...
>
> Schneidehouse ... I can relate to the "contemptuous smirk"... <br/>
>
Our system depends on increased everything, which is of course unsustainable. More people, more oil, more food, more water, etc.
I say go with the flow. Some big calamity will happen soon enough, and from the ashes, a new capitalist Ponzi scheme will be born with lots of room to expand once again.
This is simply not true for the individual investor. Investors can now own either side of the market using long or short ETF's.
I really hate to say this, but this is really pretty obvious.
Clark Jenkins
FishGoneBad.com
About Madoff - what idiot puts all their eggs in one basket?