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Posts Tagged ‘Ponzi scheme’

This is a follow up of the previous article

Is the National Debt of the United States Debt Financed Based on a Ponzi Scheme?

What really is the difference of the U.S. economy and the Madoff controversy. Is the U.S. economy really a Ponzi scheme or is it not a Ponzi scheme since the United States does not have an intent to defraud its citizens? But are both instances really using the same scheme?

Try listening intently from 1:34 in the video. Max Keiser says that what keeps the fund growing in the U.S. is 25 years of growth in the economy,  but as the economy contracts the new money needed to sustain the scheme disappears. He then continues that this is the reason why the Madoff Ponzi scheme collapsed. 

I can imagine that there are so many other institutions using this system with or without good intentions. And I can imagine a number of them collapsing. 

Is our economic system tolerant of even a mild recession or should we always ‘sound the alarm’ the moment the economy contracts?

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This film clip is related to The Greater Fool Theory: Bernard Madoff’s Ponzi Scam.

What is a “Ponzi scheme”

http://en.wikipedia.org/wiki/Ponzi_scheme

 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 the profit from any realbusiness. It is named after Charles Ponzi[1]. The term “Ponzi scheme” is used primarily in the United States, while other English-speaking countries do not distinguish in colloquial speech between this scheme and other forms of pyramid scheme[2].

The scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises (and pays) requires an ever-increasing flow of money from investors in order to keep the scheme going.

Now the juicy part of this video is when Peter Schiff says that the national debt of the United States is financed based on a Ponzi scheme. Just check out his statements starting 6:38 of the video. But to really appreciated the way it unravels, watch it from beginning to end.

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