Tuesday, December 3, 2013

How long should I invest in a ponzi scheme?

I’ve often wondered this as it pertains to the current ponzi scheme I’m invested in.  If you asked anybody how long you should invest in a ponzi scheme they’d tell you, if they like you that is, not long at all.  

For the uninitiated the following is from Wikipedia on what a ponzi scheme is.

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the high returns requires an ever-increasing flow of money from new investors to sustain the scheme.

The scheme is named after Charles Ponzi,[2] who became notorious for using the technique in 1920.[3]Ponzi did not invent the scheme (for example, Charles Dickens' 1844 novel Martin Chuzzlewit and 1857 novel Little Dorrit each described such a scheme),[4] but his operation took in so much money that it was the first to become known throughout the United States. Ponzi's original scheme was based on thearbitrage of international reply coupons for postage stamps; however, he soon diverted investors' money to make payments to earlier investors and himself.

Here is the guy who it is named after.




I have a new friend at work.  Lately I’ve shared with him some of my views on the economy.  Surprisingly he actually picked up two books I mentioned that may be of interest to him and he is reading them.  A while back, before the books, I sent him a link about how the dollar is mathematically going to collapse.  Here is the video.  http://www.youtube.com/watch?v=iFDe5kUUyT0  Just cause I thought it summed up the video well I also sent this video to another friend of mine and the following is his response just as a testament to how crazy he thought the link was.  This is a direct copy/quote by the way…

“DUDE......... is that really what is going on?  How the? What the? Why are we? Bakjdf;adso;fihaoshgoasdnflsjfoaoenflamflkamsdofjaojfmwagmawg!!!!!! **** saokjgo *****
How in the world did that happen?  Is this the result of going off the gold standard?  That video was amazing..... that guy knows exactly what is going on. I am surprised someone hasn't assassinated him yet for messing with their system.”

Just to hit it home that the above video is indeed a ponzi scheme the following will be a quote from Bernie Maddoff, greatest ponzi scheme artist in history.  Stats on Bernie..."admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S. history, The amount missing from client accounts, including fabricated gains, was almost$65 billion.[19] The court-appointed trustee estimated actual losses to investors of $18 billion.[18]On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum allowed."  

Now for his quote, "The SEC,looks terrible in this thing. It’s unbelievable, Goldman … no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”

This is found in the New Yorker magazine here, http://nymag.com/news/features/berniemadoff-2011-3/.  

So here we have the largest known ponzi scheme operator in the history of the world, who KNOWS ponzi schemes when he sees one, calling the whole government a ponzi scheme.  He rightly throws Goldman in there as is seen in the video that they, and their too big to fail comrades, are complicit in running the scheme that will eventually implode.

Back to my new friend.  He watched the video and then picked up these two books,





which I’d highly recommend to anybody interested in learning more in depth about our current ponzi scheme.  The first one is shorter and covers much of the same material in the second.  I enjoyed the second one thoroughly because it goes into the history and has many more crazy stories in it.  

My friend has been sharing some of the things he’s read in the first book and I’ve been able to expound upon some of the things in there.  One of the things I found out about my friend is that he sells diamonds to people and high quality watches.  He’s even sent me some things/articles about how the LDS church is also maneuvering for the coming collapse and doing so by diversifying into productive hard assets.  The following link is an example of just such a thing.  http://www.ksl.com/?sid=27615904

What had been interesting to see with my new friend is that he would ask me about prices of silver/gold and where I thought they could go.  I’d dutifully tell him where I thought they might go.  The last time he asked me about it though I responded by saying that I prefer to measure things in terms of other things and not by the measure of the US dollar, because as the crazy video showed there will come a day when it literally doesn’t exist anymore as it is a ponzi scheme.  I then asked him how do you measure the worth of an ounce of gold or silver in dollars, when dollars won’t be able to buy one ounce of either?  

After I’d asked that I went over to talk to him one day and he had built a spreadsheet measuring silver and gold vs home values and the stock market.  Now that makes more sense to me.  I’ll have to go back and ask him if he’s found the historical values for those things and see what assets are overvalued and which are undervalued.

Moral of the story is I (we) should feel free to invest in the ponzi scheme as long as I'm comfortable with potentially losing all the chips I had in on that game.  The getting is good when in the scheme because you get great returns.  This would be like being invested in the stock market right now or buying stuff at Walmart made in China.  Currently it is legit to be invested in the scheme.  I err on the side of "beat the rush, panic now".


No comments:

Post a Comment