How many more Bernie Madoff's are there?

Danthus · 9 Oct 2011 at 23:30

I was just watching a program about Bernie Madoff and his Ponzi scheme. What really struck me was how the scheme was partly uncovered, individuals and funds wanting to withdraw their money from Madoff as a result of the financial crisis.

It got me thinking and I wonder just how many more of these schemes are out there?

Xordium · 9 Oct 2011 at 23:32

OldCoals said:
I was just watching a program about Bernie Madoff and his Ponzi scheme. What really struck me was how the scheme was partly uncovered, individuals and funds wanting to withdraw their money from Madoff as a result of the financial crisis.

It got me thinking and I wonder just how many more of these schemes are out there?

In before Dolph posts about public sector pensions.

StriderX · 9 Oct 2011 at 23:35

Most things have turned in to ponzi schemes, people just got bored of noticing them.

Dolph · 9 Oct 2011 at 23:45

ignoring maustin's attempt to poison the well for a moment, national insurance and public sector pensions both qualify under the definition of a ponzi scheme due to the failure to have any form of investment fund and instead pay previous investors from the money given by current investors....

MagicBoy · 9 Oct 2011 at 23:46

Not the LGPS. It's a funded scheme.

Dolph · 9 Oct 2011 at 23:48

MagicBoy said:
Not the LGPS. It's a funded scheme.

true, but the lgps is the exception, not the rule.

MagicBoy · 9 Oct 2011 at 23:50

Dolph said:
true, but the lgps is the exception, not the rule.

Fair point. Reminds me, I've not had my strike ballot yet.

Anyway back on topic, wasn't there some ponzi scheme scumbag that was schmoozing the rich and famous in London and got locked up last week?

Danthus · 10 Oct 2011 at 00:15

It seems to me, the more I read, the whole financial system is one great big elaborate Ponzi scheme.

DBT85 · 10 Oct 2011 at 01:36

What annoys me about the Madoff thing is all the people left with dick all savings while the first x amount of people who withdrew before he ran out of cash sit there with years of fake interest.

Was that the CNBC show you saw?

dowie · 10 Oct 2011 at 02:16

OldCoals said:
I was just watching a program about Bernie Madoff and his Ponzi scheme. What really struck me was how the scheme was partly uncovered, individuals and funds wanting to withdraw their money from Madoff as a result of the financial crisis.

It got me thinking and I wonder just how many more of these schemes are out there

I'm not sure that there is another illegal ponzi scheme as large and audacious as Maddoff's tis possible though I guess.

If we're talking in the general sense then the whole industry is full of scammers and jokers.... seriously.

panthro · 10 Oct 2011 at 03:56

Regarding ponzi schemes, I have a question. A friend (just about) of mine continuously posts drivel about his conspiracy theories; I'm sure you know the type. He is always stating that all banks are one big ponzi scheme. How true is this? I mean if a large percentage of customers wanted to withdraw their money at the same time, could the bank pay it all? Or would it be because they had the money tied up in investments and funds? If they had the money out of these investments, would they be able to pay?

jumpy · 10 Oct 2011 at 04:29

Would they be able to pay? - Not a chance.
Would they try to pay? - Perhaps.

Danthus · 10 Oct 2011 at 07:20

jumpy said:
Would they be able to pay? - Not a chance.
Would they try to pay? - Perhaps.

And that is exactly what happened with Madoff.

Dolph · 10 Oct 2011 at 07:29

panthro said:
Regarding ponzi schemes, I have a question. A friend (just about) of mine continuously posts drivel about his conspiracy theories; I'm sure you know the type. He is always stating that all banks are one big ponzi scheme. How true is this? I mean if a large percentage of customers wanted to withdraw their money at the same time, could the bank pay it all? Or would it be because they had the money tied up in investments and funds? If they had the money out of these investments, would they be able to pay?

Banking isn't a ponzi scheme, a ponzi scheme has a specific definition that banking doesn't fulfill.

However, your friend does have somewhat of a point in that, in that if everyone tried to withdraw their money all at once from a large bank, it would cause massive problems within the system because of liquidity issues.

Fractional reserve banking refers to the lending side of the business, not the banking side, so it isn't that the banks don't have the capital, it's often just that it is not liquid.

Danthus · 10 Oct 2011 at 07:54

If it looks like a Ponzi scheme, sounds like a Ponzi scheme isn't it a Ponzi scheme?

Meridian · 10 Oct 2011 at 07:59

Dolph said:
Banking isn't a ponzi scheme, a ponzi scheme has a specific definition that banking doesn't fulfill.

And neither does the PCSPS and most other public sector pensions, but that's never stopped you. The PSPCS is paid into, and funded out of, the governments general coffers, just as private sector pensions are moved through the general funds of pension companies. In neither case is the incoming pension contributions the sole source of income, so neither is a Ponzi scheme.

M

jas72 · 10 Oct 2011 at 08:14

OldCoals said:
I was just watching a program about Bernie Madoff and his Ponzi scheme. What really struck me was how the scheme was partly uncovered, individuals and funds wanting to withdraw their money from Madoff as a result of the financial crisis.

It got me thinking and I wonder just how many more of these schemes are out there?

Pretty much all financial markets are based on this scheme all pensions are based on the fact that shares will go up. I'm still recieveing post providing me with opportunities to make cash. Before they used to say over the last 5 years we've made X amount profit.

Now they say over the last 15 year we've made X amount profit.

Even had one in the post friday stating their record over the last 30 years :eek:

Good chance in 30 years from now I'd be dead so not really exciting investment for me. Also when you factor inflation into their predictions you actually gain nothing.

Xordium · 10 Oct 2011 at 08:48

OldCoals said:
If it looks like a Ponzi scheme, sounds like a Ponzi scheme isn't it a Ponzi scheme?

Yes if it suits your agenda = public sector pension.
No if it does not suit your agenda = banking.

In reality neither really fulfil the criteria, are equally ill-thought out and poorly implemented in design. It's just Dolph's very blinkered view: where anything that does not fit his dogma is conveniently ignored, where evidence is asked for but all that is offered is subjective opinion, where the world is painted in shades of pure black and white, where the Tories are always right and Labour is always wrong. Rather than the real world where everything is a confusing muddle of problems which neither side of the political spectrum address well, where things are never really as cut and dry as it seems, where there are no real true heroes and no true bad-guys, just a bunch of people out to promote their own agenda doing exactly what their DNA designed them to and then people act shocked.

Freakbro · 10 Oct 2011 at 10:56

maustin said:
In before Dolph posts about public sector pensions.

Dolph said:
national insurance and public sector pensions both qualify under the definition of a ponzi scheme

maustin said:
Yes if it suits your agenda = public sector pension.
No if it does not suit your agenda = banking.

In reality neither really fulfil the criteria, are equally ill-thought out and poorly implemented in design. It's just Dolph's very blinkered view: where anything that does not fit his dogma is conveniently ignored, where evidence is asked for but all that is offered is subjective opinion, where the world is painted in shades of pure black and white, where the Tories are always right and Labour is always wrong. Rather than the real world where everything is a confusing muddle of problems which neither side of the political spectrum address well, where things are never really as cut and dry as it seems, where there are no real true heroes and no true bad-guys, just a bunch of people out to promote their own agenda doing exactly what their DNA designed them to and then people act shocked.

Nice post. The bit in bold is what I try and rally against. I think Dolph's very statistical based analytical view of the world just doesn't seem to cope very well with the ambiguities and general chaotic structure of how the real world actually works rather than how the equations say it should work.

I just shudder every time a discussion emphasises "efficiency" as the main goal we need to aim for. I quite enjoyed the program on BBC4, All Watched over by the machines of loving grace. Basically, how we now seem to have a distorted view of the world because of how computers tell us it should work.

dowie · 10 Oct 2011 at 11:48

OldCoals said:
It seems to me, the more I read, the whole financial system is one great big elaborate Ponzi scheme.

Nah the bank has assets to match it's liabilities. Problems arise can arise with liquidity though, there tend to be more short term liabilities and more longer duration assets (mortgages etc...). Current accounts could be considered long term to an extent but problems arise when relying on external funding - i.e. relying too much on short term deposits in order to lend mortgages as per a certain British bank.