Pyramid Schemes Are as American as Apple Pie (President Ulysses Grant was a past victim)

By his own admission, Bernard Madoff has catapulted himself into the major leagues of Wall Street fraud. That is no small accomplishment, given some of the more famous frauds of the past. But a $50 billion Ponzi scheme is no small thing.

To be sure, the number of still unanswered questions is huge. How could a Ponzi scheme last as long as this one and reach so fantastic a sum? Why didn't he take the money and decamp to some extradition-free country instead of admitting the fraud and waiting for the cops to show up? And, of course, how could so many sophisticated people be fooled for so long by an operation that, at least in retrospect, had red flags all over it?

Ponzi schemes, where early investors are paid dividends out of the money put in by later investors, usually last only a few months. Charles Ponzi's eponymous scheme in 1919 started with just 16 investors and $870. Six months later, there were 20,000 investors who had put in $10,000,000. Ten million was a whole lot of money in 1919 and when it attracted attention, Ponzi soon found himself with a five-year jail term and the dubious honor of adding his name to the English language for a type of fraud he hadn't even invented.

Most Ponzi schemes are penny-ante affairs, such as chain letters, that bilk their victims out of a few dollars each. Even Charles Ponzi's investors put in an average of only $500 each. But Wall Street's most famous Ponzi scheme was, like the present one, no small affair. And its principal victim was a man few associate with Wall Street at all -- Ulysses S. Grant.

No, they’re not “American as apple pie.” That’s like saying armed robbery is patriotic. Of course it happens a lot, but try to understand the distinction between right and wrong. Apple pie—and everything else normally associated with America—doesn’t have to be hidden from view you moron.

Unfortunately I will have to call this author stupid.

We have had several scams come through this area over the years.
First it was soap. You bought large amounts of overpriced soap and brought in several others to buy and sell soap, you kept the money invested by those, then they were to bring in more investors to sell soap.

Then it was worm farms.

Then Emu oil.

Then the “airplane”. You bought a “ticket” on the “airplane” and worked your way up to being “pilot” by bringing in others as “paid passengers”. You “bail out” and they advance,then bring in others who then work their way up to being “pilot”.

I mentioned this one in my bible class and several people jumped up to verify it was “legal” and they knew of their friends who made lots of money on “the airplane”.

there was no convincing them otherwise.

Then there is Social Security. After the first “investor” retires it requires three workers to support him. When those three retire it requires nine workers to support those three. When those nine retire it requires twenty seven workers to support them. When those twenty seven retire it requires eighty one to support them. When those eighty one retire it requires 243 workers to support them.

Now, think how many workers it will require to support just TEN MILLION retires, thirty million workers. Those thirty million will require 90 million to support them and they will require 270 million and they will require 810 million.

There are not that many people in the US so the scam will collapse leaving the elderly out in the cold.

Its not a Ponzi scheme. Its just a tax.

Theres no trust fund. Thats just an accounting fiction. It was always meant to be funded pay-as-you-go.

When the time comes when the total of taxes+SS+Medicare contributions is more insufficient than usual, benefits will get cut.

How could a Ponzi scheme last as long as this one and reach so fantastic a sum? Why didn't he take the money and decamp to some extradition-free country instead of admitting the fraud and waiting for the cops to show up? And, of course, how could so many sophisticated people be fooled for so long by an operation that, at least in retrospect, had red flags all over it?

Terrific questions.

The article answers none of them.

The whole thing really p***es me off.

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