Peacenik doesn't have any sympathy for Bernie Madoff. And Peacenik doesnt' have any sympathy for some of the people who lost money with Bernie. Investments too good to be true, probably aren't true.
Peacenik has said it before. Wall St. is a casino. Any money anyone invests in Wall St. is gambling money. The laws governing Wall St. are not being enforced. The game is rigged. It is laughable that this huge Ponzi scheme has resulted in only one prosecution. Why aren't the laws and regulations being enforced? Because the guilty have bribed and bought the regulators. And also because the whole of Wall St. has become a Ponzi scheme. To regulate it is to blow down the house of cards. But the house of cards is coming down anyways. Peacenik says cash out and hunker down.
Don't get Madoff, get even: Bernie Madoff may deserve his 150-year jail sentence – but he wasn't the biggest crook on Wall Street
by Richard Adams
Everyone knew that Bernie Madoff was going down – since he had already pleaded guilty to running a fake investment scheme worth between $65bn and $171bn. So there was none of the drama that accompanied fraud trials like that of Jeffrey Skilling, who maintained his innocence even after he was convicted for his part in the collapse of Enron. The only question today was how long inside Madoff would get. His lawyers suggested – in a spirit of optimism only paid advocates could muster – that Madoff deserved just 12 years in jail. The judge gave him the maximum 150. So, with time off for good behaviour, Bernie will be out in time to celebrate his 146th birthday in 2084.
In other words, barring a judicial miracle, the 71-year-old Madoff will spend the rest of his life behind bars. In terms of discouraging others from selling their souls in return for enjoying 20 years of wealth and prestige, Madoff's sentence is a good thing. And it is tempting to indulge in schadenfreude at Madoff's expense, after he had indulged in riches and privilege at the expense of others. But the worst result of Madoff's life sentence is that he becomes the face of the circa-2008 financial tsunami – and that he doesn't deserve, even if he deserves to rot behind bars.
Read on...
Showing posts with label ponzi schemes. Show all posts
Showing posts with label ponzi schemes. Show all posts
3/12/09
Surviving the Great Collapse
by Robert Kuttner
This economic crisis doesn't have to be a second Great Depression - if government does nearly everything right, and soon. But if government doesn't do more, and fast, this could be worse than the 1930s. Why? Three big reasons:
Finance: A Doomsday Machine. The financial system is in far worse shape than it was when the stock market crashed in October 1929. In the 1920s, there was a stock market bubble, mainly because people could play the market "on margin," borrowing to invest in stocks. There were also scams like the original Mr. Ponzi's. Like in the present decade, the Federal Reserve helped to enable the game, with low interest rates and few rules.
But today, thanks to "securitization" of loans and the ability of insiders to create exotic and unfathomable financial instruments, the speculative system makes buying stocks on margin look like child's play. In the aftermath of the crash of 2008, the process of sorting it all out and getting banks functioning again is something that markets simply cannot do.
Read on...
After Punditman's interesting post about Ann Rand yesterday, Peacenik feels almost crass to be bringing up the collapse again. When this is all over historians may view Ann Rand as the 12 Monkeys of the present crisis. (12 Monkeys reference too obscure to explain. Rent the movie)
Today the Globe and Mail headlines "IMF dashes hope of short recession." Chrysler has threatened to pull out of Canada. Nortel may be breaking up. Its funny how quickly our lovely corporate citizens turn to threats as soon as the going gets tough. AIG: save us or we'll destroy the world. GM: save us or we'll be back in the stoneages. And on and on. Reading about Ann Rand and how Alan Greenspan was part of her "collective" made Peacenik want to ralph, again. And reading that Bernie Madoff is off to jail does not make things right. There are many more Benie Madoffs who should be in jail. And there are many more Ann Rand devotees pulling the strings in government and corporate America.
This economic crisis doesn't have to be a second Great Depression - if government does nearly everything right, and soon. But if government doesn't do more, and fast, this could be worse than the 1930s. Why? Three big reasons:
Finance: A Doomsday Machine. The financial system is in far worse shape than it was when the stock market crashed in October 1929. In the 1920s, there was a stock market bubble, mainly because people could play the market "on margin," borrowing to invest in stocks. There were also scams like the original Mr. Ponzi's. Like in the present decade, the Federal Reserve helped to enable the game, with low interest rates and few rules.
But today, thanks to "securitization" of loans and the ability of insiders to create exotic and unfathomable financial instruments, the speculative system makes buying stocks on margin look like child's play. In the aftermath of the crash of 2008, the process of sorting it all out and getting banks functioning again is something that markets simply cannot do.
Read on...
After Punditman's interesting post about Ann Rand yesterday, Peacenik feels almost crass to be bringing up the collapse again. When this is all over historians may view Ann Rand as the 12 Monkeys of the present crisis. (12 Monkeys reference too obscure to explain. Rent the movie)
Today the Globe and Mail headlines "IMF dashes hope of short recession." Chrysler has threatened to pull out of Canada. Nortel may be breaking up. Its funny how quickly our lovely corporate citizens turn to threats as soon as the going gets tough. AIG: save us or we'll destroy the world. GM: save us or we'll be back in the stoneages. And on and on. Reading about Ann Rand and how Alan Greenspan was part of her "collective" made Peacenik want to ralph, again. And reading that Bernie Madoff is off to jail does not make things right. There are many more Benie Madoffs who should be in jail. And there are many more Ann Rand devotees pulling the strings in government and corporate America.
3/9/09
Guest Post: More Debt Won't Rescue the Great American Ponzi
Submitted by Rolfe Winkler, CFA, publisher of OptionARMageddon.com
And yet American policy-makers appear convinced that more debt can rescue an economy already drowning in it. If we can just keep the leverage party going, all will be well. $787 billion to fund "stimulus," another $9 trillion committed to guarantee bad debts, 0% interest rates and quantitative easing to drive more lending, new off balance sheet vehicles to hide from the public the toxic assets they've absorbed. All of it to be funded with debt, most of it the responsibility of taxpayers.
Did anyone one find any good economic news on the weekend or this morning? Peacenik looked and looked and looked. Peacenik didn't find any. Peacenik is trying to understand why this is happening. Peacenik is trying to understand what a credit default swap is. Peacenik just read the article posted above. It doesn't explain credit default swaps but it does make a compelling case for why the bailouts and stimulus plans will not work.
Peacenik will keep looking for good economic news. But in the meantime the DOW futures are down a lot. The Asian markets continued their march downward overnight. More and more people are contemplating collapse. Peacenik stopped by the Pub yesterday and was shocked to overhear three big believers of capitalism discussing survivalism. Actively planning survival. Peacenik needs to double check his inventory. And visit the seed store. Very Soon.
Policy-makers not only misunderstand the economic crisis, they continue to underestimate it. Consequently, solutions to date have not only failed to "fix" anything, they have made the problem worse. The problem isn't falling asset prices, it's not rising foreclosures, it's too much debt. With an assist from mark-to-market accounting,* too much debt inflated the asset bubble in the first place. Yves has it exactly right that the only "solution" to this crisis is price discovery, to allow asset prices to fall to whatever level they need to in order for markets to clear. This is bad news for over-levered balance sheets, but there's nothing else to be done.
And yet American policy-makers appear convinced that more debt can rescue an economy already drowning in it. If we can just keep the leverage party going, all will be well. $787 billion to fund "stimulus," another $9 trillion committed to guarantee bad debts, 0% interest rates and quantitative easing to drive more lending, new off balance sheet vehicles to hide from the public the toxic assets they've absorbed. All of it to be funded with debt, most of it the responsibility of taxpayers.
Did anyone one find any good economic news on the weekend or this morning? Peacenik looked and looked and looked. Peacenik didn't find any. Peacenik is trying to understand why this is happening. Peacenik is trying to understand what a credit default swap is. Peacenik just read the article posted above. It doesn't explain credit default swaps but it does make a compelling case for why the bailouts and stimulus plans will not work.
Peacenik will keep looking for good economic news. But in the meantime the DOW futures are down a lot. The Asian markets continued their march downward overnight. More and more people are contemplating collapse. Peacenik stopped by the Pub yesterday and was shocked to overhear three big believers of capitalism discussing survivalism. Actively planning survival. Peacenik needs to double check his inventory. And visit the seed store. Very Soon.
1/13/09
Meet Lady Subprime
By Richard CohenTuesday, January 13, 2009; Page A15
The French have the comely Marianne, the British have the fetching Britannia, and we have the welcoming Lady Liberty. May I now suggest, at least for the duration of the current recession, a new feminine emblem of our times: Marvene Halterman of Avondale, Ariz. At age 61, after 13 years of uninterrupted unemployment and at least as many years of living on welfare, she got a mortgage.
She got that mortgage less than two years ago. She got it even though at one time she had 23 people living in the house (576 square feet, one bath) and some ramshackle outbuildings. She got it for $103,000, an amount that far exceeded the value of the house. The place has since been condemned.
Read on...
If you're having trouble understanding how the world's finanical system got sucked into a black hole of derivative debt, this is a fairly readable explanation. This is why almost every financial institution in North America is bankrupt. Peacenik read a bunch of financial news yesterday and early today. It is all bleak. It is all bad. The only thing that will prevent Peacenik's prognostication about the markets from coming true is the small chance that there will be a small rally because of Obama's inauguration. A small short rally.
The French have the comely Marianne, the British have the fetching Britannia, and we have the welcoming Lady Liberty. May I now suggest, at least for the duration of the current recession, a new feminine emblem of our times: Marvene Halterman of Avondale, Ariz. At age 61, after 13 years of uninterrupted unemployment and at least as many years of living on welfare, she got a mortgage.
She got that mortgage less than two years ago. She got it even though at one time she had 23 people living in the house (576 square feet, one bath) and some ramshackle outbuildings. She got it for $103,000, an amount that far exceeded the value of the house. The place has since been condemned.
Read on...
If you're having trouble understanding how the world's finanical system got sucked into a black hole of derivative debt, this is a fairly readable explanation. This is why almost every financial institution in North America is bankrupt. Peacenik read a bunch of financial news yesterday and early today. It is all bleak. It is all bad. The only thing that will prevent Peacenik's prognostication about the markets from coming true is the small chance that there will be a small rally because of Obama's inauguration. A small short rally.
12/12/08
Prominent Trader Accused of Defrauding Clients
By DIANA B. HENRIQUES and ZACHERY KOUWEPublished: December 11, 2008
But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.
Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Peacenik woke up this morning and Conjure Bag was officially calling a depression. The Dow futures were way down. The goofballs on CNBC were freaking. Peacenik is on a day off and is now watching CNBC. Equador just defaulted on its foreign debt. GM just announced that it will shutdown for Jan. and part of Feb. Yes the news is all bad. The GOP had no problem giving $700 billion to the banks with no strings attached but $14 billion for the auto industry was too much unless the unions were destroyed. Oh, and by the way, this post has one of Wall Street's most respected persons admitting that his business was a Ponzi Scheme and $50 billion has gone poof. Why would anyone have money in the stock market? Lucky this is Friday. Peacenik is going to have a beer. Have a good weekend.
On Wall Street, his name is legendary. With money he had made as a lifeguard on the beaches of Long Island, he built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.
But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.
Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Peacenik woke up this morning and Conjure Bag was officially calling a depression. The Dow futures were way down. The goofballs on CNBC were freaking. Peacenik is on a day off and is now watching CNBC. Equador just defaulted on its foreign debt. GM just announced that it will shutdown for Jan. and part of Feb. Yes the news is all bad. The GOP had no problem giving $700 billion to the banks with no strings attached but $14 billion for the auto industry was too much unless the unions were destroyed. Oh, and by the way, this post has one of Wall Street's most respected persons admitting that his business was a Ponzi Scheme and $50 billion has gone poof. Why would anyone have money in the stock market? Lucky this is Friday. Peacenik is going to have a beer. Have a good weekend.
11/27/08
Debt Rattle, November 26, 2008: From the top of the great Pyramid
Stoneleigh: Everyone has heard of pyramid, or Ponzi, schemes. In their simplest form they are short-lived deliberate frauds where a small number of existing members are paid from the buy-in of a larger number of newer members until the supply of newer members is exhausted, whereupon they collapse. Typically, the founders, and perhaps a few others who got in early and out before it was too late, end up making a lot of money at the expense of later entrants, who end up holding the empty bag. There are always many more losers than winners. What most do not realize, however, is that Ponzi dynamics are far more pervasive than people think. There are many human systems that ultimately rest on the buy-in of new entrants, and every one of them will ultimately meet the same fate, although it can take far longer for complex constructions than for simple pyramid frauds.
What allows a more complex pyramid to last for longer than a simple one is a supplementary source of funds to pay members, besides merely the buy-in of newer members. The more such sources there are, legitimate and otherwise, the more complex the pyramid can become and the longer it will last, as the apparent on-going success of early entrants will attract many more new ones. There's nothing like seeing one's friends and neighbours seemingly making a lot of easy money for a long time to eventually overcome the mental defenses of even the most skeptical.
Peacenik remembers reading about the blow up of the Albanian Ponzi economy a few years ago. Peacenik wondered how they could be so stupid. Now the global economy has been exposed as a giant Ponzi scheme created by Wall Street, the corporate media, compliant politicians and stupid greedy citizens. The wealth and prosperity of the last 25 years has been an illusion. Peacenik lived it. Peacenik prospered from it. But now Peacenik and everyone else will suffer from it. 60 trillion dollars of "wealth" has turned out to be worthless. And now it is sucking all the wealth in the world into a black hole. The banks, pension plans, insurance companies, auto companies, are all insolvent. The only way forward seems to be to pretend that the black hole does not exist. Do not look in the black hole. Peacenik looked.
10/27/08
Easthampton Burning?
by Jim Kunstler
In the typhoon of commentary that's blown around the world a step behind the financial tsunami that's wrecking everything, two little words have been curiously absent: "fraud" and "swindle." But aren't they really at the core of what has happened? Wall Street took the whole world "for a ride" and now a handful of Wall Street's erstwhile princelings have shifted ceremoniously into US Government service to "fix" the problem with a "toolbox" containing a notional two trillion dollars. This strange exercise in financial kabuki theater will shut down sometime between the election and inauguration day, when the inaugurate finds himself president of the Economic Smoking Wreckage of the United States. What will happen?
I have thought for some time that things could get dangerously out of hand in America, despite our exceptionalist notion that we are immune to the common plot-lines of history. For starters, inauguration night will seem more like Halloween, as those two little words fly in to haunt the new president. So, a large and looming question is: who will be appointed the next attorney general of the US (to replace the human sash-weight currently occupying the office), and how soon will the federal marshals be scouring the wainscoted hallways of Goldman Sachs, JP Morgan Chase, not to mention a thousand Greenwich, Connecticut, hedge fund boiler rooms, with man-sized nets?
Kunstler seems to think that unemployed, hungry, homeless, hopeless sheeple may not react well to the new economic order. Peacenik hopes that Kunstler is wrong. Meanwhile financial planners are working overtime trying to reassure their clients to sit tight and trust the markets. Trust?
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