Ponzi scheme

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Madoff Talks: Uncovering the Untold Story Behind the Most Notorious Ponzi Scheme in History by Jim Campbell

algorithmic trading, Bear Stearns, Bernie Madoff, currency risk, delta neutral, family office, fear of failure, financial thriller, fixed income, forensic accounting, full employment, Gordon Gekko, high net worth, index fund, Jim Simons, margin call, merger arbitrage, money market fund, mutually assured destruction, offshore financial centre, payment for order flow, Ponzi scheme, proprietary trading, Renaissance Technologies, risk free rate, riskless arbitrage, Robinhood: mobile stock trading app, Sharpe ratio, short selling, sovereign wealth fund, time value of money, two and twenty, walking around money

And the whole thing blew up.”2 Ponzi schemes are not built to last. Somehow Madoff’s did for 40 years. Even Bernie didn’t believe how long he got away with it. He told me he believed he could have been brought down by a well-placed, five-minute phone call. In my estimation, five operational cornerstones of the Ponzi scheme allowed Madoff to get away with it for so long. The scheme was driven by Madoff, managed by Frank DiPascali, and operated by unwitting seventeenth-floor overpaid clerks. Some knew more than others. None knew it was a Ponzi scheme, other than Bernie. MADOFF PONZI SCHEME OPERATIONAL CORNERSTONE #1: THE SPLIT STRIKE CONVERSION INVESTMENT STRATEGY The brilliance of Madoff’s split strike conversion* strategy evolved from its seeming opaque complexity; while operationally, it allowed Madoff to scale up the Ponzi scheme to match the exponential account growth.

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To make matters worse, I could not find the courage to admit failure and face certain consequences once I realized recovery was impossible.”36 Bernie may have been brilliant, but ultimately his thinking was illogical. He should have known that Ponzi schemes never last. THE DOUBLE LIFE Bernie lived a double life. The industry titan and champion of a business built on integrity created the most notorious Ponzi scheme in history. Bernie built a business around a family culture. He then turned it into an affinity fraud, betraying family as well as his predominantly Jewish investors and charities. He built a legitimate business he could have sold for billions, meaning he had no need to create a Ponzi scheme. Yet he did. The Ponzi scheme precluded him from ever attaining those billions.

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We’ll go under the hood of the most notorious Ponzi scheme in history with the forensic experts who unraveled Madoff’s “MO.” We’ll learn how Madoff laundered an incomprehensible hundreds of millions of dollars from his investment advisory Ponzi scheme through the “back door” of his market-making and prop trading business to keep it solvent. Absent the injection of Ponzi money, BLMIS would have been insolvent as early as 2001, seven years before the demise of the Ponzi scheme. The forensic investigation uncovered the exhaustive system behind Madoff’s fraud: the fake, backdated trading, the allocation of fake trades to clients’ accounts, the phony client financial statements, the fake computer screenshots that covered up the lack of real trading, the doctoring of already falsified documents that repeatedly fooled the SEC and external auditors.

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle by Diana B. Henriques

accounting loophole / creative accounting, airport security, Albert Einstein, AOL-Time Warner, banking crisis, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, break the buck, British Empire, buy and hold, centralized clearinghouse, collapse of Lehman Brothers, computerized trading, corporate raider, diversified portfolio, Donald Trump, dumpster diving, Edward Thorp, financial deregulation, financial engineering, financial thriller, fixed income, forensic accounting, Gordon Gekko, index fund, locking in a profit, low interest rates, mail merge, merger arbitrage, messenger bag, money market fund, payment for order flow, plutocrats, Ponzi scheme, Potemkin village, proprietary trading, random walk, Renaissance Technologies, riskless arbitrage, Ronald Reagan, Savings and loan crisis, short selling, short squeeze, Small Order Execution System, source of truth, sovereign wealth fund, too big to fail, transaction costs, traveling salesman

.; Madoff victims; and specific agencies, funds, and individuals arbitrage and, 38–41, 52 arrest of, 12–16, 19–22, 209, 211, 216–17, 222 assets of, frozen and sold, 230, 238, 245, 305, 316–18 audits of, 149–50, 254–55 automation and, 42–49, 103 Avellino & Bienes and, 50–56, 77–78, 102 bail and, 18–20, 224–27, 237–39, 252 bankruptcy problems exposed by arrest of, 327 Bayou scandal and, 147–49 Bear Stearns and, 186–87 beginning of fraud by, xxiii, 29–30, 41, 81, 85–86, 90–94, 113, 225, 251–52, 271, 274, 298, 333–35 brokerage firm founded by, and OTC market, 24–27, 34–36 cash crisis of 1962 and borrowing by, 24–30, 225, 335 cash crisis of 1987 and, xxiii, 84–87, 90–91, 335–36 cash crisis of 1992 and, 94–95 cash crisis of 2005–6 and near exposure of, 146–62 cash crisis of 2005–6 and recovery by, 166–67, 173–76 cash crisis of 2008 and lead-up to collapse of, 21, 193–209 cash flows of 1990s, 81, 90–94 cash flows of 2002, 132–33 cash flows of 2007, 182–83 cash withdrawal requests of 2008 and, 1, 183, 187–88, 190–93, 197, 200–209, 256 cash withdrawals of 1994–2003, 132–36 charities and, 3, 88, 110–11, 114, 183, 337 checks written before confession, 6, 18, 314 childhood and education of, xxii–xxiii, 24, 30–35 Cincinnati Stock Exchange and, 68, 76, 86 civil lawsuits by victims of, 299–302 clawback lawsuits and, 257–58, 266–67, 288, 294–95 Cohmad formed by, 70–75, 149 commission payments and, 117, 136, 151 confession of, xxi–xxii, 1–12, 207–9, 282 congressional hearings on, 267–68 death of parents and, 48 death of son Mark and, 323 derivatives and, 174–76 DiPascali and fraud of, 81–82, 207–9, 297–99 DTCC and, 119–20, 150–51, 159, 164, 245, 255, 272, 296 early investors and introducers and, 43, 57–69, 92, 100–102, 110–15, 148 economic weakness in 2007 and, 176–80 employee money managed by, 182 employee salaries and, 178–79 exclusivity and secrecy and, 59–60, 93, 116–17, 134 extramarital affair allegations and, 277, 288–89 Fairfield Greenwich and, 89–91, 104–10, 187–88, 190–93 falsification of records by, xxiii, 41, 99–100, 102–3, 117–20, 122–27, 129, 139–46, 150–51, 153, 158–59, 163–64, 179, 272–73, 296, 309–10 family illnesses and, 135–36 family of, and impact of crime, 278, 281–90 family of, and questions about knowledge of fraud, 281–84, 333, 337 family wealth and, 160–61, 178, 182, 258, 321, 334 father’s brokerage failure and, 31–32, 35–36 feeder fund fees and, 87, 117 feeder funds begun by father-in-law, 36–39, 41, 50 feeder funds begun by nonfamily members, 102, 104–6, 119–21, 123, 130–32 feelings of, for family, 272 feelings of, for victims, xx, xxii, 333 foreign funds and, 65, 74–75, 84, 166–71, 243–44, 335 French town house, 177, 194, 239, 274, 318 guilty plea of, 247–53, 326 hedge funds and, 87–88, 90–91, 104–5, 119, 123, 125–32, 136, 144–46, 171–73 house arrest of, and gifts to family, 229–30, 237–38 humanity of, xxi, 345–48 IRAs and, 126–27 Jewish connections and, 88–89, 111, 114, 212–15 lawsuits arising from, 295–97 lessons of, for investors and regulators, 339–47 Levy estate executor, 63, 148 Lipstick Building office of, 2, 71–72, 81, 90, 103, 112, 120 loans by, to family and staff, 179, 181, 189–90 London office opened by, 48, 68–69, 82 losses of, and final account statements, 256 losses of, and length of fraud, 279 losses of, and number of victims, 211–16 lying by, xxii–xviii Manhattan penthouse of, 18, 80–81, 274, 280–81, 305, 316 market making and, 40–41, 80, 82–84, 136, 199, 245 Markopolos accusations and, 122–25, 153–59, 162–66 marries Ruth Alpern, 33–35, 47 modern market shaped by, xxiv Montauk beach house, 18, 69, 193, 226, 274, 305, 316 NASDAQ and, 80, 84, 86–87, 107–8 options trading not reported, 142 Palm Beach home and, 18, 109, 114, 183–84, 226, 274, 305 pension funds and, 127–32 Philoctetes speech of 2007, 179–80 Picower and, 63–65, 132–36, 161–62, 333 Picower settlement and, 330–31 Ponzi scheme of, and legitimate firm, 136, 152–53, 160, 251 Ponzi scheme of, described to federal prosecutors, 225–27 Ponzi scheme of, enabled by Wall Street, xxiv Ponzi scheme of, seductiveness of, 339–40 Ponzi scheme of, size of, xxiii, 117, 180, 247, 260 prison interviews of, xvii–xx, xxii, 333–38, 344–345 reason for not fleeing, xxiii–xxiv, 339 relationship with brother, Peter, 48–50, 292–95 relationship with wife, Ruth, 288, 337–38 relationship with sons, xx, 285, 333, 338 returns of, 25, 38, 50–51, 53–54, 56, 67, 76, 80, 93–94, 112–13, 296 Roslyn house of, 47, 69–71, 167 SEC failures exposed by arrest of, 227–30, 272 SEC inquiries of 1992–2005, 152–56, 162 SEC inspector Kotz interviews, 270–72 SEC investigation of 1992 and, 94–104, 335 SEC investigation of 2003 and, 139–40, 145–46 SEC investigation of 2005 and, 139–46 SEC investigation of late 2005–6 and, 153–60, 162–66 SEC investigations of, revealed in 2009, 302–3 SEC shutdown of Avellino & Bienes and, 102 sentencing of, 273, 275–80, 332–33 SIPC liquidation and, 219–22, 235–37, 260–61 small investors and, 171–73 sole responsibility claim of, 225, 252 Sorkin as lawyer for, and conflict issue, 242–43 split-strike conversion strategy and, 74–76, 84–85, 94, 106, 112 suspicions of, 113, 117–29, 131–32, 134–35, 138, 141–44, 150–51, 176–77, 185, 188–89, 203–4, 231, 318, 333 synthetic trades by, and taxes, 85 third market and, 82, 108 trading strength affirmed, 118 travels to France, 179, 194 trust and credibility of, 28, 41–42, 48, 61, 63, 66–68, 82, 86–87, 89–90, 93, 112, 138, 175–76, 214–15, 343, 347 victim compensation and, 338 wealth and lifestyle of, xx, 69–70, 80–82, 136–38, 177–79 yacht and slip of, 177, 179, 239, 305, 318 Madoff, Deborah (former daughter-in-law), 284 Madoff, Marion (sister-in-law), 47 Madoff, Mark (son), 43, 47, 69, 82–83, 136, 152, 178, 230, 276, 288 accusations vs., 281–91 father’s arrest and, 4–13, 19, 230, 324 lawsuits vs., 285–7, 294, 321, 324 loans to, 161, 189–90, 198 suicide of, 321–23, 345 wife changes last name, 285, 321 Madoff, Peter (brother) Cincinnati Stock Exchange and, 68 Cohmad and, 72 death of son and, 5, 135, 161 DiPascali and, 81 early life of, 31, 47 Engler and, 66 family redemption checks and, 335 gifts and loans to, 179, 181–82 hedge funds and, 178 lawsuits vs., 50, 292–95 London office and, 48, 69 Madoff confesses to, 5–8 Madoff’s arrest and, 14–15, 17, 22, 226, 230 Mark’s suicide and, 323 Palm Beach home of, 184 role of, in firm, 3, 47–50, 82, 86, 136, 152, 181 Madoff, Ralph (father), 30–31, 33, 35–36, 48 Madoff, Roger (nephew) illness and death of, 3, 5, 135, 161, 285 Madoff, Rose (grandmother), 30 Madoff, Ruth Alpern (wife), 186, 276, 335 accusations vs., 281–84, 286–91 assets forfeited by, 230, 237–38, 274–75, 280–81, 288, 316–18 charities and, 3, 183 children and, 43, 47 criminal charges not filed vs., 274 early life of, 33–34 early work for firm, 26 family illnesses and, 135–36 feelings of, for victims, 252, 278 firm Christmas party and, 11–12, 182 friendships and, 67, 114, 148 lawsuits vs., 288, 294, 338 Madoff’s arrest and, 13, 15–17, 19–20, 226, 229–30, 237, 275 Madoff’s confession and, 6–9, 18 mails jewelry to family, 230, 238 Manhattan penthouse and, 81 marries Madoff, 33–35 son Mark’s suicide and, 323 stands by husband after arrest, 332, 337–38 year before arrest and, 3–4, 179, 184, 193–94 Madoff, Shana (niece), 17, 47, 73, 135–36, 179, 237, 294, 302, 323 Madoff, Solomon David (grandfather), 30 Madoff, Sondra (sister), 30, 47 Madoff, Stephanie (daughter-in-law), 189, 285, 322–23 Madoff, Sylvia Muntner (mother), 30–31, 48 Madoff family foundation, 135–36, 340 Madoff Securities International, Ltd.

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In fact, his questions were totally irrelevant: No knowledge of derivatives is required to investigate a Ponzi scheme. If it’s truly a Ponzi scheme, there are no derivatives; there’s just a liar with a bank account. In fact, Cheung’s previous experience might have been more relevant, since accounting fraud investigations sometimes involve verifying whether the assets shown on the balance sheet actually exist, the precise question a Ponzi scheme investigation must answer. If Cheung had known more about Ponzi schemes, she would have known how to deal with Markopolos’s arrogant and misguided questions. But she didn’t.

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Like every Ponzi schemer, he was able to face his victims every day because they didn’t look like victims, not until the final days and weeks—and the evidence is that, in those days, he was as tormented by fear and grief as any guilty, cornered human being would have been. Such is the Ponzi scheme. It is the crime of the egotist, not the sadist. One need not enjoy others’ pain to run a Ponzi scheme. Until the final moments, there is no pain. One is helping, not hurting. That delusion, based on a lie, is reinforced every day by every thankful customer who says, “Bless you, Bernie!” But Madoff’s Ponzi scheme didn’t simply reinforce what we always knew about this sort of crime. It etched new lessons into our hearts. All Ponzi schemes transfer wealth from victim to victim. But because of the nature of so many of Madoff’s victims—charities, endowments, major philanthropists, generous people on all rungs of the economic ladder—this Ponzi scheme transferred wealth from victims to the larger community, too.

No One Would Listen: A True Financial Thriller by Harry Markopolos

Alan Greenspan, backtesting, barriers to entry, Bernie Madoff, buy and hold, call centre, centralized clearinghouse, correlation coefficient, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, family office, financial engineering, financial thriller, fixed income, forensic accounting, high net worth, index card, Long Term Capital Management, Louis Bachelier, low interest rates, Market Wizards by Jack D. Schwager, offshore financial centre, payment for order flow, Ponzi scheme, price mechanism, proprietary trading, quantitative trading / quantitative finance, regulatory arbitrage, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, statistical arbitrage, too big to fail, transaction costs, two and twenty, your tax dollars at work

A CPA on Long Island had lost both his and his wife’s retirement funds as well as their children’s college funds. “I just got those redemptions and kept investing more. After a while I never took anything out,” he said, casually defining the horror of a Ponzi scheme. There was nothing Ocrant could do but listen and sympathize. So while I talked about Madoff’s Ponzi scheme in the abstract, Mike Ocrant knew what a real Ponzi scheme smelled like, and he knew the human damage it did. To Ocrant, this just didn’t smell like a Ponzi scheme. He didn’t know exactly what it was, possibly front-running, but he just couldn’t believe the evidence. When he returned to New York he began his education, spending several hours on the phone with Frank, learning the language of options, and like any good reporter, trying to punch holes in our theory.

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It was during their dinner that Frank revealed the details of the investigation. His whole operation was a scam, he said. Madoff was either front-running or it was the biggest Ponzi scheme in history. Like a good reporter, Ocrant casually absorbed the information. He didn’t really respond, but in fact his reaction was typical; he had a tough time believing that Bernard Madoff was running a Ponzi scheme. His professional experience had shown him how difficult it is to sustain a Ponzi scheme for even a couple of years, so it was hard for him to accept the claim that this had been going on for at least a decade. But more than that, he got hung up on the lack of a motive.

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The Boston and New York SEC Offices Reacted Very Differently to the 2005 Submission ... The Matter Was Assigned to a Relatively Inexperienced Team, Particularly with Respect to Conducting Ponzi Scheme Investigations ... The Enforcement Staff Considered the Evidence of Little Value Because Markopolos Was Not a Madoff Investor or Someone Personally Involved in the Alleged Ponzi Scheme ... The Enforcement Staff Questioned Markopolos’ Credibility Because of His Perceived Self-Interest ... The Enforcement Staff Concluded That Madoff Did Not Fit the ‘Profile’ of a Ponzi Scheme Operator.” “In April 2008, Markopolos Attempted to Send a Version of the 2005 Submission to the SEC’s Office of Risk Assessment, but It Was Not Received.”

Planet Ponzi by Mitch Feierstein

Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, Bernie Madoff, book value, break the buck, centre right, collapse of Lehman Brothers, collateralized debt obligation, commoditize, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, disintermediation, diversification, Donald Trump, energy security, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Future Shock, Glass-Steagall Act, government statistician, high net worth, High speed trading, illegal immigration, income inequality, interest rate swap, invention of agriculture, junk bonds, light touch regulation, Long Term Capital Management, low earth orbit, low interest rates, mega-rich, money market fund, moral hazard, mortgage debt, negative equity, Neil Armstrong, Northern Rock, obamacare, offshore financial centre, oil shock, pensions crisis, plutocrats, Ponzi scheme, price anchoring, price stability, proprietary trading, purchasing power parity, quantitative easing, risk tolerance, Robert Shiller, Ronald Reagan, tail risk, too big to fail, trickle-down economics, value at risk, yield curve

Norman Thomas, 1930 I wish my mum were still alive to enjoy and support Planet Ponzi. This book is for her; she’d have loved it. A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

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His was a useless, wasted, destructive life, but he gave his name to history. A Ponzi scheme is any financial adventure in which depositors can only be paid out by using the money of new investors. As long as the scheme is expanding, everything looks fine. The financial mathematics are bad and getting worse all the time, but you can’t tell how bad a Ponzi scheme is by how you experience the ride. It’s not the ride that matters, it’s the way it ends. Now, you’d be right to think that Ponzi’s investors were dumb. If you think you’d be smarter than them‌—‌relax, you would be. But just as investors have become shrewder over time, so Ponzi schemes have become a little smarter too.

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This book begins with the story of how the politicians in Washington and the bankers on Wall Street jointly created the largest Ponzi scheme in history. The origins of that scheme go way back‌—‌at least three decades, if you think only of Wall Street, but arguably as much as sixty years if you think of the federal government. Naturally, I’m aware that my claim sounds implausible, but I hope it doesn’t strike readers as entirely implausible. After all, just a few years ago in 2008–9, part of the Ponzi scheme was laid bare for all to see in the shape of the subprime mortgage bust and the consequent banking crisis. That crisis was already the largest Ponzi scheme in history, so the track record is there.

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie, Jacob Silverman

algorithmic trading, asset allocation, bank run, barriers to entry, Ben McKenzie, Bernie Madoff, Big Tech, bitcoin, Bitcoin "FTX", blockchain, capital controls, citizen journalism, cognitive dissonance, collateralized debt obligation, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cryptocurrency, data science, distributed ledger, Dogecoin, Donald Trump, effective altruism, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, experimental economics, financial deregulation, financial engineering, financial innovation, Flash crash, Glass-Steagall Act, high net worth, housing crisis, information asymmetry, initial coin offering, Jacob Silverman, Jane Street, low interest rates, Lyft, margin call, meme stock, money market fund, money: store of value / unit of account / medium of exchange, Network effects, offshore financial centre, operational security, payday loans, Peter Thiel, Ponzi scheme, Potemkin village, prediction markets, proprietary trading, pushing on a string, QR code, quantitative easing, race to the bottom, ransomware, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Robinhood: mobile stock trading app, Ross Ulbricht, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, short selling, short squeeze, Silicon Valley, Skype, smart contracts, Steve Bannon, systems thinking, TikTok, too big to fail, transaction costs, tulip mania, uber lyft, underbanked, vertical integration, zero-sum game

Either the supply of new investors dries up, or worse, the current ones wise up to the fraud and demand their money back, only to discover it isn’t there. Ponzi schemes are traditionally thought of as having a central figure coordinating the fraud. Think of Bernie Madoff, whose Ponzi scheme collapsed during the subprime crisis as investors saw the broader market cratering. By conventional measurements, Madoff’s fraud holds the record for the largest Ponzi scheme in history, with some $64 billion lost—at least on paper. But as Shiller describes in Irrational Exuberance (2015), a Ponzi scheme does not need to have a central administrator to fit the broader definition of one.

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But it was already clear that many of the economic gains during the pandemic were going to the ultrarich. And as an armchair economist, I saw far worse storm clouds forming on the horizon. Surveying the markets in the spring of 2021, I saw all the signs of what Robert Shiller describes as “naturally occurring Ponzi schemes.” The premise of a traditional Ponzi scheme is quite simple: A fraudster promises investors he can produce incredible returns if they give him money to invest on their behalf. Instead of legitimately investing that money, the con man pretends to have generated profits and uses that story to lure in more investors. He pays the original investors off with the money from the new ones (See?

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Tether stated on its website that they wouldn’t honor redemptions for less than $100,000. And over time, they added other language to their terms of service that practically gave them the right to refuse redemptions for any reason. This is the crimson flag when it comes to fraud, especially Ponzi schemes. Again, from Dan Davies’s book Lying for Money, “a fraud can be called a Ponzi scheme with greater validity, the greater the extent to which the mechanics of the crime revolve around managing the renewal of its financing and convincing the investor and lender communities to keep their money in the scheme rather than demanding repayment in cash.”

Irrational Exuberance: With a New Preface by the Author by Robert J. Shiller

Alan Greenspan, Andrei Shleifer, asset allocation, banking crisis, benefit corporation, Benoit Mandelbrot, book value, business cycle, buy and hold, computer age, correlation does not imply causation, Daniel Kahneman / Amos Tversky, demographic transition, diversification, diversified portfolio, equity premium, Everybody Ought to Be Rich, experimental subject, hindsight bias, income per capita, index fund, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, Long Term Capital Management, loss aversion, Mahbub ul Haq, mandelbrot fractal, market bubble, market design, market fundamentalism, Mexican peso crisis / tequila crisis, Milgram experiment, money market fund, moral hazard, new economy, open economy, pattern recognition, Phillips curve, Ponzi scheme, price anchoring, random walk, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Small Order Execution System, spice trade, statistical model, stocks for the long run, Suez crisis 1956, survivorship bias, the market place, Tobin tax, transaction costs, tulip mania, uptick rule, urban decay, Y2K

She promised to pay 50% returns in two months and enticed 1,200 investors in forty-two states to pay her a total of between $10 and $15 million between 1989 and 1995.25 A particularly dramatic story emerged in Albania in 1996 and 1997 when a number of Ponzi schemes promising fantastic rates of return enticed a good share of the people of that country. Seven Ponzi schemes accumulated some $2 billion, or 30% of Albania’s annual gross domestic product.26 Enthusiasm for the schemes was so intense that in the 1996 local elections members of the ruling government party included symbols of the Ponzi scheme funds on their campaign posters, apparently wanting to gain some credit for the new wealth sources. When the schemes failed in 1997, enraged protesters looted banks and burned buildings, and the government was forced to call out the army to restore peace; a number of rioters were killed.

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There is no reason for these stories to be fraudulent; they need only emphasize the positive news and give less emphasis to the negative. The path of a naturally occurring Ponzi scheme—if we may call speculative bubbles that—will be more irregular and less dramatic, since there is no direct manipulation, but the path may sometimes resemble that of a Ponzi scheme when it is supported by naturally occurring stories. The extension from Ponzi schemes to naturally occurring speculative bubbles appears so natural that one must conclude, if there is to be debate about speculative bubbles, that the burden of proof is on skeptics to provide evidence as to why Ponzi-like speculative bubbles cannot occur.

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The conspicuous feature of the current high pricing is high confidence that the market will always do well. 64 STR UC TUR AL FAC TOR S Ponzi Schemes as Models of Feedback and Speculative Bubbles It is very hard to prove that a simple mechanical price feedback model, producing heightened investor attention and enthusiasm, is actually a factor in financial markets. We may have a casual impression that investors are showing enthusiasm for investments in response to past price increases, but we do not see any concrete evidence that such feedback actually affects their decisions. In order to provide evidence that such feedback mechanisms do play a role in financial markets, it is helpful to look at the example of Ponzi schemes, or pyramid schemes, by means of which hoaxers create positive feedback from putative current investment returns to future investment returns.

Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond: The Innovative Investor's Guide to Bitcoin and Beyond by Chris Burniske, Jack Tatar

Airbnb, Alan Greenspan, altcoin, Alvin Toffler, asset allocation, asset-backed security, autonomous vehicles, Bear Stearns, bitcoin, Bitcoin Ponzi scheme, blockchain, Blythe Masters, book value, business cycle, business process, buy and hold, capital controls, carbon tax, Carmen Reinhart, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, disintermediation, distributed ledger, diversification, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, fixed income, Future Shock, general purpose technology, George Gilder, Google Hangouts, high net worth, hype cycle, information security, initial coin offering, it's over 9,000, Jeff Bezos, Kenneth Rogoff, Kickstarter, Leonard Kleinrock, litecoin, low interest rates, Marc Andreessen, Mark Zuckerberg, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, packet switching, passive investing, peer-to-peer, peer-to-peer lending, Peter Thiel, pets.com, Ponzi scheme, prediction markets, quantitative easing, quantum cryptography, RAND corporation, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ross Ulbricht, Salesforce, Satoshi Nakamoto, seminal paper, Sharpe ratio, Silicon Valley, Simon Singh, Skype, smart contracts, social web, South Sea Bubble, Steve Jobs, transaction costs, tulip mania, Turing complete, two and twenty, Uber for X, Vanguard fund, Vitalik Buterin, WikiLeaks, Y2K

The growth of new cryptoassets and new investment products around them create a rapidly evolving marketplace in which financial criminals can exploit profit-seeking motives, especially if the innovative investor doesn’t perform proper due diligence. This chapter will focus on Ponzi schemes, misleading asset issuers, and the cornering of markets (also known as “pump and dump” schemes). As we’ve mentioned, those who lack an understanding of bitcoin and cryptoassets often express their disdain and ignorance with the proclamation, “It’s just a Ponzi scheme.” So let’s start there. PONZI SCHEMES Ponzi schemes, also referred to as pyramid schemes, are the most dangerous type of misleading asset. While it got its name from Charles Ponzi, an Italian who lived from 1882 to 1949, it existed before he was born; he just made it famous.

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Tragically, investors often don’t realize they are duping one another, and it is the operator of the Ponzi scheme who makes out handsomely. Before we turn to cryptoassets, let’s look at how Ponzi schemes have played out in traditional assets. Many think of bonds as a safe investment with steady cash flows. If they are issued by a government, then they also have the full backing of that government. As we will soon see, bonds have not always been safe, and in what has been labeled the first emerging market boom, many bonds turned out to be Ponzi schemes.1 For about a century after the equity bubbles brought on by the Mississippi Company2 and South Sea Schemes3 (we’ll cover the shady dealings of these companies in the next section), British investors stuck close to government-issued bonds.4 During the Napoleonic Wars from 1803 to 1815, the British government issued over 400 million pounds of bonds, providing plenty of opportunity to bond investors.

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For example, Chile, Colombia, and Peru have spent 27.5 percent, 36.2 percent, and 40.2 percent of their sovereign lives in default or rescheduling, never quite able to escape the early precedent that was set.9 The Bitcoin Ponzi Myth Criticisms of bitcoin and cryptoassets being Ponzi schemes have been circulating since bitcoin first hit investors’ radar screens.10 However, this criticism is deeply misinformed, and the World Bank has joined us in this opinion. In a 2014 report it states: Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such. The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transactions cost.11 Historical Ponzi schemes require a central authority to hide the facts and promise a certain annual percent return.

Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts by David Gerard

altcoin, Amazon Web Services, augmented reality, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, Blythe Masters, Bretton Woods, Californian Ideology, clean water, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, Dogecoin, Dr. Strangelove, drug harm reduction, Dunning–Kruger effect, Ethereum, ethereum blockchain, Extropian, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, functional programming, index fund, information security, initial coin offering, Internet Archive, Internet of things, Kickstarter, litecoin, M-Pesa, margin call, Neal Stephenson, Network effects, operational security, peer-to-peer, Peter Thiel, pets.com, Ponzi scheme, Potemkin village, prediction markets, quantitative easing, RAND corporation, ransomware, Ray Kurzweil, Ross Ulbricht, Ruby on Rails, Satoshi Nakamoto, short selling, Silicon Valley, Silicon Valley ideology, Singularitarianism, slashdot, smart contracts, South Sea Bubble, tulip mania, Turing complete, Turing machine, Vitalik Buterin, WikiLeaks

“Judge Awards $40.7 Million in SEC Case Over Bitcoin Ponzi Scheme”. Recode, 19 September 2014. [76] “Manhattan U.S. Attorney And FBI Assistant Director Announce Securities And Wire Fraud Charges Against Texas Man For Running Bitcoin Ponzi Scheme”. Department of Justice, U.S. Attorney’s Office, Southern District of New York (press release), 6 November 2014. [77] Nate Raymond. “Texan gets one-and-a-half years in prison for running bitcoin Ponzi scheme”. Reuters, 21 July 2016. [78] Justin O’Connell. “Lawyer Reveals Details About the Man Behind Bitcoin’s $4.5 Million Ponzi Scheme”. Motherboard, 18 December 2015

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The general problem is that you don’t know who or where these people are, and they routinely just disappear with everyone’s money. Scams common to the cryptocurrency world include:59 Ponzi schemes: in which early investors are paid using money from later ones. These are so attractive to crypto fans that when Ethereum took blockchains and added “smart contracts” (programs that run on the blockchain), the first thing people did was write automatic “honest” Ponzis. High-yield investment programmes: a variety of Ponzi scheme. You might think it obvious that no investment scheme could pay 6% interest per week sustainably, particularly when it claims a “secret” investment strategy, but what worked on Bernie Madoff’s victims works on Bitcoiners.

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– Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System, 20081 An experimental new Internet-based form of money is created that anyone can generate at home. People build frightening firetrap computers full of video cards, putting out so much heat that one operator is hospitalised with heatstroke and brain damage. Someone known only as “Pirateat40” starts a “high yield investment program.” Just before its collapse as a Ponzi scheme, it holds 7% of all bitcoins at the time. Aggrieved investors eventually manage to convince the authorities not only that these Internet tokens are worth anything, but that they gave them to some guy on an Internet forum calling himself “Pirate” because he said he would double their money. A young physics student starts a revolutionary new marketplace based on the nonaggression principle, immune to State coercion.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis by Tim Lee, Jamie Lee, Kevin Coldiron

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, backtesting, bank run, Bear Stearns, Bernie Madoff, Bretton Woods, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, currency risk, debt deflation, disinformation, distributed ledger, diversification, financial engineering, financial intermediation, Flash crash, global reserve currency, implied volatility, income inequality, inflation targeting, junk bonds, labor-force participation, Long Term Capital Management, low interest rates, Lyft, margin call, market bubble, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, negative equity, Network effects, Ponzi scheme, proprietary trading, public intellectual, purchasing power parity, quantitative easing, random walk, rent-seeking, reserve currency, rising living standards, risk free rate, risk/return, sharing economy, short selling, short squeeze, sovereign wealth fund, stock buybacks, tail risk, TikTok, Uber and Lyft, uber lyft, yield curve

As long as it continues, the carry regime changes the economic logic to one in which the carry traders with the most resources win in the end. Is There a Similarity Between Carry Bubbles and Ponzi Schemes? There is a clear similarity between the dynamic described in our description of carry bubbles and that of a Ponzi scheme. For example, the idea that the new carry bubble, created out of the carry crash, tends to be larger than the preceding carry bubble, is similar to the case of a Ponzi scheme that suffers a run. If a Ponzi scheme is to recover from a run, then it will become even larger; the restoration of confidence following the successful test of confidence suggests this, as also does the requirement for the scheme to continue to grow larger because any outflows need to be financed with new inflows.

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If a Ponzi scheme is to recover from a run, then it will become even larger; the restoration of confidence following the successful test of confidence suggests this, as also does the requirement for the scheme to continue to grow larger because any outflows need to be financed with new inflows. For example, imagine a hypothetical—admittedly completely unrealistic—alternative scenario for the notorious, and huge, Ponzi scheme run by Bernard (“Bernie”) Madoff. Madoff’s giant Ponzi scheme collapsed in December 2008, during the global carry crash associated with the collapse of Lehman Brothers. At the time of the Madoff scheme collapse, Madoff’s clients had an illusory US$65 billion standing to their credit in the scheme. Madoff’s scheme was a classic Ponzi scheme, operated simply by marking up client accounts to reflect fabricated good and consistent returns, while financing any client withdrawals from the scheme with new client inflows.

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Ponzi schemes that are relatively large and long lasting usually have four main characteristics: (1) The funds supposedly standing to the credit of participants, or investors, are not backed by assets of equivalent value, when the value of assets is considered fundamentally in terms of the future flow of goods and services that they can lay claim to or produce. (2) The scheme will collapse once withdrawals exceed new inflows for any significant length of time. (3) The scheme is generally endorsed, or seemingly endorsed, by the government, or someone in authority, or someone who is highly respected. (4) The “fees” taken by the promoters, or insiders, are high relative to the funds committed. As with the concept of carry, participation (as an “investor”) in a Ponzi scheme can be rational from the perspective of the participant, even if not for the economy as a whole. Research on this notion has been produced 142 THE RISE OF CARRY by an economist formerly at Indiana University, Utpal Bhattacharya. In his paper, titled “The Optimal Design of Ponzi Schemes in Finite Economies,” Bhattacharya shows that in a Ponzi scheme that is going to terminate, it can still be rational to participate in the final round (when contributions are considered as taking place in rounds) if the scheme is sufficiently large and a post-collapse bailout is anticipated that will, inevitably, impose costs on nonparticipants.1 Extending this idea, an interpretation is that even if it is considered likely to be at a late stage in the viability of the scheme, it can be rational to be a participant.

The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry by William K. Black

accounting loophole / creative accounting, affirmative action, Alan Greenspan, Andrei Shleifer, Black Monday: stock market crash in 1987, book value, business climate, cognitive dissonance, corporate governance, corporate raider, Donald Trump, fear of failure, financial deregulation, friendly fire, George Akerlof, hiring and firing, junk bonds, margin call, market bubble, Michael Milken, money market fund, moral hazard, offshore financial centre, Ponzi scheme, race to the bottom, Ronald Reagan, Savings and loan crisis, short selling, The Market for Lemons, transaction costs

They transact with each other or with “straws” on what appears to be an arm’s-length basis, but is really a fraud that massively overvalues assets in order to create fictitious income and hide real losses. Control frauds grow rapidly (Black 1993d). The worst control frauds are Ponzi schemes, named after Carlo Ponzi, an early American fraud. A Ponzi must bring in new money continuously to pay off old investors, and the fraudster pockets a percentage of the take. The record “income” that the accounting fraud produces makes it possible for the Ponzi scheme to grow. S&Ls made superb control frauds because deposit insurance permitted even insolvent S&Ls to grow. The high-tech bubble of the 1990s allowed similarly massive growth.

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Nevertheless, he gave the industry the ability to grow massively, and he took no action to stop the large number of S&Ls that began to grow rapidly. The results were, predictably, disastrous. THE ADC PONZI SCHEME The proposed net worth rule restricted growth by increasing capital requirements for faster growing S&Ls. Gray proposed to reverse the Bank Board’s prior policy, five-year averaging, which reduced the capital requirement for fast growers. Gray acted because of the tendency of fast growers to become the worst failures. The agency did not understand the acquisition, development, and construction (ADC) Ponzi scheme fully when it drafted the rule. This was ironic because the rule struck the control frauds’ Achilles’ heel and proved the most critical act of reregulation.

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Surely, it is in the interest of control frauds to make profitable loans so they can stay in business and continue to loot the corporation? Most people (fortunately) do not think like white-collar criminals. Control frauds operate by different, perverse rules that harm society, but that does not mean they are irrational. A Ponzi scheme invariably collapses, but that does not mean that the fraud fails: the corrupt CEO can make a great deal of money looting the company. The purported profitability of the Ponzi schemes, combined with deposit insurance, meant that S&Ls could grow rapidly for several years before they collapsed. Such CEOs did not have the option of making money honestly, as my discussion about the inability to grow out of your problem illustrated.

Nobody's Fool: Why We Get Taken in and What We Can Do About It by Daniel Simons, Christopher Chabris

Abraham Wald, Airbnb, artificial general intelligence, Bernie Madoff, bitcoin, Bitcoin "FTX", blockchain, Boston Dynamics, butterfly effect, call centre, Carmen Reinhart, Cass Sunstein, ChatGPT, Checklist Manifesto, choice architecture, computer vision, contact tracing, coronavirus, COVID-19, cryptocurrency, DALL-E, data science, disinformation, Donald Trump, Elon Musk, en.wikipedia.org, fake news, false flag, financial thriller, forensic accounting, framing effect, George Akerlof, global pandemic, index fund, information asymmetry, information security, Internet Archive, Jeffrey Epstein, Jim Simons, John von Neumann, Keith Raniere, Kenneth Rogoff, London Whale, lone genius, longitudinal study, loss aversion, Mark Zuckerberg, meta-analysis, moral panic, multilevel marketing, Nelson Mandela, pattern recognition, Pershing Square Capital Management, pets.com, placebo effect, Ponzi scheme, power law, publication bias, randomized controlled trial, replication crisis, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, Sharpe ratio, short selling, side hustle, Silicon Valley, Silicon Valley startup, Skype, smart transportation, sovereign wealth fund, statistical model, stem cell, Steve Jobs, sunk-cost fallacy, survivorship bias, systematic bias, TED Talk, transcontinental railway, WikiLeaks, Y2K

BitConnect disguised its fraudulent nature with a variety of phony transfers and other complex transactions to make it look like its customers’ BitConnect investments were increasing in value. But when customers wanted to extract those profits, they were paid from deposits made by other investors. In other words, BitConnect was a classic Ponzi scheme dressed up in modern digital currency clothes. Ponzi schemes are named after Charles Ponzi, an Italian immigrant living in Boston who, in 1919, thought he had found a way to make money by buying and selling international postal coupons in different countries. Suppose such a coupon was being sold for the equivalent of $1 at post offices in Italy but for $2 in the United States.

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Rumors of his bankruptcy triggered a rush to withdraw, a criminal investigation, and Ponzi’s conviction for fraud.4 A Ponzi scheme is now defined as a business structure in which early participants profit at the direct expense of later ones. Commonly, victims think their money is being used to trade real assets. In reality, some is being stolen by the operators, some is paid to other investors as “profits,” and the rest is held in reserve to pay for future withdrawals so the scam can continue. Most Ponzi schemes follow the same script. The scammer promises an unusually high and consistent monthly or quarterly return and describes the investment principal as completely safe from loss.

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Celsius offered 18.9 percent interest per year on Bitcoin deposits but stopped allowing withdrawals during the market downturn early in 2022 and filed for bankruptcy later that year.6 SMOOTH LIKE BUTTER The phony “hedge fund” operated by Bernard L. Madoff was perhaps the largest and longest-running Ponzi scheme on record. Madoff started managing money for people in the early 1960s, but his Ponzi scheme began later (perhaps as early as the 1970s and definitely by 1993). From that point until 2008, when the fraud was exposed and the fund shut down, Madoff made no real trades for his customers. Investors deposited about $20 billion with Madoff over the years, and according to their account statements, there should have been about $65 billion in the fund when it closed.

Tulipomania: The Story of the World's Most Coveted Flower & the Extraordinary Passions It Aroused by Mike Dash

fixed income, Ponzi scheme, random walk, South Sea Bubble, spice trade, trade route, tulip mania

The hyacinth trade Krelage, Bloemenspeculatie in Nederland, pp. 142–96, and Krelage, Drie Eeuwen Bloembollenexport, pp. 13, 645–55; Garber, “Tulip-mania,” pp. 553–54; Bulgatz, Ponzi Schemes, pp. 109–14. A $4,000 bottle of Coca-Cola Pendergrast, For God, Country, p. 211. The history of the tulip to the present day Krelage, Drie Eeuwen Bloembollen-export, pp. 15–18. Craze for dahlias Bulgatz, Ponzi Schemes, pp. 108–09. During this episode there was even talk of the propagation of blue dahlias—as much a botanical impossibility as the black tulip. Craze for gladioli Posthumus, “Tulip Mania in Holland,” p. 148. Chinese spider lily mania Malkiel, Random Walk down Wall Street, pp. 82–83. Florida land boom Bulgatz, Ponzi Schemes, pp. 46–75. BIBLIOGRAPHY Unpublished Material Municipal Archives, Haarlem Notarial registers, vols. 120–50 Burial registers, vols. 70–76 Index to Heerenboek Manuscript entitled Aanteekeningen van C.

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Many of the short accounts of the subject are based on badly flawed popular studies, most notably Charles Mackay’s entertaining but misleading Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (Ware: Wordsworth Editions, 1995), which remains in print today despite having originally appeared in 1841. (Much more reliable, though still dependent on secondary sources, is the fairly extensive modern reanalysis by Joseph Bulgatz, published in Ponzi Schemes, Invaders from Mars and More Extraordinary Popular Delusions and the Madness of Crowds [New York: Harmony, 1992], which has, however, attracted very little attention.) Apart from contemporary pamphlets, collected by E. H. Krelage in De Pamfletten van den Tulpenwindhandel 1636–1637 (The Hague: Martinus Nijhoff, 1942), the most valuable Dutch sources are the solicitors’ acts, which still exist for most of the cities caught up in the mania and record not only some of the (comparatively rare) legal agreements for the purchase of tulip bulbs but also the proceedings brought as a result of the collapse of prices in 1637.

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Baudartius and the pressure of overpopulation Deursen, Plain Lives, pp. 3–4, 8. Spread of the fashion for gardening in the Netherlands Cotterell, Amsterdam, pp. 88, 131; Brereton, Travels in Holland, p. 38; Mundy, Travels of Peter Mundy, vol. 4, p. 75; Segal, Tulips Portrayed, p. 8; Bulgatz, Ponzi Schemes, p. 86. Dutch savings Temple, Observations, p. 102. The gambling impulse Deursen, Plain Lives, pp. 67–68, 105–06; Schama, Embarrassment of Riches, pp. 306–07, 347; Zumthor, Daily Life in Rembrandt’s Holland, p. 76. Chapter 10. Boom The course of the mania is set out best in E. H. Krelage, Bloemenspeculatie in Nederland: De Tulpomanie van 1636–37 en de Hyacintenhandel 1720–36 (Amsterdam, 1942).

Warnings by Richard A. Clarke

"Hurricane Katrina" Superdome, active measures, Albert Einstein, algorithmic trading, anti-communist, artificial general intelligence, Asilomar, Asilomar Conference on Recombinant DNA, Bear Stearns, behavioural economics, Bernie Madoff, Black Monday: stock market crash in 1987, carbon tax, cognitive bias, collateralized debt obligation, complexity theory, corporate governance, CRISPR, cuban missile crisis, data acquisition, deep learning, DeepMind, discovery of penicillin, double helix, Elon Musk, failed state, financial thriller, fixed income, Flash crash, forensic accounting, friendly AI, Hacker News, Intergovernmental Panel on Climate Change (IPCC), Internet of things, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge worker, Maui Hawaii, megacity, Mikhail Gorbachev, money market fund, mouse model, Nate Silver, new economy, Nicholas Carr, Nick Bostrom, nuclear winter, OpenAI, pattern recognition, personalized medicine, phenotype, Ponzi scheme, Ray Kurzweil, Recombinant DNA, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Ronald Reagan, Sam Altman, Search for Extraterrestrial Intelligence, self-driving car, Silicon Valley, smart grid, statistical model, Stephen Hawking, Stuxnet, subprime mortgage crisis, tacit knowledge, technological singularity, The Future of Employment, the scientific method, The Signal and the Noise by Nate Silver, Tunguska event, uranium enrichment, Vernor Vinge, WarGames: Global Thermonuclear War, Watson beat the top human players on Jeopardy!, women in the workforce, Y2K

For this strategy, you do not need to be a genius, working the market night and day; you don’t need to make any trades at all. You just need to keep taking in new money so you have enough to pay off investors who want to cash out. All the rest, you keep. There is a name for this strategy, and it is called a Ponzi scheme, named for the Italian-American Charles Ponzi, who ran a short-lived version of such a racket in 1920 in Boston, conning a flood of new investors. A Ponzi scheme involves no trades and no investments. It is a pure sham. And that is what Harry figured Bernie Madoff was doing. THE CASSANDRA MOMENT At Rampart Investment Management, Markopolos, Casey, and Chelo were fascinated by the scam.

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Elie Wiesel’s Foundation for Humanity lost $15 million, everything it had; Wiesel and his wife lost millions more personally.19 When it was all said and done, the collapse of Madoff’s Ponzi scheme brought crippling financial losses to more than 13,500 victims. The shock waves widened far beyond the individual account holders. When philanthropists and foundations took a hit, so did the hospitals, museums, and charities they supported. Thanks to his network of feeder funds, Madoff had built the first truly worldwide Ponzi scheme, with victims in Latin America, China, Japan, Korea, Singapore, and Dubai. Europe was especially hard hit by L’affaire Madoff, as it came to be called in Geneva and Paris.

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David Nakamura and Chico Harlan, “Japanese Nuclear Plant’s Evaluators Cast Aside Threat of Tsunami,” Washington Post, Mar. 23, 2011, www.washingtonpost.com/world/japanese-nuclear-plants-evaluators-cast-aside-threat-of-tsunami/2011/03/22/AB7Rf2KB_story.html (accessed Oct. 4, 2016). CHAPTER 6: THE ACCOUNTANT: MADOFF’S PONZI SCHEME 1. Enormous amounts have been written about the Madoff case, but we benefited particularly from Harry Markopolos’s own book, No One Would Listen: A True Financial Thriller (Hoboken, NJ: Wiley, 2010); Erin Arvedlund, Too Good To Be True: The Rise and Fall of Bernie Madoff (New York: Portfolio, 2009); U.S. Security and Exchange Commission Office of Inspector General, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme (Public Version) (2009); and a series of articles by Mark Seal that appeared in Vanity Fair magazine as “The Madoff Chronicles,” in April, June, and September 2009. 2.

Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, book value, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, Cornelius Vanderbilt, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, flying shuttle, Glass-Steagall Act, Gordon Gekko, Henri Poincaré, Henry Singleton, high net worth, impact investing, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, John Bogle, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, margin call, means of production, Menlo Park, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Performance of Mutual Funds in the Period, Ponzi scheme, Post-Keynesian economics, price mechanism, principal–agent problem, profit maximization, proprietary trading, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Sand Hill Road, Savings and loan crisis, seminal paper, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, tail risk, technology bubble, Teledyne, The Wealth of Nations by Adam Smith, time value of money, tontine, too big to fail, transaction costs, two and twenty, underbanked, Vanguard fund, working poor, yield curve

Or, even if curiosity did not motivate them, why did the simple realities of key man risk not spur them—for was it wise to continue having a man of seventy running a portion of this ostensibly very lucrative business no one else in the firm understood? Shedding light on this question are Bernie Madoff’s own contentions that it should have been abundantly obvious to the SEC that he was running a Ponzi scheme. Madoff said, “I was astonished. They never even looked at my stock records.” He also noted that investigators did not check with the Depository Trust Company. “If you’re looking at a Ponzi scheme, it’s the first thing you do,” said Madoff.4 If Madoff believed that the commission, charged with overseeing thousands of firms, should have had no difficulty in ascertaining that a fraud was underway at his company, then surely his two sons, who spent their entire workweeks directing a part of the firm, had to have figured it out.

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Almost comically, the House Appropriations Committee substantially scaled back the budget request for fiscal year 2012 and provided only the same amount of money as it had in fiscal year 2011, despite the new challenges presented by Dodd-Frank. Most puzzling of all, however, were some of the reasons cited by the committee for the decision, including that it “remains concerned with the SEC’s track record in dealing with Ponzi schemes.”165 The solution to the commission’s inability to properly identify and prosecute more cases of Ponzi schemes clearly was not to leave it even more bereft of resources than before. The decisions to reduce the resources of the SEC are seemingly politically motivated attempts to limit the agency’s reach. After all, legislators are wrong to cite the size of the federal deficit as a reason to curtail the SEC’s budget so substantially, because the SEC’s collection of fees and fines is greater than its own budget.166 Fraud, Market Manipulation, and Insider Trading 195 The SEC is hardly a perfect organization.

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Straney, Securities Fraud, 83. Ponzi v. Fessenden, 258 U.S. 254 (1922). Erin Skarda, “William Miller, the Original Schemer,” Time, March 7, 2012, http://content.time.com/time/specials/packages/article/0,288 04,2104982_2104983_2104992,00.html. “A Century of Ponzi Schemes,” DealBook (blog), New York Times, December 15, 2008, http://dealbook.nytimes.com/2008/12/15/a-century-of -ponzi-schemes. Skarda, “William Miller.” Darby, “In Ponzi We Trust.” John Steele Gordon, “Pyramid Schemes Are as American as Apple Pie,” Wall Street Journal, December 17, 2008, http://online.wsj.com/news /articles/SB122948144507313073. Ibid. Ibid.

The Glass Hotel by Emily St. John Mandel

Bernie Madoff, big-box store, discrete time, East Village, high net worth, McMansion, off-the-grid, Panamax, Pepto Bismol, Ponzi scheme, sovereign wealth fund, white picket fence, Y2K

He was sitting behind his desk, Claire crying on the sofa, Harvey staring into space, while Vincent fidgeted around with a coat and shopping bag and then sat and stared at him until he finally had to tell her: “Vincent,” he said, “do you know what a Ponzi scheme is?” “Yes,” Vincent said. Claire, from the sofa, still crying: “How do you know what a Ponzi scheme is, Vincent? Did he tell you? Did you know about this? I swear to god, if you knew about this, if he told you…” “Of course he didn’t tell me,” Vincent said. “I know what a Ponzi scheme is because I’m not a fucking idiot.” He thought, That’s my girl. * * * — In the counterlife, he walks through a hotel corridor—wide and silent with modernist sconces, the corridor of the hotel on Palm Jumeirah—and takes the stairs this time, walking slowly through the cool air.

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He spoke very calmly, staring at a painting of Jonathan’s yacht on the opposite wall. He seemed curiously detached from the scene. “Just tell her,” Claire said. “Careful, now,” Harvey said in that same tone of disinterest. After a pained interval of silence, Jonathan settled on a question. “Vincent,” he said, “do you know what a Ponzi scheme is?” PART THREE 10 THE OFFICE CHORUS December 2008 1 We had crossed a line, that much was obvious, but it was difficult to say later exactly where that line had been. Or perhaps we’d all had different lines, or crossed the same line at different times. Simone, the new receptionist, didn’t even know the line was there until the day before Alkaitis was arrested, which is to say the day of the 2008 holiday party, when Enrico came around to our desks in the late morning and told us that Alkaitis wanted us assembled in the seventeenth-floor conference room at one o’clock.

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We shuffled our papers, or stared fixedly at our notes, or stared into space and imagined leaving the country (Oskar), or looked out the window and made firm, actionable plans to leave the country (Enrico), or looked out the window and decided fatalistically that it was too late to go anywhere (Harvey), or indulged in the fantastical notion that somehow everything would work itself out (Joelle). Ron glanced around, confused. He often seemed confused, the rest of us had noticed that about him, and it seemed he actually didn’t know what we did here, which was baffling in retrospect: what did he think we were doing, if not running a Ponzi scheme? When we talked among ourselves about the Arrangement, as we’d come to refer to it, what exactly did he think we were discussing? Still, there it was. He looked around in the silence, cleared his throat, and said, “Well, we have so much trading activity with the London office already, though.” The silence that followed this remark was, if possible, even worse than the silence that had preceded it.

American Kleptocracy: How the U.S. Created the World's Greatest Money Laundering Scheme in History by Casey Michel

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Bellingcat, Berlin Wall, Bernie Sanders, bitcoin, clean water, coronavirus, corporate governance, cross-border payments, cryptocurrency, deindustrialization, Donald Trump, en.wikipedia.org, estate planning, Fall of the Berlin Wall, fixed income, forensic accounting, Global Witness, high net worth, hiring and firing, income inequality, Internet Archive, invention of the telegraph, Jeffrey Epstein, joint-stock company, Kickstarter, Maui Hawaii, McMansion, megaproject, Mikhail Gorbachev, New Journalism, offshore financial centre, opioid epidemic / opioid crisis, Ponzi scheme, race to the bottom, Ronald Reagan, Silicon Valley, Silicon Valley startup, Steve Jobs, too big to fail

And as Gontareva soon discovered, instead of acting as a dependable partner of Ukrainians across the country, those behind PrivatBank had launched the greatest Ponzi scheme the country had ever seen. “No one imagined it was like this,” Gontareva told me. “It was all a Ponzi scheme. There were no assets at all.… That’s why I called this the biggest fraud of the twenty-first century.”12 * * * AFTER NATIONALIZING PRIVATBANK, authorities in Kyiv had one question: Where had all the money gone? As investigators and forensic accountants later discovered, the PrivatBank Ponzi scheme stood—as with many Ponzi schemes—both confusingly complex and perfectly straightforward. The key to PrivatBank’s Ponzi success was what some dubbed a “Shadow Bank”13 or a “Bank within the Bank.”14 Here’s how the scheme worked, according to both Ukrainian and American authorities.

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Second, and perhaps more important, his sellers would have been surprised to learn that this was no rich kid playing and investing with his parents’ money. In reality, his finances were linked directly to a post-Soviet oligarch named Ihor Kolomoisky, who posed as a Ukrainian steel and banking magnate—and who at the time was allegedly helping to run one of the largest Ponzi schemes the world had ever seen, conning depositors who used his Ukrainian bank. Kolomoisky was hardly a well-known name in the U.S. Yet this Ukrainian businessman was not only the secret money behind Schochet’s network—he was also a key oligarch rising in power and wealth alike, threatening Ukraine’s democratic trajectory while allegedly pilfering billions of dollars from unsuspecting Ukrainians along the way.

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Using Delaware companies and Ohio steel mills, using investments in Texas and Kentucky and Illinois, and using a series of skyscrapers and office buildings in Cleveland, Kolomoisky could take full advantage of America’s money laundering services—all to help clean the proceeds of his massive Ukrainian Ponzi scheme. But that wasn’t all. It would take years, as the following chapters will reveal, for us to learn that this Ukrainian oligarch, who had become the kingpin of Cleveland, had also become the embodiment of something else entirely. For it wasn’t just American money laundering that Kolomoisky was interested in.

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

After the financial crisis and the subsequent stock market decline between 2008 and 2009, however, the number of Ponzi schemes fell sharply.44 In fact, Deason, Rajgopol, and Waymire estimated there was a correlation of 47.9 percent between the S&P 500 quarterly return and the number of SEC-prosecuted Ponzi schemes per quarter. Why are Ponzi schemes so popular during economic booms compared to economic busts? Wouldn’t the opposite be the case, since people naturally would want to do better in bad times? Deason, Rajgopol, and Waymire noted that Ponzi schemes are harder to sustain in declining markets, as we saw with Madoff. Also, SEC enforcement budgets tend to increase after bubbles burst, and there may be more demand for enforcement by politicians and the public. They also confirmed that Ponzi schemes are more likely when there’s some affinity between the perpetrator and the victim, such as a common religious background or shared membership in an ethnic group, or when the victim group tends to place more trust in others (e.g., senior citizens), reminding us that culture can be exploited maliciously.

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This pattern suggests a rising tide makes fraudulent activity a more acceptable corporate risk-taking behavior, but a sinking boat has the opposite effect. What about scams like Madoff’s Ponzi scheme? Researchers Stephen Deason, Shivaram Rajgopal, and Gregory B. Waymire found a very similar pattern in the number of Ponzi schemes prosecuted by the SEC between 1988 and 2012 (see figure 10.6). There was an upward trend during the bull market of the late 1990s, a decline in the aftermath of the Internet bust of 2001–2002, and another increase as the market climbed. After the financial crisis and the subsequent stock market decline between 2008 and 2009, however, the number of Ponzi schemes fell sharply.44 In fact, Deason, Rajgopol, and Waymire estimated there was a correlation of 47.9 percent between the S&P 500 quarterly return and the number of SEC-prosecuted Ponzi schemes per quarter.

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“There’s no hard and fast rule about field work but … field work cannot go on indefinitely because people have a hunch,” one NERO assistant director later testified.30 Markopolos’s 2005 complaint reached NERO with the strong endorsement of the SEC’s Boston office.31 However, the fruitless earlier examination of claims against Madoff biased the NERO examiners against Markopolos’s claim.32 The examiners quickly discounted Markopolos’s idea that Madoff was running a Ponzi scheme. The staff attorney involved with the examination wrote at the beginning of the investigation that there wasn’t “any real reason to suspect some kind of wrongdoing … all we suspect is disclosure problems” (emphasis in the original).33 The Office of Investigations was harsh in its verdict: “As a result of this initial failure, the Enforcement staff never really conducted an adequate and thorough investigation of Markopolos’s claim that Madoff was operating a Ponzi scheme.”34 The Madoff debacle, which I’ve streamlined, was only one of many events that caused the internal culture of the SEC to fall under scrutiny.

How to Predict the Unpredictable by William Poundstone

accounting loophole / creative accounting, Albert Einstein, Bernie Madoff, Brownian motion, business cycle, butter production in bangladesh, buy and hold, buy low sell high, call centre, centre right, Claude Shannon: information theory, computer age, crowdsourcing, Daniel Kahneman / Amos Tversky, Edward Thorp, Firefox, fixed income, forensic accounting, high net worth, index card, index fund, Jim Simons, John von Neumann, market bubble, money market fund, pattern recognition, Paul Samuelson, Ponzi scheme, power law, prediction markets, proprietary trading, random walk, Richard Thaler, risk-adjusted returns, Robert Shiller, Rubik’s Cube, statistical model, Steven Pinker, subprime mortgage crisis, transaction costs

— Dan Guterman See notes on this chapter Contents Prologue: The Outguessing Machine Part One: The Randomness Experiment 1 The Zenith Broadcast 2 How to Outguess Rock, Paper, Scissors 3 How to Outguess Multiple-Choice Tests 4 How to Outguess the Lottery 5 How to Outguess Tennis Serves 6 How to Outguess Football Penalty Kicks 7 How to Outguess Card Games 8 How to Outguess Passwords 9 How to Outguess Crowd-Sourced Ratings 10 How to Outguess Fake Numbers 11 How to Outguess Manipulated Numbers 12 How to Outguess Ponzi Schemes Part Two: The Hot Hand Theory 13 In the Zone 14 How to Outguess Football Bets 15 How to Outguess Oscar Pools 16 How to Outguess Big Data 17 How to Outguess Retail Prices 18 How to Outguess Property Prices 19 How to Outguess the Unpredictable 20 How to Outguess the Stock Market Epilogue: Fortune’s Wheel Acknowledgments Notes Bibliography Index Prologue The Outguessing Machine The outguessing machine began with a messy laboratory accident.

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“This could be good — for the seventeenth floor.” Somehow, through Bernie’s wizardry, the $4-million disaster was wished away into that cornfield. It never haunted Mark again. Mark’s lucky streak resumed, lasting until the awful day nine years later when he and his brother turned in their father for running the largest Ponzi scheme in history. Two years after that, the unrelenting scandal drove Mark to end his once-perfect life. It seems such a simple thing to predict the random walks that determine our fates. It’s not, and one reason is that our intuitions about close-to-random sequences often fail us. Misprediction can be the stuff of tragedy.

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This is common with expense accounts. • Digit analysis cannot “prove” anything by itself. Its value is in flagging data meriting investigation by a good auditor. Be skeptical of claims (of election fraud, say) based on first-digit Benford tests. See notes on this chapter Twelve How to Outguess Ponzi Schemes From the 1970s through 2008, three longtime employees of Bernard L. Madoff Investment Securities—David Kugel, Annette Bongiorno, and Joann Crupi — did the paperwork. “I worked together with them to create the false trades and make them appear on investment advisor client statements and confirmations,” Kugel told a federal judge.

Lying for Money: How Fraud Makes the World Go Round by Daniel Davies

Alan Greenspan, bank run, banking crisis, Bernie Madoff, bitcoin, Black Swan, Bretton Woods, business cycle, business process, collapse of Lehman Brothers, compound rate of return, cryptocurrency, fake it until you make it, financial deregulation, fixed income, Frederick Winslow Taylor, Gordon Gekko, high net worth, illegal immigration, index arbitrage, junk bonds, Michael Milken, multilevel marketing, Nick Leeson, offshore financial centre, Peter Thiel, Ponzi scheme, price mechanism, principal–agent problem, railway mania, Ronald Coase, Ronald Reagan, Savings and loan crisis, scientific management, short selling, social web, South Sea Bubble, tacit knowledge, tail risk, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, time value of money, vertical integration, web of trust

Marino dealt with the problem by sending the accounts late on a Friday, on the assumption that by Monday morning they would be buried under a pile of stuff that arrived over the weekend and would never get any real scrutiny. This shows a pretty good understanding of the brokerage business.* The second of Marino’s insights, however, was a work of genius. A fraudulent hedge fund, unlike traditional Ponzi schemes, could go on indefinitely. The mechanics of a Ponzi scheme work by using new inflows to cover investor withdrawals, and since the returns promised to investors compound over time, the fraud needs to keep finding new victims at an ever increasing rate. But what if there aren’t any withdrawals? A hedge fund with good (reported) performance won’t get many requests from investors for their money back – they want to keep it in the fund if it’s doing well.

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As an audit report on the SEC came in (the valuation of which was pointlessly disputed by Ponzi), it finally became indisputable that there had never been anything like enough assets to pay the bonds back with 50 per cent interest, and Ponzi was taken away by a US marshal. Ponzi is ill-served as a fraudster by his eponym. He was a considerably more sophisticated operator than the epigones and wannabes behind most modern ‘Ponzi’ schemes. He was aware from the earliest stages of his scheme that he was only buying time and was relying on his ability to find another idea, as brilliant as the postal scheme but not as impossible to execute. He was decades ahead of his time in understanding that ‘assets controlled’ is more important to a wholly dishonest actor than ‘assets owned’.

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And any attempt to alleviate the cash drain by selling more bonds was just increasing the size of the underlying problem. The mathematics of compound interest, particularly at 50 per cent every ninety days, was too much for him. Despite his claims to the contrary, the possibility of escape never looks to have been better than theoretical. And this is the essence of the ‘Ponzi scheme’ – the single feature that unites all subsequent frauds bearing the name of Charles Ponzi is the attempt to defeat the runaway nature of fraud by raising new money faster than you pay out old. Pyramid schemes The modern ‘pyramid scheme’ is a rough pile of rocks compared to the Venetian palazzo of Ponzi’s original template.

A Man for All Markets by Edward O. Thorp

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", 3Com Palm IPO, Alan Greenspan, Albert Einstein, asset allocation, Bear Stearns, beat the dealer, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Black-Scholes formula, book value, Brownian motion, buy and hold, buy low sell high, caloric restriction, caloric restriction, carried interest, Chuck Templeton: OpenTable:, Claude Shannon: information theory, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Edward Thorp, Erdős number, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, Garrett Hardin, George Santayana, German hyperinflation, Glass-Steagall Act, Henri Poincaré, high net worth, High speed trading, index arbitrage, index fund, interest rate swap, invisible hand, Jarndyce and Jarndyce, Jeff Bezos, John Bogle, John Meriwether, John Nash: game theory, junk bonds, Kenneth Arrow, Livingstone, I presume, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, Mason jar, merger arbitrage, Michael Milken, Murray Gell-Mann, Myron Scholes, NetJets, Norbert Wiener, PalmPilot, passive investing, Paul Erdős, Paul Samuelson, Pluto: dwarf planet, Ponzi scheme, power law, price anchoring, publish or perish, quantitative trading / quantitative finance, race to the bottom, random walk, Renaissance Technologies, RFID, Richard Feynman, risk-adjusted returns, Robert Shiller, rolodex, Sharpe ratio, short selling, Silicon Valley, Stanford marshmallow experiment, statistical arbitrage, stem cell, stock buybacks, stocks for the long run, survivorship bias, tail risk, The Myth of the Rational Market, The Predators' Ball, the rule of 72, The Wisdom of Crowds, too big to fail, Tragedy of the Commons, uptick rule, Upton Sinclair, value at risk, Vanguard fund, Vilfredo Pareto, Works Progress Administration

The scheme had already been operating for more than twenty years! Having shown that Madoff was posting made-up trades to my client’s accounts, and that he was apparently doing so to several other investors with whom I spoke, I had the smoking gun that proved fraud. I warned people in my network, forecasting an ever-expanding Ponzi scheme that one day would end disastrously. Ponzi schemes take profits to investors. They use the money the investors put in but eventually need more, which they get by recruiting new investors. These new investors also have to be paid, leading the Ponzi operators to sign up still more. The longer it went undetected the bigger it would grow and the worse it would be when it collapsed.

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For the next ten years Markopoulos attempted to get the SEC to investigate, but it brushed him aside repeatedly, cleared Madoff after superficial investigations, and quashed a request from the Boston office, prompted by Markopoulos, to investigate Madoff Investment as a possible Ponzi scheme. In a remarkable 477-page document, “Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme—Public Version,” August 31, 2009, Report No. OIG-509, the SEC investigates and documents its own repeated failures, beginning in 1992 and continuing until Madoff confessed in 2008, to follow up on obvious clues, pointed complaints, and clear violations of securities laws.

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It was by chance during this time that I discovered the greatest of all financial frauds. On the afternoon of Thursday, December 11, 2008, I got the news I had been expecting for more than seventeen years. Calling from New York, my son, Jeff, told me Bernie Madoff confessed to having defrauded investors of $50 billion in the greatest Ponzi scheme in history. “It’s what you predicted in…1991!” he said. On a balmy Monday morning in the spring of ’91, I arrived at the New York office of a well-known international consulting company. The investment committee hired me as an independent adviser to review their hedge fund investments. I spent a few days examining performance histories, business structures, and backgrounds of managers, as well as making onsite visits.

Filthy Rich: A Powerful Billionaire, the Sex Scandal That Undid Him, and All the Justice That Money Can Buy: The Shocking True Story of Jeffrey Epstein by James Patterson, John Connolly, Tim Malloy

"World Economic Forum" Davos, Bear Stearns, Bernie Madoff, corporate raider, Donald Trump, East Village, Elon Musk, Isaac Newton, Jeffrey Epstein, Julian Assange, junk bonds, Murray Gell-Mann, Ponzi scheme, Stephen Hawking, WikiLeaks

By all outward appearances, he could afford it: seventy lawyers worked in his firm, which had offices in Florida, New York, and Venezuela. But Rothstein’s millions actually came from a $1.2 billion Ponzi scheme he’d been running since 2005. In April of 2009, Bradley Edwards joined Rothstein’s firm. The lawyer brought his papers along, and Rothstein showed those pertaining to Epstein to potential investors. In exchange for a lump sum up front, Rothstein said, investors would receive a far larger chunk of money later, which Epstein would pay in future settlements. Edwards and Rothstein both say that Edwards had no knowledge whatsoever of the Ponzi scheme. (Prosecutors, and the Florida Bar, agree.) Edwards left as soon as he caught wind of the scheme, in November of 2009.

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“Upon information and belief,” the suit stated, “EDWARDS knew or should have known that ROTHSTEIN was utilizing RRA as a front for the massive Ponzi scheme and/or were selling an alleged interest or investment in the Civil Actions (and other claims) involving Epstein.” The suit also claimed that, “By using Civil Actions against EPSTEIN as ‘bait’ and fabricating settlements regarding same, ROTHSTEIN and others were able to lure investors into ROTHSTEIN’S lair and bilked them of millions of dollars which, in turn, was used to fund the litigation against EPSTEIN for the sole purpose of continuing the massive Ponzi scheme.” Moreover, the suit claimed, L.M. had “testified she never had sex with Epstein; worked at numerous strip clubs; is an admitted prostitute and call girl; has a history of illegal drug use (pot, painkillers, Xanax, Ecstasy); and continually asserted the 5th Amendment during her depositions in order to avoid answering relevant but problem questions for her.”

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He bought his own jet, a luxury yacht, and a Long Island mansion to go with his expensive Manhattan apartment. He’d also briefly owned a controlling interest in the New York Post. To cover his tracks, Hoffenberg had been taking money from investors and using it to pay previous investors. It was a classic Ponzi scheme—one of the biggest in history—and Hoffenberg ended up spending nineteen years in a federal prison. Why was Epstein not implicated in the case? All that Hoffenberg will say when asked is: “Ask Robert Gold.” Another source suggests that Gold, the former federal prosecutor who had helped Epstein recover Ana Obregón’s money, kept the US attorney away from Epstein until there were only a few weeks left before the statute of limitations ran out.

Virus of the Mind by Richard Brodie

Abraham Maslow, cognitive dissonance, disinformation, Douglas Hofstadter, Dr. Strangelove, Gödel, Escher, Bach, joint-stock company, multilevel marketing, New Journalism, phenotype, Ponzi scheme, profit motive, publish or perish, Ralph Waldo Emerson, Richard Feynman, Stephen Hawking, Steven Levy

The pyramid then splits in two, with the two players in the row of two each becoming hosts eligible to make $4,000. Such a deal! Pyramid schemes rely on the same button-pushing memes that the Ponzi scheme does and add in the powerful force of evangelism. Since infected people have a stake in enrolling new players in the pyramid virus, the illusion of reward doesn’t need to be as great as with the Ponzi scheme. Rather than simply attracting new investors, there is now an army of recruiters intentionally infecting people with the pyramid virus. Although the pyramid virus’s spreading mechanism is different from the Ponzi scheme’s, the two institutions fall apart for the same reason. Dependent on exponential growth, they quickly 198 Designer Viruses (How to Start a Cult) exhaust the supply of players.

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When the newspaper story broke and people stopped investing, Ponzi was found to owe $7 million and have only $4 million in assets. The later investors were out of luck. *An entertaining exploration of Ponzi’s original scheme and several other interesting virus-like phenomena appear in Joseph Bulgatz’s book Ponzi Schemes, Invaders from Mars, & More Extraordinary Popular Delusions and the Madness of Crowds (Harmony Books, 1992). 197 virus of the mind The mind virus in the Ponzi scheme, though, had nothing to do with the scheme itself. It was the spreading of the strategy-meme Invest with Ponzi. Bundled with powerful button-pushing window of opportunity and reward memes—a Get rich quick meme—Ponzi’s scheme attracted so much attention that it spread quickly throughout the general public in Massachusetts and neighboring states.

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I would expect to see many profit-motivated viruses, many power-motivated ones, and perhaps a few motivated by someone’s vision of a better future for humanity. Profit Viruses Profit-motivated designer viruses, many of which are completely legal and aboveboard today, have their shady origins in the crooked Ponzi scheme.* Charles Ponzi was an Italian immigrant who opened a business in Boston in 1919 called the Securities Exchange Company. He offered to repay people’s investments in 90 days with 50 percent interest: an investment of $10 would bring $15 in three months. His story was that he bought international postal reply coupons in Europe and, due to currency fluctuations, redeemed them in the United States at a profit.

Duped: Double Lives, False Identities, and the Con Man I Almost Married by Abby Ellin

Bernie Madoff, bitcoin, Burning Man, business intelligence, Charles Lindbergh, cognitive dissonance, cognitive load, content marketing, dark triade / dark tetrad, Donald Trump, double helix, dumpster diving, East Village, fake news, feminist movement, forensic accounting, fudge factor, hiring and firing, Internet Archive, John Darwin disappearance case, longitudinal study, Lyft, mandatory minimum, meta-analysis, pink-collar, Ponzi scheme, post-truth, Robert Hanssen: Double agent, Ronald Reagan, Silicon Valley, Skype, Snapchat, TED Talk, telemarketer, theory of mind, Thomas Kuhn: the structure of scientific revolutions

Bourree Lam, “Why Is Utah the First State to Have a White-Collar Crime Registry?,” The Atlantic, March 29, 2016, https://www.theatlantic.com/business/archive/2016/03/utah-white-collar-crime/475896; Greg Smith and Associates, “Utah No. 5 on FBI List for Ponzi Schemes,” https://www.bestutahlawyer.com/Articles/Utah-No-5-on-FBI-List-for-Ponzi-Schemes. 40. Smith and Associates, “Utah No. 5”; State of Utah, “White Collar Crime Offender Registry,” https://www.utfraud.com/Home/Registry. 41. Email interview with author. 42. Ibid. 43. Ibid. 44. Ibid. 45. Dahl, “6 Facts on the Thin Line.” 46. Telephone interview with author. 47.

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“You moved everything out, the bed, the couch, all your clothes—only to bring it all back a few weeks later?” “Yes,” he said. I think he believed it himself. CAN YOU LOVE someone who has one foot in one world and one foot in another? I can’t. And ultimately, does it make a difference if the lies are to hide an illegitimate child, a dominatrix habit, an addiction to opioids, or a Ponzi scheme? It’s the same thing: a person with a hidden world, who looks you straight in the eye and vehemently denies your accusations. Who tells you the sky is plaid and makes you think there’s something wrong with you for believing it’s blue. I composed one final email: Hi there, I’ve written a bunch of emails and tossed them, so I’ll keep this brief.

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They were grateful that someone had shed light on the subject and, more importantly, not blamed them for being taken for such a ride. But secret lives are all around us, especially in today’s culture. Flip on the TV or surf the web and tales of gross betrayal will assault you: The respected Wall Street financier operating a billion-dollar Ponzi scheme. The friendly neighbor with three women imprisoned in his basement. A beloved comedian known as “America’s Dad” accused of drugging and sexually assaulting dozens of women.2 Married, anti-gay, family values–spouting politicians who solicit men in airport bathrooms. Political and environmental activists who are romantically involved with female group members, and sometimes have children with them—only to be revealed years later as undercover police officers spying for the state.3 While leading a double life sounds like the stomping ground of psychopaths, moles, and covert agents with indeterminate dialects, plenty of “normal” people in appearance and affect keep canyon-sized secrets from those in their immediate orbits.

Risk: A User's Guide by Stanley McChrystal, Anna Butrico

"Hurricane Katrina" Superdome, Abraham Maslow, activist fund / activist shareholder / activist investor, airport security, Albert Einstein, Apollo 13, banking crisis, Bernie Madoff, Boeing 737 MAX, business process, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, computer vision, coronavirus, corporate governance, cotton gin, COVID-19, cuban missile crisis, deep learning, disinformation, don't be evil, Dr. Strangelove, fake news, fear of failure, George Floyd, Glass-Steagall Act, global pandemic, Googley, Greta Thunberg, hindsight bias, inflight wifi, invisible hand, iterative process, late fees, lockdown, Paul Buchheit, Ponzi scheme, QWERTY keyboard, ride hailing / ride sharing, Ronald Reagan, San Francisco homelessness, School Strike for Climate, Scientific racism, Silicon Valley, Silicon Valley startup, Skype, social distancing, source of truth, Stanislav Petrov, Steve Jobs, Thomas L Friedman, too big to fail, Travis Kalanick, wikimedia commons, work culture

exchange the international coupons for American stamps: Mary Darby, “In Ponzi We Trust,” Smithsonian Magazine, December 1998, https://smithsonianmag.com/history/in-ponzi-we-trust-64016168/. investments would double: Jeannette L. Nolen, “Ponzi Scheme,” Encyclopedia Britannica Online, accessed September 22, 2020, https://britannica.com/topic/Ponzi-scheme; Darby, “In Ponzi We Trust.” pay the phony returns: “Ponzi Schemes,” U.S. Securities and Exchange Commission, accessed October 6, 2020, https://sec.gov/fast-answers/answersponzihtm.html. defrauded $15 million: Nolen, “Ponzi Scheme.” fourteen company-wide cultural values: Upon hearing complaints from employees about Uber’s toxic work culture, the company hired a prestigious law firm to conduct an investigation on the workplace and offer recommendations.

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The Securities and Exchange Commission (SEC) assumed that Madoff—an experienced financier who played a part in launching the Nasdaq stock market and himself advised the SEC on trading securities—was acting responsibly. But Madoff was secretly running a multibillion-dollar Ponzi scheme that, once revealed, resulted in a 150-year prison sentence. Charles Ponzi, the namesake of the “Ponzi scheme.” (Photo by Leslie Jones) The SEC wasn’t alone in assuming Madoff’s good intentions: JPMorgan, who ran his bank account, did not raise any red flags about signs of money laundering, nor did accounting firms identify anything suspicious in their financial reviews.

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Take former Uber CEO Travis Kalanick—whose behavior and leadership went unchecked as the company soared to unprecedented heights. Since 2009, Kalanick had revolutionized the ride-hailing industry, and in 2017 the tech start-up operated in more than seventy countries, valued at nearly $70 billion by its private investors. Beneath the hood of the car, however, was an engine of toxic corporate culture. ponzi scheming ■ How much is a stamp worth? In 1919 Charles Ponzi realized that there was profit potential in redeeming international postal reply coupons. Customers could exchange the international coupons for American stamps, and—if the country’s economy was weaker than that of the United States—could make a profit.

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

The theft was not complicated – high returns to savers were achieved by paying any withdrawals from the funds subscribed by new investors. The new investors were attracted by the success of those who had been in the scheme from the beginning. Ponzi schemes break down when the supply of new investors is insufficient to meet the withdrawals of the old. The greatest of all Ponzi schemes in history was that perpetrated by Bernard Madoff, who claimed high returns with low volatility from an investment strategy using derivative securities. In fact, no investment activity took place.25 During the global financial crisis the demand for redemptions increased and incoming funds shrank.

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Unable to meet withdrawals, Madoff turned himself in to the FBI and was duly sentenced to 140 years in jail. Some of those who invested with Ponzi and Madoff made money. Even if you know, or suspect, a Ponzi scheme, you might hope to get out in time, with a profit. I’ll be gone, you’ll be gone. Ponzi and Madoff went to prison because they lied. But the new economy bubble of 1999–2000 was a – perhaps legal – Ponzi scheme. Early investors made large profits, but it was later investors, attracted by the prospect of similar gains, who provided the funds that made these profits possible. Securities with no intrinsic value were bought and sold repeatedly by people whose motive for buying was knowledge of the profits that had already been made in such stocks and the expectation (fulfilled in many cases) that they would make similar profits by selling these stocks on at higher prices still.

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‘Payment in kind’ securities similarly buttressed their value with additional debt of the same kind: the reality of much Third World debt, where promises to pay were simply rolled forward into the future, was similar. Like the gambler in the casino with a martingale strategy who always plays another hand, the borrower defers the due date of payment whenever it falls due. Warren Buffett famously said of these structures that ‘it is impossible to default on a promise to pay nothing’.24 The Ponzi scheme is closely related to the martingale. This approach to thinking yourself rich is named after Charles Ponzi, who told investors (correctly) in the 1920s that international reply coupons, used by the world’s postal authorities, were mispriced. Profits could be earned by buying in one country and selling in another.

When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A) by Scott McCleskey

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, barriers to entry, Bear Stearns, Bernie Madoff, break the buck, call centre, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, Glass-Steagall Act, information asymmetry, invisible hand, Isaac Newton, iterative process, junk bonds, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, place-making, Ponzi scheme, prediction markets, proprietary trading, risk tolerance, Savings and loan crisis, shareholder value, statistical model, The Wealth of Nations by Adam Smith, time value of money, too big to fail, web of trust

There is some logic to creating a structure that is highly specialized and dispersed, with one and only one regulator for each sector. That regulator would be highly specialized and knowledgeable. But if it fails in its role, there is no Plan B. Criticisms of the SEC for its hidebound inability to listen to warnings about a Ponzi scheme big enough to make the Fortune 500, or of the legion of banking regulators for their failure to spot fraudulent mortgage activity, are not simply criticisms of the specific agencies. They also lay the foundation for the argument that redundancy and even overlap should be built into the structure.

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Firms with a high number of customer complaints, those that fared poorly in previous examinations, and those whose business puts them in frequent contact with retail and unsophisticated investors are likely to find themselves inspected more often than others. As such, a firm like Madoff Investment Securities, which did not have a high number of customer complaints (Ponzi schemes rarely do, since everyone is happy until the music stops), dealt primarily with wealthy investors, and had not had particularly bad previous inspection results, may fly under OCIE’s radar for years at a time. The second type of examination is the cause examination. These occur when the OCIE staff have reason to believe that specific violations of federal securities laws are occurring or have already occurred.

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With respect to the conduct of investigations, the lead attorney leads the investigation and determines the tactics, but the Branch Chief manages the broader strategy (i.e., what violations are to be investigated and when the investigation is complete). Understanding the workload of the SEC staff and the administrative processes involved in examinations and investigations provides important insight into how the SEC managed to miss a multibillion-dollar Ponzi scheme in spite of the fact that outsiders, and some of its own staff, had raised concerns. If you’ve ever watched a TV crime show, you’ve likely seen a cop (along with C12 06/16/2010 112 11:24:23 & Page 112 Nice Law, Now Go Do It: Regulators and Compliance Officers his partner or dog) working on one case at a time, which he or she or they solve within one hour minus time for commercials.

The Bitcoin Guidebook: How to Obtain, Invest, and Spend the World's First Decentralized Cryptocurrency by Ian Demartino

3D printing, AltaVista, altcoin, bitcoin, Bitcoin Ponzi scheme, blockchain, buy low sell high, capital controls, cloud computing, Cody Wilson, corporate governance, crowdsourcing, cryptocurrency, decentralized internet, distributed ledger, Dogecoin, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, fiat currency, Firefox, forensic accounting, global village, GnuPG, Google Earth, Haight Ashbury, initial coin offering, Jacob Appelbaum, Kevin Kelly, Kickstarter, litecoin, M-Pesa, Marc Andreessen, Marshall McLuhan, Oculus Rift, peer-to-peer, peer-to-peer lending, Ponzi scheme, prediction markets, printed gun, QR code, ransomware, Ross Ulbricht, Salesforce, Satoshi Nakamoto, self-driving car, selling pickaxes during a gold rush, Skype, smart contracts, Steven Levy, the medium is the message, underbanked, WikiLeaks, Zimmermann PGP

With a business such as an online casino, that might be reasonable; in 99 percent of other cases it is not and the company should be avoided. The most important thing to remember is that if it sounds like a scam, it probably is. Be wary of anyone who promises you instant or unrealistic returns on your investment. The basics of Ponzi schemes work in cryptocurrency just as well as in any other business. If older investors are being paid with the capital from new investments, you are dealing with a Ponzi scheme. People will claim all sorts of things to make it seem as if revenue is coming from elsewhere, so you have to do your own research and dig deep into anything at which you are going to throw any money. The offenders listed below hail from all over the Bitcoin spectrum.

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It is possible for cloud-mining companies to use the blockchain to prove they are actually mining and paying those profits to customers, but some don’t. If the company does not prove it has the hashing power it says it has, don’t go anywhere near it. Without that evidence, it is impossible to know whether what you are investing in is an actual mining operation and not a Ponzi scheme. Cloud-mining companies have been caught paying off older investors with new customers’ purchases, which is the very definition of a Ponzi scheme.2 Some people contend that cloud mining doesn’t make sense. If mining is more profitable than the fees gathered from customers, the reasonable question to ask is, why wouldn’t the companies instead mine with that hardware themselves rather than pass those profits on to customers?

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According to the article, they were using E-gold as their preferred method of payment because of its global reach and anonymous accounts.6 By this time, E-gold had become the second-largest online payment service, second only to the rapidly growing PayPal. It wasn’t just card thieves who were attracted to E-gold. Ponzi schemes were common with E-gold. Jackson worked with authorities and complied with government requests for information on user accounts—as it turned out, E-gold was not very anonymous if Jackson wanted to reveal a user’s identity. But the Secret Service, which was investigating the stolen credit card numbers, decided not to work with Jackson and sought to bring E-gold into the regulated space along with the likes of MoneyGram and Western Union.

Talking to Strangers: What We Should Know About the People We Don't Know by Malcolm Gladwell

Berlin Wall, Bernie Madoff, Black Lives Matter, borderless world, crack epidemic, disinformation, Ferguson, Missouri, financial thriller, light touch regulation, Mahatma Gandhi, Milgram experiment, moral panic, Ponzi scheme, Renaissance Technologies, Snapchat

When the SEC did nothing, Markopolos came back in October 2001. Then again in 2005, 2007, and 2008. Each time he got nowhere. Reading slowly from his notes, Markopolos described years of frustration. I gift-wrapped and delivered the largest Ponzi scheme in history to them, and somehow they couldn’t be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority. If a $50 billion Ponzi scheme doesn’t make the SEC’s priority list, then I want to know who sets their priorities. Harry Markopolos, alone among the people who had doubts about Bernie Madoff, did not default to truth. He saw a stranger for who that stranger really was.

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The next three chapters of Talking to Strangers are devoted to the ideas of a psychologist named Tim Levine, who has thought as much about the problem of why we are deceived by strangers as anyone in social science. The second chapter looks at Levine’s theories through the story of Bernie Madoff, the investor who ran the largest Ponzi scheme in history. The third examines the strange case of Jerry Sandusky, the Pennsylvania State University football coach convicted of sexual abuse. And this, the first, is about the fallout from that moment of crisis between the United States and Cuba in 1996. Does anything about Admiral Carroll and the Cuban shoot-downs strike you as odd?

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The volume numbers that he suggested he was doing [were] not supported by any evidence we could find.” Renaissance had doubts. So did Renaissance sell off its stake in Madoff? Not quite. They cut their stake in half. They hedged their bets. Five years later, after Madoff had been exposed as a fraud—the mastermind of the biggest Ponzi scheme in history—federal investigators sat down with Nat Simons and asked him to explain why. “I never, as the manager, entertained the thought that it was truly fraudulent,” Simons said. He was willing to admit that he didn’t understand what Madoff was up to, and that Madoff smelled a little funny.

The Truth About Lies: The Illusion of Honesty and the Evolution of Deceit by Aja Raden

air gap, Ayatollah Khomeini, bank run, banking crisis, Bernie Madoff, bitcoin, blockchain, California gold rush, carbon footprint, carbon-based life, cognitive bias, cognitive dissonance, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, data science, disinformation, Donald Trump, fake news, intentional community, iterative process, low interest rates, Milgram experiment, mirror neurons, multilevel marketing, offshore financial centre, opioid epidemic / opioid crisis, placebo effect, Ponzi scheme, prosperity theology / prosperity gospel / gospel of success, Ronald Reagan, Ronald Reagan: Tear down this wall, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Steve Bannon, sugar pill, survivorship bias, theory of mind, too big to fail, transcontinental railway, Vincenzo Peruggia: Mona Lisa

But just as often, people believe things simply because they want to. So. Did investors learn their lesson after Ponzi went to jail? Um, not exactly. In fact, it’s kind of weird we’re still calling it a Ponzi scheme one hundred years later. Especially when he didn’t invent it, didn’t pioneer it, and didn’t even go out the biggest. That dubious honor belongs to Bernie Madoff, who was busted in 2008 for running the biggest Ponzi scheme in history, to the tune of $65 billion. Bernie Madoff was born in Queens, New York, in 1938, the son of a plumber. He briefly attended Brooklyn Law School but decided Wall Street was the place to make real money, so in 1960 he founded his own firm, Bernard L.

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See Marcy, Louis patent medicines dangerous drugs in opiates and narcotics in Penn and Teller magicians perceptual cognition, Shell Game on flaws in persistence of vision pharmaceutical companies placebo effect and pure research absence by pharmaceutical marketing of cocaine direct-to-consumer opioid crisis and to physicians physical perception, Shell Game and physicians opiates and narcotics prescriptions by pharmaceutical marketing to placebo effect anticipatory response Beecher and CNS regulating drugs ineffectiveness and confirmation bias and dental surgery study expectation in pharmaceutical companies and science of in Snake Oil Con specific lies and Trivers on Valium and pollination, in nature Ponzi, Charles Ponzi scheme Poyais MacGregor investment capital from MacGregor land sale of MacGregor made up country of MacGregor paradise claim of MacGregor Paris scam Praise the Lord (PTL) Club, of Bakker Premack, David priming behavioral lies told using proof, in Bait and Switch PTL. See Praise the Lord Pyramid Schemes of Avon or Mary Kay Bitcoin critical mass requirement for of Madoff math in of Miller MLM in Ponzi scheme process of of religion 70 percent rule for of Weil Radithor tonic, of Bailey Ralston, William Rasputin, Grigory Yefimovich as Alexandra spiritual advisor Alexei miracle healing by cognitive dissonance and Guru Con of real fake proof, in Bait and Switch religion, Pyramid Scheme and.

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Mostly, though, belief—in fact or in falsehood—is an act of will. And often enough, the very expectations that prime us to believe lies are nothing more than our own projected desires. As such, they require only the slightest nudge to loop backward into believability. Money in the Mail Have you ever heard of a Ponzi scheme? It was named after a con man, Charles Ponzi, who became famous when his “rob Peter to pay Paul” postage swindle was exposed. In the 1920s, Ponzi realized he could buy international postal coupons (stamps, essentially) at a discount in certain countries. This occurred to him when he got one in the mail from Spain.

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression by Richard A. Posner

Alan Greenspan, Andrei Shleifer, banking crisis, Bear Stearns, Bernie Madoff, business cycle, collateralized debt obligation, collective bargaining, compensation consultant, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, diversified portfolio, equity premium, financial deregulation, financial intermediation, Glass-Steagall Act, Home mortgage interest deduction, illegal immigration, laissez-faire capitalism, Long Term Capital Management, low interest rates, market bubble, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, oil shock, Ponzi scheme, price stability, profit maximization, proprietary trading, race to the bottom, reserve currency, risk tolerance, risk/return, Robert Shiller, savings glut, shareholder value, short selling, statistical model, subprime mortgage crisis, too big to fail, transaction costs, very high income

The more moderate the returns promised by the Ponzi schemer, the longer the scheme can survive the loss of capital caused by the schemer's paying his investors their promised returns out of principal that is not earning what has been promised. Some journalists, confusing Ponzi schemes with pyramid schemes, have described the housing and credit bubbles as Ponzi schemes. That is inaccurate. The essence of a Ponzi scheme is deception. The investor thinks that the promised high return on his investment will come from the promoter's putting the investment to work, not that his investment will be used to pay other investors in order to keep the scheme going.

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The longer the world economy went without a depression, the worse the collapse would be when it finally, inevitably, came. Warren Buffett is reported to have said that you don't know who's swimming naked until the tide goes out. The receding stock market tide exposed Bernard Madoff, who is said to have confessed to having pulled off the biggest Ponzi scheme in history. The scheme would have lasted longer and the losses to investors would have been greater had the stock market crash been postponed. The crash reduced the value of Madoff's hedge fund, but more important (because the fund probably had little in the way of assets), the general economic collapse caused requests for redemptions of investments in hedge funds and other investment funds to soar, and Madoff could not honor his investors' requests for redemption and as a result his scheme collapsed.

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These are hedge funds that invest in other hedge funds or in similar investment funds and justify the fees they charge their investors as compensation for choosing the best hedge funds in which to invest (there are thousands of hedge funds) and monitoring their performance. Hedge funds are secretive; the funds of funds operate, or claim to operate, as a kind of private Securities and Exchange Commission supervising the hedge fund industry. But it seems that some of the funds of funds invested in Madoffs Ponzi scheme without performing the kind of "due diligence" that their customers had been led to expect. If the confidence of the investment community in the vigilance of the funds of funds is shaken, this will cause additional requests by customers of hedge funds to withdraw their money. But the aspect of the Madoff scandal that I want to emphasize is the light it sheds on a philosophy of government that contributed to the depression.

The Village Effect: How Face-To-Face Contact Can Make Us Healthier, Happier, and Smarter by Susan Pinker

assortative mating, Atul Gawande, autism spectrum disorder, behavioural economics, Bernie Madoff, call centre, caloric restriction, caloric restriction, cognitive dissonance, David Brooks, delayed gratification, digital divide, Edward Glaeser, epigenetics, Erik Brynjolfsson, estate planning, facts on the ground, fixed-gear, game design, happiness index / gross national happiness, indoor plumbing, intentional community, invisible hand, Kickstarter, language acquisition, longitudinal study, Mark Zuckerberg, medical residency, Menlo Park, meta-analysis, mirror neurons, neurotypical, Occupy movement, old-boy network, One Laptop per Child (OLPC), place-making, Ponzi scheme, Ralph Waldo Emerson, randomized controlled trial, Ray Oldenburg, Silicon Valley, Skype, social contagion, social intelligence, Stanford marshmallow experiment, Steven Pinker, tacit knowledge, The Great Good Place, the strength of weak ties, The Wisdom of Crowds, theory of mind, tontine, Tony Hsieh, Twitter Arab Spring, urban planning, Yogi Berra

Working as the victims’ financial sleuth, manager, and problem-solver, Curran (along with two other adult children of Jones’s victims, Ginny Nelles and Joey Davis) discovered that this was one tightly interwoven social group. It was also an aging and fragile one. By July 2010, one year after Earl Jones’s Ponzi scheme was revealed, three of Jones’s elderly victims had died, one had been diagnosed with breast cancer, five had lost their homes, and another eleven were about to lose theirs as the one-year grace period negotiated with their banks expired. Thirty-five others were forced to accept handouts to pay for rent, food, Ensure, and adult diapers from the charities they had not long before supported with their own donations.1 No one wants to spend their golden years financially vulnerable and dependent on others.

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And then there were his own expenses, such as mortgages on four condos, including one in Boca Raton and another on a golf course in Mont-Tremblant, a Quebec ski resort. There was also a condo in Maine that he’d bought for his intellectually handicapped daughter, Kimberly. There were private school fees, cars, and cruises, too, all bankrolled by his clients’ nest eggs. He had been running a Madoff-like Ponzi scheme built on his own community’s life savings. Coughlan was on holiday with her family in Maine in early July 2009 when she got a call from her bank. Her checks were bouncing. Soon other members of her social set were discovering that their money was mysteriously inaccessible. With a trip to New York planned, forty-two-year-old Ginny Nelles—whose late father had been a close friend of Jones’s—discovered that the money she wanted to withdraw from her account with “Uncle Earl” was out of reach, just when she needed it for a family holiday.

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The money was ostensibly invested in her account with Earl to give her an immediate high rate of return; Wendy wanted to share this income with her children and grandchildren. On Jones’s advice and against the diversification mantra of most financial planners, she collapsed all her accounts in other banks in order to consolidate her money with him. I met with Ginny Nelles in November 2009, five months after Earl Jones’s Ponzi scheme had been exposed. Her mother was about to lose her house and had no source of income. Ginny and her brother would likely never recover their inheritances from their father, much less their own savings. And this blow had struck after grave health crises for both Ginny and her brother. Yet little of this psychological wear and tear was evident at first glance.

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

3D printing, agricultural Revolution, Alan Greenspan, Anthropocene, Apollo 11, back-to-the-land, banking crisis, banks create money, Bear Stearns, biodiversity loss, Bretton Woods, business cycle, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, degrowth, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, global village, green transition, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, intentional community, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jevons paradox, Kenneth Rogoff, late fees, liberal capitalism, low interest rates, mega-rich, military-industrial complex, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, rolling blackouts, Ronald Reagan, short selling, special drawing rights, systems thinking, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, WikiLeaks, working poor, world market for maybe five computers, zero-sum game

There are plenty of historic examples of currency failures, so this would not be a unique occurrence.18 Some who come to understand that government deficit spending is unsustainable immediately conclude that the sky is falling and doom is imminent. It is disquieting, after all, to realize for the first time that the world economic system is a kind of Ponzi scheme that is only kept going by the confidence of its participants. But as long as deficit spending doesn’t exceed certain bounds, and as long as the economy resumes growth in the not-too-distant future, then the scheme can be sustained for quite some time. In fact, Ponzi schemes theoretically can continue forever — if the number of potential participants is infinite. The absolute size of government debt is not necessarily a critical factor, as long as future growth will be sufficient so that the proportion of debt relative to revenues remains the same.

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Again, as long as the down-side of this business cycle is short, such a plan could work in principle. But whether it actually will work in the current situation is problematic. As noted above, Ponzi schemes can theoretically go on forever, as long as the number of new investors is infinite. Yet in the real world the number of potential investors is always finite. There are limits. And when those limits are hit, Ponzi schemes can unravel very quickly. All Loaned Up and Nowhere to Go These are the four categories of debt. Over the short term, there is no room for growth of debt in the household or corporate sectors.

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At the height of the scheme, Ponzi was raking in $250,000 a day, millions in today’s dollars. Thousands of people lost their savings, in some cases having mortgaged or sold their houses in order to invest. A few critics (primarily advocates of gold-backed currency) have called fractional reserve banking a kind of Ponzi scheme, and there is some truth to the claim.5 As long as the real economy of goods and services within a nation is growing, an expanding money supply seems justifiable, arguably necessary. However, units of currency are essentially claims on labor and natural resources — and as those claims multiply (with the growth of the money supply), and as resources deplete, eventually the remaining resources will be insufficient to satisfy all of the existing monetary claims.

Bitcoin Billionaires: A True Story of Genius, Betrayal, and Redemption by Ben Mezrich

airport security, Albert Einstein, bank run, Ben Horowitz, Big Tech, bitcoin, Bitcoin Ponzi scheme, blockchain, Burning Man, buttonwood tree, cryptocurrency, East Village, El Camino Real, Elon Musk, fake news, family office, fault tolerance, fiat currency, financial engineering, financial innovation, game design, information security, Isaac Newton, junk bonds, Marc Andreessen, Mark Zuckerberg, Max Levchin, Menlo Park, Metcalfe’s law, Michael Milken, new economy, offshore financial centre, paypal mafia, peer-to-peer, Peter Thiel, Ponzi scheme, proprietary trading, QR code, Ronald Reagan, Ross Ulbricht, Sand Hill Road, Satoshi Nakamoto, Savings and loan crisis, Schrödinger's Cat, self-driving car, Sheryl Sandberg, side hustle, side project, Silicon Valley, Skype, smart contracts, South of Market, San Francisco, Steve Jobs, Susan Wojcicki, transaction costs, Virgin Galactic, zero-sum game

None of the professors they’d contacted—some of them among the most elite economics professors in the world—had ever heard of Bitcoin. When the twins had explained what they had learned so far, some responded in a knee-jerk way, labeling Bitcoin as some sort of scam or Ponzi scheme. But when Cameron pressed them on those notions, the professors couldn’t exactly say what the scam was, or why it was a Ponzi scheme. Settling their SUV just below the speed limit, Cameron hit the button to unmute the conversation. “The party is just getting started,” blurted a voice, words coming so fast they threatened to run right into each other. “The market cap of the entire Bitcoin economy is only about a hundred and forty million.

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“Your quote is great,” Cameron said, and then read it out loud. “ ‘We have elected to put our money and faith in a mathematical framework that is free of politics and human error.’ ” “Now you finally sound like Men of Harvard,” Tyler’s father joked. “You got a great quote in too, Cameron. ‘People say it’s a Ponzi scheme, it’s a bubble. People really don’t want to take it seriously. At some point that narrative will shift to “virtual currencies are here to stay.” We’re in the early days.’ ” “Nice,” Tyler agreed. “The haters can take that and stuff it where it belongs.” Calling Bitcoin a Ponzi scheme, or equating it to the Dutch tulip bubble of the seventeenth century, were favorite criticisms of the virtual currency. They would never deny there were a lot of growing pains ahead: the Bitcoin market was volatile, still trying to recover from the crash caused by Mt.

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What made it better than gold? What was money anyway? “Okay, but gold has some intrinsic value,” Tyler said. “It’s used in jewelry, and in transistors.” “But what about cash?” Charlie responded. “It hasn’t been backed by gold since the 1970s, and the government can print as much of it as it wants. Talk about a Ponzi scheme. No intrinsic value there.” “Cash has intrinsic value,” Cameron responded. “If you were freezing on top of a mountain and all you had was cash, you could burn it to keep warm.” “Ah, the Cliffhanger maneuver,” Azar’s voice came through the car’s speakers. “Love that movie.” “The intrinsic value of gold is overrated,” emerged another voice over the line.

Boomerang: Travels in the New Third World by Michael Lewis

Apollo 11, Bear Stearns, Berlin Wall, Bernie Madoff, Carmen Reinhart, Celtic Tiger, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, fiat currency, financial engineering, financial thriller, full employment, German hyperinflation, government statistician, Irish property bubble, junk bonds, Kenneth Rogoff, Neil Armstrong, offshore financial centre, pension reform, Ponzi scheme, proprietary trading, Ronald Reagan, Ronald Reagan: Tear down this wall, South Sea Bubble, subprime mortgage crisis, the new new thing, Tragedy of the Commons, tulip mania, women in the workforce

The Irish Property Council has counted twenty-nine suicides by property developers since the crash—in a country where suicide often goes unreported and undercounted. “I said to all the guys, ‘Always take money off the table.’ Not many of them took money off the table,” says Dermont Desmond, an Irish billionaire who made his fortune from software in the early 1990s, and so counts as old money. The Irish nouveau riche may have created a Ponzi scheme, but it was a Ponzi scheme in which they themselves believed. So, too, for that matter, did some large number of ordinary Irish citizens who bought houses for fantastic sums. Ireland’s 87 percent rate of homeownership is the highest in the world. There’s no such thing as a nonrecourse mortgage in Ireland: the guy who pays too much for his house is not allowed simply to hand the keys to the bank and walk away.

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The stocks of the three main Irish banks, Anglo Irish, AIB, and Bank of Ireland, had fallen by between a fifth and a half in a single trading session, and a run on Irish bank deposits had started. The Irish government was about to guarantee all the obligations of the six biggest Irish banks. The most plausible explanation for all of this was Morgan Kelly’s narrative: that the Irish economy had become a giant Ponzi scheme, and the country was effectively bankrupt. But it was so starkly at odds with the story peddled by Irish government officials and senior Irish bankers—that the banks merely had a “liquidity” problem and that Anglo Irish was “fundamentally sound”—that the two could not be reconciled. The government had a report newly thrown together by Merrill Lynch, which declared that “all of the Irish banks are profitable and well-capitalized.”

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To Ingram’s eyes there appeared to be a vast difference between what the Irish banks were saying and what they were doing. To get at it he ignored what they were saying and went looking for knowledgeable insiders in the commercial property market. He interviewed them, as a journalist might. On March 13, 2008, six months before the Irish real estate Ponzi scheme collapsed, Ingram published a report in which he simply quoted verbatim what market insiders had told him about various banks’ lending to commercial real estate developers. The Irish banks were making far riskier loans in Ireland than they were in Britain, but even in Britain, the report revealed, they were the nuttiest lenders around: in that category, Anglo Irish, Bank of Ireland, and AIB came, in that order, first, second, and third.

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-border payments, currency peg, currency risk, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Glass-Steagall Act, Herman Kahn, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, Japanese asset price bubble, joint-stock company, junk bonds, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Mary Meeker, Michael Milken, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, Suez canal 1869, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

(One measurement problem is deciding whether the losses should include only the amounts of the initial deposits that individuals made with Madoff, or whether these losses should also include the ‘investment income’ that they had earned over the years. Another involves whether the cash withdrawn from the accounts should be included.) Madoff had run the scheme for twenty years, so he may hold the world’s record for both the largest and the most long-lived Ponzi scheme. Every Ponzi scheme has a ‘story’ – an explanation for why the firm earns such high returns. Ponzi himself said he was arbitraging international postal reply coupons. (You don’t really need to know the details.) Madoff said he had a ‘split strike option strategy’. Madoff’s scheme differed from Ponzi’s in one other important dimension – the rate of return on the funds entrusted to Madoff were in the range of 10 to 12 percent a year – a bit higher than stocks, and much higher than on bonds.

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Ponzi finance, chain letters, pyramid schemes, manias, and bubbles Ponzi finance, chain letters, bubbles, pyramid schemes, finance, and manias are somewhat overlapping terms for non-sustainable patterns of financial behavior, in that asset prices today are not consistent with asset prices at distant future dates. The Ponzi schemes generally involve promises to pay an interest rate of 30 or 40 or 50 percent a month; the entrepreneurs that develop these schemes always claim they have discovered a new secret formula so they can earn these high rates of return. They make the promised interest payments for the first few months with the money received from their new customers attracted by the promised high rates of return.

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The implosion of a bubble always leads to the discovery of frauds and swindles that developed in the froth of the mania; these events are reviewed in Chapter 7. Fraud and corruption are based on mis-information – both falsification and misrepresentation; some fraud also involves the theft of private information before it becomes publicly available. Some of the fraud is personal, some is corporate. Bernie Madoff ran one of the largest Ponzi schemes ever, investors lost more than $20 billion. The owners of some business conglomerates in Iceland had ‘captured’ control of the banks and then borrowed from the banks to increase their consumption and their investments. The combination of failed thrift institutions and the rapid growth of junk bonds in the 1980s cost American taxpayers more than $100 billion; some of these thrifts had been acquired by individuals who relied on the junk bonds for their financing.

Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof, Robert J. Shiller, Stanley B Resor Professor Of Economics Robert J Shiller

Andrei Shleifer, asset-backed security, Bear Stearns, behavioural economics, Bernie Madoff, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carl Icahn, collapse of Lehman Brothers, compensation consultant, corporate raider, Credit Default Swap, Daniel Kahneman / Amos Tversky, dark matter, David Brooks, desegregation, en.wikipedia.org, endowment effect, equity premium, financial intermediation, financial thriller, fixed income, full employment, George Akerlof, greed is good, income per capita, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Arrow, Kenneth Rogoff, late fees, loss aversion, market bubble, Menlo Park, mental accounting, Michael Milken, Milgram experiment, money market fund, moral hazard, new economy, Pareto efficiency, Paul Samuelson, payday loans, Ponzi scheme, profit motive, publication bias, Ralph Nader, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, short selling, Silicon Valley, stock buybacks, the new new thing, The Predators' Ball, the scientific method, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, too big to fail, transaction costs, Unsafe at Any Speed, Upton Sinclair, Vanguard fund, Vilfredo Pareto, wage slave

David Kotz, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, Report of Investigation Case No. OIG-509, United States Securities and Exchange Commission, Office of Inspector General (2011), pp. 61–77, accessed May 29, 2015, https://www.sec.gov/news/studies/2009/oig-509.pdf. 26. James B. Stewart, “How They Failed to Catch Madoff,” Fortune, May 10, 2011. Accessed May 2, 2015. http://fortune.com/2011/05/10/how-they-failed-to-catch-madoff/. 27. Kotz, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, p. 249. 28. Ibid., p. 247. 29. Ibid., p. 250. Markopolos gives a graphic account of the conversation from his perspective: No One Would Listen, Kindle location 2585 and following.

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But the deterrence effects of prosecuting whole corporations are far weaker: since penalties against organizations are spread across all their stakeholders; whereas penalties against individuals are targeted to those directly responsible. The Madoff case gives a second, much more detailed glimpse into the workings of the SEC, and as we will see, possibly, into the consequences of budgetary deficiency. It is now common knowledge how the great phisher-for-phools Bernard Madoff duped wealthy investors into a Ponzi scheme. Every month the investors would receive a statement showing how their Madoff-held assets had grown in value: with remarkable regularity. An investment quant from Whitman, Massachusetts, Harry Markopolos, followed up on this and presented his suspicions to the SEC Boston regional office. He claimed that Madoff’s high, and smooth, returns (between 1 and 2 percent per month) defied the laws of finance.22 Madoff said that he accomplished the smoothing by an investment strategy called a “collar.”

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He said he bought options to cut off extraordinary losses and balanced this with sales of options that cut off extraordinary gains.23 While such a strategy would have smoothed earnings, Markopolos saw that it would be much too costly for Madoff to make the high returns he credited to his investors. A Ponzi scheme was further suggested, since to practice such a collar, it would be necessary for Madoff to make more options trades than on the entire US market.24 Despite their cogency, Markopolos’s suspicions were met with resistance at the SEC. His first complaints to the SEC office in Boston in 2000 and 2001 quickly died.25 But Markopolos persisted, and the New York regional office, with jurisdiction over Madoff, decided to conduct an investigation in November 2005.

Bitcoin: The Future of Money? by Dominic Frisby

3D printing, Alan Greenspan, altcoin, bank run, banking crisis, banks create money, barriers to entry, bitcoin, Bitcoin Ponzi scheme, blockchain, capital controls, Chelsea Manning, cloud computing, computer age, cryptocurrency, disintermediation, Dogecoin, Ethereum, ethereum blockchain, fiat currency, financial engineering, fixed income, friendly fire, game design, Hacker News, hype cycle, Isaac Newton, John Gilmore, Julian Assange, land value tax, litecoin, low interest rates, M-Pesa, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Occupy movement, Peter Thiel, Ponzi scheme, prediction markets, price stability, printed gun, QR code, quantitative easing, railway mania, Ronald Reagan, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, Stephen Hawking, Steve Jobs, Ted Nelson, too big to fail, transaction costs, Turing complete, Twitter Arab Spring, Virgin Galactic, Vitalik Buterin, War on Poverty, web application, WikiLeaks

Its founders faced all sorts of legal calamities – and are still dealing with the fall-out. I’ve no doubt seeing their fate is part of the reason Bitcoin’s founder so prizes his anonymity. Other companies with similar models to E-gold sprang up and failed in the Noughties – eBullion, Standard Reserve, INTGold and even a multi-million dollar Ponzi scheme that had no gold at all, OS-Gold. James Turk, founder of the gold storage facility Goldmoney, had also patented an e-gold payments system, but Goldmoney abandoned this in 2012 because of the cost of compliance. So, Digicash failed because it had an erratic man in charge and it went bust. E-gold failed because the FBI shut it down.

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Over the next six months, the range was flat around $100. More organizations started accepting bitcoins. Venture capital began pouring into the sector, despite continuing criminal activity ranging from hacking to money laundering. One notorious organization – the Texas Bitcoin Savings and Trust – was accused of being a Ponzi scheme. In court, its founder Trendon Shavers tried to argue that bitcoins are not real money to sidestep misappropriation-of-funds charges, but the judge ruled that ‘Bitcoin is a currency or form of money.’ In August, Bitcoin was also ruled a unit of account by the German Federal Ministry of Finance.

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You then, if I remember right, had to find eight people beneath you each paying £3,000 to you, so you made £24,000. They then had to find eight more. Did I make money? Er, no. This scene reminded me of the meetings I went to then, with large wads of cash being passed about. It’s a pyramid scheme, a Ponzi scheme, a scam. Alarm bells are going off. Should I get rid of my coins here and now? Now, like then, there are all sorts at the meeting. In addition to those already mentioned there are several Indians, a load of black guys either African or London-born, a proper Shoreditch twit with ridiculous hair and white leather jacket, people from all over Europe, a load of grungy-looking guys who are either homeless (complete with tracksuits, hoodies, roll ups, cans of lager and rotten teeth) or perennials on the festival circuit, a few couples, some city bods of various shapes and sizes, and goodness knows what else.

A Mathematician Plays the Stock Market by John Allen Paulos

Alan Greenspan, AOL-Time Warner, Benoit Mandelbrot, Black-Scholes formula, book value, Brownian motion, business climate, business cycle, butter production in bangladesh, butterfly effect, capital asset pricing model, confounding variable, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, diversified portfolio, dogs of the Dow, Donald Trump, double entry bookkeeping, Elliott wave, endowment effect, equity risk premium, Erdős number, Eugene Fama: efficient market hypothesis, four colour theorem, George Gilder, global village, greed is good, index fund, intangible asset, invisible hand, Isaac Newton, it's over 9,000, John Bogle, John Nash: game theory, Larry Ellison, Long Term Capital Management, loss aversion, Louis Bachelier, mandelbrot fractal, margin call, mental accounting, Myron Scholes, Nash equilibrium, Network effects, passive investing, Paul Erdős, Paul Samuelson, Plato's cave, Ponzi scheme, power law, price anchoring, Ralph Nelson Elliott, random walk, Reminiscences of a Stock Operator, Richard Thaler, risk free rate, Robert Shiller, short selling, six sigma, Stephen Hawking, stocks for the long run, survivorship bias, transaction costs, two and twenty, ultimatum game, UUNET, Vanguard fund, Yogi Berra

As the economist Robert Shiller has long argued quite persuasively, however, the fundamentals of a stock don’t change nearly as much or as rapidly as its price. Ponzi and the Irrational Discounting of the Future Before returning to other applications of these financial notions, it may be helpful to take a respite and examine an extreme case of undervaluing the future: pyramids, Ponzi schemes, and chain letters. These differ in their details and colorful storylines. A recent example in California took the form of all-women dinner parties whose new members contributed cash appetizers. Whatever their outward appearance, however, almost all these scams involve collecting money from an initial group of “investors” by promising them quick and extraordinary returns.

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Maybe our genes are to blame. (They always seem to get the rap.) Natural selection probably favors organisms that respond to local or near-term events and ignore distant or future ones, which are discounted in somewhat the same way that future money is. Even the ravaging of the environment may be seen as a kind of global Ponzi scheme, the early “investors” doing well, later ones less well, until a catastrophe wipes out all gains. A quite different illustration of our short-sightedness comes courtesy of Robert Louis Stevenson’s “The Imp in the Bottle.” The story tells of a genie in a bottle able and willing to satisfy your every romantic whim and financial desire.

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Ebbers, Bernie acquisition appetite of arrogance of author emails offer of help Digex purchase down-home style of forced to sell WCOM stock fraud by pump and dump strategy and purchase of WorldCom stock by economics, human behavior and The Education of a Speculator (Niederhoffer) “efficient frontier” of portfolios (Markowitz) Efficient Market Hypothesis background of impact of accounting scandals on increased efficiency results in decreased predictability investors beliefs impacting moving averages and paradoxes of randomness and rationale for resistance and support levels and versions of Elliott, Ralph Nelson Ellison, Larry employee remuneration vs. CEO remuneration endowment effect Enron accounting practices margin calls on CEO Ken Lay environmental exploitation, as Ponzi scheme equity-risk premium Erdös, Paul Escher, M. C. European stock market euros benefits of standardizing European currencies euro-pound/pound-euro exchange rate expected excess return expected value. see also mean value covariance and formula for obtaining graphing against risk (Markowitz optimal portfolios) insurance company example “maximization of expected value,” mu (m) probability theory and exploitable opportunities, tendency to disappear Fama, Eugene Fibonacci numbers Elliott wave theory and golden ratio and fibre-optic cable fifty-two-week highs “flocking effect,” Internet Fooled by Randomness (Taleb) formulas Black-Scholes options compound interest expected value fractals Frank, Robert fraud. see also accounting scandals applying Benford’s Law to corporate fraud applying Benford’s law to income tax fraud Bernie Ebbers Salomon Smith Barney benefitting illegally from IPOs WCOM fraud wrongdoing of brokers at Merrill Lynch free market economy French, Ken Full House: The Spread of Excellence from Plato to Darwin (Gould) fund managers. see also stock brokers/analysts fundamental analysis determining fundamental value by discounting process evidence supporting present value and sequence complexity and trading rules and as sober investment strategy stock valuation with unexciting nature of future value P/E ratio as measure of future earnings expectations present value and gambler’s fallacy games gambling and probability game theory guessing games Monopoly Parrondo’s paradox St.

Elsewhere, U.S.A: How We Got From the Company Man, Family Dinners, and the Affluent Society to the Home Office, BlackBerry Moms,and Economic Anxiety by Dalton Conley

Alan Greenspan, assortative mating, call centre, clean water, commoditize, company town, dematerialisation, demographic transition, Edward Glaeser, extreme commuting, feminist movement, financial independence, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Home mortgage interest deduction, income inequality, informal economy, insecure affluence, It's morning again in America, Jane Jacobs, Joan Didion, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labor-force participation, late capitalism, low interest rates, low skilled workers, manufacturing employment, mass immigration, McMansion, Michael Shellenberger, mortgage tax deduction, new economy, off grid, oil shock, PageRank, Paradox of Choice, Ponzi scheme, positional goods, post-industrial society, post-materialism, principal–agent problem, recommendation engine, Richard Florida, rolodex, Ronald Reagan, Silicon Valley, Skype, statistical model, Ted Nordhaus, The Death and Life of Great American Cities, The Great Moderation, the long tail, the strength of weak ties, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, transaction costs, women in the workforce, Yom Kippur War

Or it could even be the kid herself, who has just the look Mrs. 2009 needs for her newest marketing campaign. Even when the Elsewhere class ostensibly go out purely to socialize, they find that they cannot stop themselves from glancing at their text messages, talking work, or making valuable introductions across the table. It all may be a Ponzi scheme, but it certainly is no shell game: In an information and service economy, much of what drives success is, in fact, social skills. This new merger between work and play can even be seen in the names of the giant corporations that now dominate our business world. Whereas in industrial capitalism the monikers of corporate behemoths attempted to connote nationalism, grandeur, and heaviness, in the new info-economy playfulness is paramount.

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As long as demand for housing continued apace, then everyone’s housing values increased (or more specifically, those in white neighborhoods—but that’s another story).6 Today housing wealth represents over one third of all net worth for American households, and that figure is much higher for low- and moderate-income families.7 Likewise, construction jobs were created. In 2008, the home-building industry directly employed 7.5 million workers, up from 1.25 million in 1945.8 Welcome to the Ponzi scheme we call the American real estate market. But this all worked because it was a relatively closed system. Who was footing the bill for high wages for American workers? American consumers, that’s who. It was no big problem, since these were the same folks as the workers who were demanding and receiving higher wages—after they clocked out.

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If you live in a home you own—especially if you enjoy the security of owning it outright—you have less need for the government to take care of you with a strong social insurance and pension system.16 Rather, you are actually living in your own private piggybank. What’s more, it is the family home, more than the stock market, that keeps our inequality Ponzi scheme going and that drives government policy and private choices. The median size of new homes has increased to 2,500 square feet today, up by almost 50 percent since 1976. Likewise, the proportion of new homes with four or more bedrooms has doubled and the number with three or more bathrooms has tripled in just the last twenty years.

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

accounting loophole / creative accounting, Alan Greenspan, banking crisis, banks create money, barriers to entry, behavioural economics, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, book value, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Greenspan put, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, Money creation, money market fund, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, place-making, Ponzi scheme, Post-Keynesian economics, power law, profit maximization, quantitative easing, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Shiller, Robert Solow, Ronald Coase, Savings and loan crisis, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game

.: 348) It would be foolish to deny that we have a similar weakness in modern capitalist society: our tendency to be sucked into Ponzi schemes by a banking sector that profits from rising debt. As I explain in the next chapter, when lending is undertaken for investment or consumption, debt tends not to get out of hand. But when borrowing is undertaken to speculate on asset prices, debt tends to grow more rapidly than income. This growth causes a false boom while it is happening, but results in a collapse once debt growth terminates – as it has done now. Though borrowers can be blamed for having euphoric expectations of unsustainable capital gains, in reality the real blame for Ponzi schemes lies with their financiers – the banks and the finance sector in general – rather than the borrowers.

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Though individuals can operate with a soft budget constraint while the price bubble lasts, the entire economy is stuck with the hard budget constraint that, in the long run, the debt must be serviced from income.12 If we are to prevent this process playing out yet again in the future, then we need to prevent the formation of Ponzi schemes in the first place. Unfortunately, the way that financial assets are currently defined contains the seeds of not one Ponzi scheme but two. Because shares currently have an indefinite lifespan, it is quite possible for someone to assert, as Henry Blodget did about Amazon in 1998, that a given company’s shares will go from $1 to $400 in a matter of a year (Blodget 2010).

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In a market economy attenuated by the welfare state, this choice is less stark, but still present. A three-horse race This point will become clearer in later chapters, when I outline the monetary approach to economics that I take, in which bankers are treated as a separate social class to capitalists. The précis for now is that bankers’ incomes depend on the level of debt, and if a Ponzi scheme develops, then the level of debt can escalate dramatically. This then transfers income from both workers and capitalists to bankers, and to the detriment of society in general since it also normally results in a lower level of real investment. This issue might seem arcane now, but it has serious implications during a financial crisis, such as the one we are currently in.

Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America by Matt Taibbi

addicted to oil, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bear Stearns, Bernie Sanders, Bretton Woods, buy and hold, carried interest, classic study, clean water, collateralized debt obligation, collective bargaining, computerized trading, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, desegregation, diversification, diversified portfolio, Donald Trump, financial innovation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Greenspan put, illegal immigration, interest rate swap, laissez-faire capitalism, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, medical malpractice, military-industrial complex, money market fund, moral hazard, mortgage debt, Nixon triggered the end of the Bretton Woods system, obamacare, passive investing, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, quantitative easing, reserve currency, Ronald Reagan, Savings and loan crisis, Sergey Aleynikov, short selling, sovereign wealth fund, too big to fail, trickle-down economics, Y2K, Yom Kippur War

Within the same two-week time frame, a third top-five investment bank, Merrill Lynch, would sink to the bottom alongside Lehman Brothers thanks to a hole blown in its side by years of reckless gambling debts; Merrill would be swallowed up in a shady state-aided backroom shotgun wedding to Bank of America that would never become anything like a major issue in this presidential race. The root cause of all these disasters was the unraveling of a massive Ponzi scheme centered around the American real estate market, a huge bubble of investment fraud that floated the American economy for the better part of a decade. This is a pretty big story, but at the moment I know nothing about it. Take it as a powerful indictment of American journalism that I’m far from alone in this among the campaign press corps charged with covering the 2008 election.

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If you want to understand why America is such a paradise for high-class thieves, just look at the way a manufactured movement like the Tea Party corrals and neutralizes public anger that otherwise should be sending pitchforks in the direction of downtown Manhattan. There are two reasons why Tea Party voters will probably never get wise to the Ponzi-scheme reality of bubble economics. One has to do with the sales pitch of Tea Party rhetoric, which cleverly exploits Main Street frustrations over genuinely intrusive state and local governments that are constantly in the pockets of small businesses for fees and fines and permits. The other reason is obvious: the bubble economy is hard as hell to understand.

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It was a shell game—money comes in the front door as payroll taxes and goes right out the back door as deficit spending, with only new payroll taxes over the years keeping the bubble from popping, continuing the illusion that the money had never left. Senator Daniel Patrick Moynihan, way back in 1983, had called this “thievery,” but as the scam played out over the decades it earned a more specific title. “A classic Ponzi scheme” is how one reporter who covered Greenspan put it. Coming up with a scheme like this is the sort of service that endears one to presidents, and by the mid-eighties Greenspan got his chance at the big job. Reagan had grown disenchanted with Volcker. The administration apparently wanted a Fed chief who would “collaborate more intimately with the White House,” as one Fed historian put it, and they got him in Greenspan, whom Reagan put in the top job in 1987.

Ludicrous: The Unvarnished Story of Tesla Motors by Edward Niedermeyer

autonomous vehicles, barriers to entry, Bear Stearns, bitcoin, business climate, call centre, carbon footprint, Clayton Christensen, clean tech, Colonization of Mars, computer vision, crowdsourcing, disruptive innovation, Donald Trump, driverless car, Elon Musk, en.wikipedia.org, facts on the ground, fake it until you make it, family office, financial engineering, Ford Model T, gigafactory, global supply chain, Google Earth, housing crisis, hype cycle, Hyperloop, junk bonds, Kaizen: continuous improvement, Kanban, Kickstarter, Lyft, Marc Andreessen, Menlo Park, minimum viable product, new economy, off grid, off-the-grid, OpenAI, Paul Graham, peak oil, performance metric, Ponzi scheme, ride hailing / ride sharing, risk tolerance, Sand Hill Road, self-driving car, short selling, short squeeze, side project, Silicon Valley, Silicon Valley startup, Skype, smart cities, Solyndra, stealth mode startup, Steve Jobs, Steve Jurvetson, tail risk, technoutopianism, Tesla Model S, too big to fail, Toyota Production System, Uber and Lyft, uber lyft, union organizing, vertical integration, WeWork, work culture , Zipcar

The incident, which directly preceded his hiring at Electrek, would establish him as one of the most aggressive and prolific pro-Tesla propagandists. The accusation that Saleen “resembled a ponzi scheme” was particularly interesting given that Tesla had done the exact same thing Lambert accused the tuning company of doing: using customer deposits to fund operations. Several years after the Saleen lawsuit, when the CEO of the car-dealer chain AutoNation suggested that Tesla might be a ponzi scheme, Lambert wrote an Electrek piece defending the company. Lambert’s ability to compare Saleen’s use of customer deposits to a ponzi scheme while defending Tesla’s practices from the same comparison was emblematic of his coverage.

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Jalopnik, July 29, 2015. https://jalopnik.com/saleen-settles-case-with-reddit-user-they-sued-for-call-1720904330 99but not before soliciting financial support: Zach Shahan. “Help FredTesla.” Gas2, July 22, 2015. http://gas2.org/2015/07/22/help-fredtesla/ 99Lambert wrote an Electrek piece defending the company: Fred Lambert. “AutoNation CEO goes after Tesla, compares company to a ‘Ponzi scheme’ and lies about cost.” Electrek, April 11, 2017. https://electrek.co/2017/04/11/tesla-autonation-ceo-ponzi-scheme/ 100reported that Tesla’s Investor Relations team was recommending that investors get their news: Charley Grant. “Investors who have met with IR in private told me they said to go to Reddit and Electrek for news instead of the mainstream media.”

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(Tuning is alteration of the appearance or performance of a vehicle. Saleen is generally known for making power-increasing modifications, to Mustangs specifically, while the Tesla they modified had only cosmetic changes.) The lawsuit alleged that Lambert had defamed Saleen as a “pump-and-dump” and ponzi scheme, and sought an injunction against further defamation. Lambert eventually settled with Saleen, agreeing to retract his defamatory statements and refrain from making further such statements, but not before soliciting financial support for his legal battle through several crowdfunding sites. Lambert initially claimed he had researched Saleen in the course of “diligence” for a potential investment, and that his crusade was simply an attempt to warn investors who might be taken in by the “pumpers” trying to boost Saleen’s stock price, but his interest in the company was clearly tied to his investment in Tesla.

Choose Yourself! by James Altucher

Airbnb, Albert Einstein, Bernie Madoff, bitcoin, cashless society, cognitive bias, dark matter, digital rights, do what you love, Elon Musk, estate planning, John Bogle, junk bonds, Mark Zuckerberg, mirror neurons, money market fund, Network effects, new economy, PageRank, passive income, pattern recognition, payday loans, Peter Thiel, Ponzi scheme, Rodney Brooks, rolodex, Salesforce, Saturday Night Live, sharing economy, short selling, side project, Silicon Valley, Skype, software as a service, Steve Jobs, superconnector, Uber for X, Vanguard fund, Virgin Galactic, Y2K, Zipcar

If you give me the year, I can give you a scam that took place. In the ’90s it was Reg S trading, and everyone involved went to jail. In the early 2000s it was mutual fund timing. In the late 2000s it was PIPEs. In the later 2000s it was insider trading. Of course there were plenty of Ponzi schemes, of which Madoff is the worst. And, of course, a Ponzi scheme has many victims. For instance, me. I was not invested in Madoff. But I was running what’s called a fund of hedge funds at the time. This means an investor would invest money with me, I’d charge a fee, I’d then invest the money in hedge funds I did due diligence on, and they would all charge me fees.

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Ultimately, I had to shut my fund down. Who could compete? So many legitimate funds that might have been better places for investor money (better to pay all the fees than lose all your money in a Ponzi scheme) couldn’t survive because the illegitimate funds crowded them out of the space. Some vehicles that “sophisticated investors” invest in: hedge funds, funds of hedge funds, derivatives, venture capital funds, private equity funds. Other than the Ponzi schemes and super-fees charged by all these entities, here is the dark secret that none of these funds will tell you: when the market goes up, all of these funds do well. When the market goes down, pretty much all of these funds go down.

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This is borderline illegal and I don’t recommend it. People who cheat. I’ve seen it for 20 years. I’ve seen every scam. I can write a history of scams in the past 20 years. Without describing them, here’s the history: Reg S, Calendar trading, Mutual fund timing, Death spirals, Front running, Pump and Dump, manipulating illiquid stocks, Ponzi schemes, and inside information. Inside information has always existed and always will exist. One time I wanted to raise money for one of my funds. I went to visit my neighbor’s boss. The boss had been returning a solid 12% per year for 20 years. Everyone wanted to know how he did it. “Get some info while you are there,” a friend of mine in the business said when he heard I was visiting my neighbor’s boss.

J.K. Lasser's New Tax Law Simplified: Tax Relief From the HIRE Act, Health Care Reform, and More by Barbara Weltman

accelerated depreciation, Affordable Care Act / Obamacare, Bernie Madoff, employer provided health coverage, estate planning, Home mortgage interest deduction, independent contractor, mortgage debt, Ponzi scheme

As recent court decisions have demonstrated, the election cannot be made retroactively and no extension can be granted to make a late election. Thus, the election cannot be made on an amended return (which, by definition, is filed after the due date of the return for the year in question). Investment Losses in Ponzi Schemes The Bernard Madoff Ponzi scheme and other similar financial frauds in 2008 left thousands of investors without their money and with uncertainty about how to handle their losses for tax purposes. Unfortunately for investors, more financial schemes are being uncovered every day. The IRS has created a safe harbor for affected investors under which they can treat losses as a theft loss and claim a deduction.

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The portion of the gain from the sale of this small business stock that is excludable from income for regular tax purposes is includible in alternative minimum taxable income. For instance, if the 50 percent exclusion applies, then seven percent of the exclusion becomes a tax preference for the AMT. P1: OTA/XYZ P2: ABC c04 JWBT413/Weltman October 14, 2010 14:52 Printer Name: Yet to Come INVESTMENT LOSSES IN PONZI SCHEMES Mark-to-Market Reporting Those who regularly trade in securities may make a tax election, called markto-market accounting, to treat all securities positions as having been sold at the end of the year for their fair market value, with all gains and losses deemed to be ordinary gains or losses.

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See Limited liability partnerships (LLPs) Local tax, prepaid, 124 Lodging, travel expenses substantiation, 137 Long-term care insurance: deductible portion of, 26 exclusion for benefits paid from, 30 planning strategies, 27 riders, 27 Losses: in federal disaster areas, 108 in passive activities, 86–89 in Ponzi schemes, 85–86 Loss on sale of residence, 9 Lottery winnings, 155 Luxury cars, 132 P1: OTA/XYZ P2: ABC ind JWBT413/Weltman October 18, 2010 15:26 Printer Name: Yet to Come INDEX Making Work Pay tax credit: eligibility, 93–94 expiring tax laws, 167 MAGI cap, 95 payment method, 94 planning strategies, 96 Schedule M, 94 for self-employed individuals, 149–150 tax savings, 50 Mandatory health coverage.

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

"World Economic Forum" Davos, Abraham Maslow, Airbnb, Apollo 13, barriers to entry, behavioural economics, Bernie Madoff, bike sharing, Buckminster Fuller, business logic, buy and hold, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, Ford Model T, Garrett Hardin, George Akerlof, global village, hedonic treadmill, Hugh Fearnley-Whittingstall, information retrieval, intentional community, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Paradox of Choice, Parkinson's law, peer-to-peer, peer-to-peer lending, peer-to-peer rental, planned obsolescence, Ponzi scheme, pre–internet, public intellectual, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, systems thinking, TED Talk, the long tail, The Nature of the Firm, The Spirit Level, the strength of weak ties, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, Tragedy of the Commons, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, work culture , Yochai Benkler, Zipcar

District Court in New York, pleaded guilty to an eleven-count criminal complaint, and was sentenced to 150 years in prison, the maximum sentence allowed. Madoff’s notorious crime was the creation of a $65 billion Ponzi scheme, the largest investor fraud ever committed by a single person. But while Madoff’s actions were abhorrent and the punishment was fitting, we have all in some way been a part of and fallen victim to a far greater Ponzi scheme. The last two hundred years of industrialized growth have been a Ponzi scheme. We have depleted our natural resources, spewed poisonous gases into our atmosphere, and created wasteful products that will far outlive our own existence.

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Either way, they assumed that the traditional model of consumerism, the one in which we buy products, use them, throw them away, and then buy more, would continue, even if at a hobbled rate. While the “spend more, consume more” way out may be a short-term fix, it is neither sustainable nor healthy. While the rampant unregulated financial systems led to investors losing millions in Ponzi schemes, hedge funds, insurance companies, and even savings banks, everyday people pursuing the supposed American dream felt the worst impact. In all corners of the world, millions lost their homes, their jobs, their buying power, and their confidence. But within weeks of the crash, there were signs of a new and increasing consumer awareness, tinged with anger.

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Even those on the isolated peripheries of our society, such as someone in Siberia or on the equator, or someone with a unique hobby such as collecting miniature Polish pipe organs, can find a group to share and connect with based on common interests. Every investigative journalist knows that the key to breaking a news story is that money always leads to the top. Whether it’s Al Capone or Bernard Madoff, taxes or Ponzi schemes, money is linked to power and control. If we apply these principles to Web 2.0, we find a surprising new relationship between money and power. The Internet is inherently democratic and decentralized. One of the first celebrated examples of this autonomous force was in 1991 when a twenty-one-year-old Finnish student posted a simple request on Usenet (a global discussion forum) for help from his mother’s Helsinki apartment.

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, Goodhart's law, Greenspan put, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, junk bonds, Kenneth Rogoff, Kickstarter, labour market flexibility, Les Trente Glorieuses, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market clearing, Martin Wolf, Minsky moment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, Suez crisis 1956, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

However, this was a false analogy. French land was worth something because it produced food and offered shelter. The colonial possessions delivered nothing like enough to pay the dividends promised to those who bought the shares. Law had to pay those from the money raised in new issues – the definition of a Ponzi scheme.5 Law developed his system so that the bank would both collect taxes and assume the national debt. Everything seemed to add up; investors could pay for the shares with gold and silver (good), paper from Law’s bank (also good), or with government bonds (another positive, since it reduced the debt).

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In the Women Empowering Women scheme, each person needed to find eight new investors at every stage. At that rate, the expansion is very rapid, with successive stages requiring 8, 64, 512,4,096, 32,768 and 262,144 investors. Five more stages after that and the scheme would require more investors than there are people on the planet.8 The Ponzi scheme was built on a similar epic scale. With money doubling every three months, investors would have been 16 times better off in a year and 256 times better off in two. Within five years, anyone who had invested a single dollar would have become a millionaire. We know that pyramids must eventually collapse, and the higher the return (or promised return), the faster that collapse will come.

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Had banks kept a lid on the amount they would lend, relative to incomes, the supply of new buyers would have run out. So they increased the income multiple – janitors were given the chance to buy $500,000 houses. This was the heyday of sub-prime mortgages, when people with poor credit records and no proof of income were able to get loans. From the point of view of a Ponzi scheme, this made sense. A scheme always needs a fresh supply of new buyers. So the proportion of homeowners in the US population increased from 63 per cent to 69 per cent, and plenty of people ‘invested’ in property by buying additional homes. Loans were made with no money down. Indeed some loans did not even require borrowers to meet the full interest payment, with the shortfall simply added to the capital sum due.

Small Change: Why Business Won't Save the World by Michael Edwards

"Friedman doctrine" OR "shareholder theory", Bernie Madoff, clean water, corporate governance, corporate social responsibility, different worldview, high net worth, invisible hand, knowledge economy, Larry Ellison, light touch regulation, Mahatma Gandhi, Mark Shuttleworth, market bubble, microcredit, Nelson Mandela, New Journalism, One Laptop per Child (OLPC), Ponzi scheme, profit motive, public intellectual, Robert Shiller, shareholder value, Silicon Valley, Silicon Valley startup, Social Responsibility of Business Is to Increase Its Profits, subprime mortgage crisis, The Fortune at the Bottom of the Pyramid, The Spirit Level, The Wealth of Nations by Adam Smith, transaction costs

Come to think of it, that’s not such a bad idea: It might have saved us from the colossal mismanagement and risk taking by banks and hedge funds that led to the financial crisis — companies that were so successful and well managed that, like Lehman Brothers and its foundation, they collapsed overnight, leaving hundreds of nonprofits to face financial ruin — or it might have spared us Bernard Madoff with his massive Ponzi scheme, who defrauded Jewish charities of huge amounts of money and caused whole philanthropies like the JEHT Foundation to vanish without a trace.9 “In investment banking, it is taken for granted that decisions about how to use capital are based on rigorous research into performance,” say Bishop and Green in their love poem to irrational exuberance 5 philanthrocapitalism; or as we now know, such decisions could be based on raw speculation at everyone else’s expense.

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See also Creative Capitalism Gates, Melinda, 9, 30, 92 Girl Scouts of America, The, 52, 58 GiveWell, 80 Global Fund to Fight AIDS, Tuberculosis and Malaria, 2 Global Giving, 72 Global Peace Index, 61 Good Club, The, 94 Good to Great, 78 Google.org, 20, 32, 34, 80 Grameen Bank, 19, 62 Grameen Foundation, 41 Grameen Phone, 41 Greed patterns of, 9 Green Dot, 47 Green, Michael, 2 Greenlining Institute, 101 GuideStar International, 79 H Habitat for Humanity, 52, 58 Hartigan, Pamela, 74 Hasan, Arif, 12 Hatred patterns of, 9 Helmsley, Leona, 94 Hewlett Foundation, 104 Hindustan Lever (HLL), 42 HIV/AIDS, 37, 60, 89 Hoffman, Kurt, 3–4 Holla, Richard, 43 Homophobia patterns of, 9 Hookworm, 37 Hotmail, 72 How to Change the World: Social Entrepreneurs and the Power of New Ideas (Bornstein), 19 Humankind, love of, 2 I Ibrahim, Mo, 32 IMproved, 72 Individualism role of entrepreneur and, 71 Inequality attitudes toward economic, 67 Infosys, 3 Intel, 31 Iverson, Erik, 8 J JEHT Foundation, 4 K Kahn, Si, 70 Kaletra, 37 Karnani, Aneel, 42 Karnofsky, Holden, 80 Kassoy, Andrew, 21 King, Martin Luther, 19 Kiva, 72 Kunreuther, Frances, 70 L La Mujer Obrera, 19, 44 Landsburg, Daniel, 31 Lee, Mike, 87 Lehman Brothers, 4, 59 Leishmaniasis, 37 M Madoff, Bernard, 4, 59. See also Ponzi scheme Make the Road New York, 10, 11, 77 index Malaria bed nets and, 36 Mandela, Nelson, 30 Market regulation, 6 McKinsey and Company, 39, 52 Menon, Lakshmi, 43 Micro-Credit Ratings International Ltd., 73 Microcredit, 40 Microfinance, 40 Microsoft, 29, 30, 72 Mondragon, 22 Morino, Mario (quoted), 5 Movement Strategy Center, 13 MTV.com, 44 Multinational companies versus mom-and-pop stores, 17 Munger, Charles (quoted), 2 N National AIDS Control Organization, 39 National Center for Social Entrepreneurs, 47 National Committee for Responsive Philanthropy (NCRP), 90–91 Nature Conservancy, The, 51 NCRP (National Committee for Responsive Philanthropy), 90–91 New business models, 21–22 New Deal, 23 New Philanthropy Capital (NPC), 79 Nightingale, Florence, 19 Nilekani, Nandan, 3 Nilekani, Rohini, 74 Nonmarket peer production, 22 Nonprofit Quarterly, 51, 57–58 Novogratz, Jacqueline, 8 121 O Obama, Barack, 6 Omidyar Network, The, 30, 104 Omidyar, Peter, 7, 89 One Laptop Per Child, 31, 44 Oracle, 2 P Parent Teacher Associations (PTAs), 54 Participant Productions, 19, 44 PATH, 44 Peaceworks, 30 Philanthrocapitalism as form of philanthropy, 2 civil rights and, 14 competition and, 68 focus of, 9 hype surrounding, 34 rise of, 1–6 social justice and, 73 social problems and, 36 versus social transformation, 7 Philanthrocapitalists, 2–3, 78.

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., 73 Microcredit, 40 Microfinance, 40 Microsoft, 29, 30, 72 Mondragon, 22 Morino, Mario (quoted), 5 Movement Strategy Center, 13 MTV.com, 44 Multinational companies versus mom-and-pop stores, 17 Munger, Charles (quoted), 2 N National AIDS Control Organization, 39 National Center for Social Entrepreneurs, 47 National Committee for Responsive Philanthropy (NCRP), 90–91 Nature Conservancy, The, 51 NCRP (National Committee for Responsive Philanthropy), 90–91 New business models, 21–22 New Deal, 23 New Philanthropy Capital (NPC), 79 Nightingale, Florence, 19 Nilekani, Nandan, 3 Nilekani, Rohini, 74 Nonmarket peer production, 22 Nonprofit Quarterly, 51, 57–58 Novogratz, Jacqueline, 8 121 O Obama, Barack, 6 Omidyar Network, The, 30, 104 Omidyar, Peter, 7, 89 One Laptop Per Child, 31, 44 Oracle, 2 P Parent Teacher Associations (PTAs), 54 Participant Productions, 19, 44 PATH, 44 Peaceworks, 30 Philanthrocapitalism as form of philanthropy, 2 civil rights and, 14 competition and, 68 focus of, 9 hype surrounding, 34 rise of, 1–6 social justice and, 73 social problems and, 36 versus social transformation, 7 Philanthrocapitalists, 2–3, 78. See also Philanthrocapitalism; Philanthropy Philanthropy as ineffective, 3 as support system, 99–100 fun of, 102–103 Planned Parenthood of America, 51 Ponzi scheme, 4 Porter, Michael (quoted), 3 Prahalad, C. K., 42 Project Red, 96 Project Shakti, 42 Public goods support for, 104–105 Pulse, 80 Pushback Network, 11 122 small change R Racism patterns of, 9 Rajani, Rakesh, 39 RealBenefits, 44 Red Brand, 2 Resource Generation, 104 Robinson, Mary, 30 Rockefeller, John D., 21 S School of Forestry and Environmental Studies (Yale), 65 Schwarz, Eric, 58 SCOPE (Strategic Concepts in Organizing and Policy Education), 10 Scott, H.

The Confidence Game: The Psychology of the Con and Why We Fall for It Every Time by Maria Konnikova

Abraham Maslow, attribution theory, Bear Stearns, behavioural economics, Bernie Madoff, Bluma Zeigarnik, British Empire, Cass Sunstein, cognitive dissonance, cognitive load, coherent worldview, Daniel Kahneman / Amos Tversky, dark triade / dark tetrad, endowment effect, epigenetics, Higgs boson, higher-order functions, hindsight bias, lake wobegon effect, lateral thinking, libertarian paternalism, Milgram experiment, placebo effect, Ponzi scheme, post-work, publish or perish, Richard Thaler, risk tolerance, seminal paper, side project, Skype, Steven Pinker, sunk-cost fallacy, the scientific method, tulip mania, Walter Mischel

No matter the medium or the guise, cons, at their core, are united by the same basic principles—principles that rest on the manipulation of belief. Cons go unreported—indeed, undetected—because none of us want to admit that our basic beliefs could be wrong. It matters little if we’re dealing with a Ponzi scheme or falsified data, fake quotes or misleading information, fraudulent art or doubtful health claims, a false version of history or a less than honest version of the future. At a fundamental, psychological level, it’s all about confidence—or, rather, the taking advantage of somebody else’s. This book is not a history of the con.

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CHAPTER 1 THE GRIFTER AND THE MARK He does not answer questions, or gives evasive answers; he speaks nonsense, rubs the great toe along the ground, and shivers; his face is discolored; he rubs the roots of his hair with his fingers. —PROFILE OF A LIAR, 900 BCE Whenever people ask me if I’ve ever been conned, I tell them the truth: I have no idea. I’ve never given money to a Ponzi scheme or gotten tripped up on an unwinnable game of three-card monte—that much I know. And there have been some smaller deceptions I’ve certainly fallen for—though whether they qualify as full-fledged cons is a matter of dispute. But here’s the thing about cons: the best of them are never discovered.

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In a 2011 study of over seven hundred fraud victims, alongside fifteen hundred non-victims, psychologists Karla Pak and Doug Shadel found that different types of people fell for different types of cons; depending on where you look, the profile of the ideal mark shifts considerably. Victims of investment frauds, like Bernie Madoff’s Ponzi scheme, and business opportunity frauds, like a lucrative investment in a new oil field, were more likely to be well-educated older men who made over $50,000 a year. Lottery frauds, on the other hand—fake tickets and the like—were likely to claim victims who were less educated and earned less money. When it came to prescription drug fraud and identity theft, the typical victim was a single female who made less than $50,000 a year.

Kings of Crypto: One Startup's Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street by Jeff John Roberts

4chan, Airbnb, Alan Greenspan, altcoin, Apple II, Bernie Sanders, Bertram Gilfoyle, Big Tech, bitcoin, blockchain, Blythe Masters, Bonfire of the Vanities, Burning Man, buttonwood tree, cloud computing, coronavirus, COVID-19, creative destruction, Credit Default Swap, cryptocurrency, democratizing finance, Dogecoin, Donald Trump, double helix, driverless car, Elliott wave, Elon Musk, Ethereum, ethereum blockchain, family office, financial engineering, Flash crash, forensic accounting, hacker house, Hacker News, hockey-stick growth, index fund, information security, initial coin offering, Jeff Bezos, John Gilmore, Joseph Schumpeter, litecoin, Marc Andreessen, Mark Zuckerberg, Masayoshi Son, Menlo Park, move fast and break things, Multics, Network effects, offshore financial centre, open borders, Paul Graham, Peter Thiel, Ponzi scheme, prediction markets, proprietary trading, radical decentralization, ransomware, regulatory arbitrage, reserve currency, ride hailing / ride sharing, Robert Shiller, rolodex, Ross Ulbricht, Sam Altman, Sand Hill Road, Satoshi Nakamoto, sharing economy, side hustle, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, smart contracts, SoftBank, software is eating the world, Startup school, Steve Ballmer, Steve Jobs, Steve Wozniak, transaction costs, Vitalik Buterin, WeWork, work culture , Y Combinator, zero-sum game

Matos had made his investment through a website that encouraged customers to trade in bitcoin and receive a new cryptocurrency—called Bitconnect—which they could lend out in order to receive returns as high as 40 percent a month. Customers could obtain even higher returns if they signed up other clients for Bitconnect. Crypto details aside, Bitconnect was an old-fashioned Ponzi scheme. It worked for a while. Bitconnect tokens reached an all-time high in late 2017 of $450, but the value collapsed when the company shut down months later amid an FBI investigation. Today, its millions of tokens are worth nothing. The thousands of people who bought Bitconnect tokens, which briefly sat as the twentieth-most-popular cryptocurrency, lost every dollar.

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These include Wyoming, which has passed a series of banking laws that encourage crypto companies to set up shop. • • • All this doesn’t mean crypto has lost its outlaw side, of course. A report revealed that scammers took in a record $4 billion in 2019 as a result of crypto hustles, most notably through Ponzi schemes. On social media, the scams became so bad that crypto firm Ripple filed a lawsuit against YouTube over a series of send-us-your-money videos that hijacked the image of its CEO Brad Garlinghouse. Meanwhile, teenagers would hack into Twitter in July of 2020, hijacking the accounts of everyone from Brian to Elon Musk to Michelle Obama in order to invite their millions of followers to send bitcoin.

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Gox, 57 Casares, Wences, 182–183, 216 Casey, Michael, 23 celebrity endorsements, 144–145 Chainalysis, 196 Charles Schwab, 207–208 China, 81–83, 207 Choi, Emilie, 175, 191, 209 Circle, 55, 105 circuit breakers, 140 Clayton, Jay, 169 CNBC, 146 Coinbase, 173 acquisitions by, 186–187, 197, 209 agency trading model at, 174 Apple Store and, 40, 63 Balaji at, 185–187 Binance and, 179–181, 187–190 Bluxome Street office, 37–38, 66–67 capacity issues at, 151 Chicago and, 192 cold storage at, 43–44 competition for, 54–55, 178–181 the crypto winter and, 172–175 culture at, 39, 49–51, 67–68, 189–190 currencies added to, 96–97, 181–182, 187–190, 196 customer acquisition at, 47, 139, 154, 156–157 customer service at, 159, 173–175 diversification at, 64, 209 engineering strategy at, 187–188 Ethereum and, 93–95 Facebook and, 205–206 first hires at, 24–30 flash crash and, 139–141 funding rounds for, 33–37, 51, 64–65, 154–155, 173 future of, 216, 219–220, 225–226 hacking attacks on, 40–43, 143, 157 hiring at, 29, 37–41, 45–47, 49–51 Hirji at, 157–158 hot wallet attack on, 40–43 infrastructure issues at, 155–159, 209–210 IRS and, 121–126 JP Morgan and, 213 layoffs at, 74 leadership team at, 157, 175 Market Street office, 67 Moon Launch, 65 opposition to, 27 origins of, 3–15 in other countries, 65 private keys and, 9 profits at, 154–155 regulation and, 118, 121–131 reputation of, 42–43, 68, 71–72, 124, 125 running through brick walls at, 33–52, 63–64 security systems at, 79–80 Silicon Valley Bank and, 69–70, 72–73 staff departures from, 117–118, 193–195 super voting shares at, 112–113 threats against, 149–151 Wall Street and, 104 coinbase, in bitcoin, 21 CoinDesk, 145, 182 Commodity Futures Trading Commission (CFTC), 126 Conscious Leadership, 68 Consensus, 167 ConsenSys, 94 Covid-19 pandemic, 221–223 The Creamery, 37–38 creative destruction, 214 criminal activity, 18, 224 Dread Pirate Roberts and, 31, 59 money laundering, 45, 58 Mt. Gox and, 56–58 Ponzi schemes, 141–142 swindles, 141–145 threats of, 149–151 cryptocurrencies academic research on, 218–219 altcoins/shitcoins, 138 Binance and, 179–181 bubble around, 133–139 bubble in, 138–145, 149–155 bull run in, 201–203 celebrity endorsements of, 144–145 code for, 188–189 crash in, 160–161, 165–175 exchanges of, 127, 215–216 Libra, 205–207 as property versus currency, 122–126 swindles using, 141–145 See also individual currencies crypto winter, 170–175, 198, 201 Custody, 209 cypherpunks, 23, 99–100 CZ.

A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan by Ben Carlson

Albert Einstein, asset allocation, backtesting, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, book value, business cycle, buy and hold, buy low sell high, commodity super cycle, corporate governance, delayed gratification, discounted cash flows, diversification, diversified portfolio, do what you love, endowment effect, family office, financial independence, fixed income, Gordon Gekko, high net worth, index fund, John Bogle, junk bonds, loss aversion, market bubble, medical residency, Occam's razor, paper trading, passive investing, Ponzi scheme, price anchoring, Reminiscences of a Stock Operator, Richard Thaler, risk tolerance, Robert Shiller, robo advisor, South Sea Bubble, sovereign wealth fund, stocks for the long run, technology bubble, Ted Nelson, transaction costs, Vanguard fund, Vilfredo Pareto

—Michael Mauboussin In December 2008, as the financial world was in the process of crumbling all around us following the near collapse of the banking system and the bankruptcy of Lehman Brothers, there was another event that shook the collective trust of the investing public. Bernie Madoff's Ponzi scheme—the largest in history at almost $65 billion in fake gains promised to clients—finally unraveled after years of lies and deception. That very same month Dr. Stephen Greenspan released a book called Annals of Gullibility: Why We Get Duped and How to Avoid It that focused on human competence or the lack thereof.

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Gullibility is when our intelligence fails us and we are easily tricked into doing something that's against our better judgment. Now here's the kicker—Greenspan was an investor in Madoff's funds! The man who literally wrote the book on human gullibility was himself duped into investing in the biggest Ponzi scheme of all-time. Greenspan was kind enough to pen an op-ed for the Wall Street Journal to explain what caused this to happen and share some lessons he took away from the experience: In my own case, the decision to invest in the Rye fund (a feeder fund invested with Madoff) reflected both my profound ignorance of finance, and my somewhat lazy unwillingness to remedy that ignorance.

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She knew it was an ear infection so putting the ear drops on the patient's rear end made absolutely no sense, but she never questioned the instructions because they came from a doctor. The patient went right along as well. No one bothered to question the misinterpreted instructions because they came from someone in a position of influence.3 An investor without a well thought out investment philosophy might as well be throwing their money away in a Ponzi scheme or putting ear drops up their butt, because there's no use in implementing a portfolio strategy without first understanding your investment philosophy. An investment philosophy is simply a set of principles that will guide your actions when making portfolio decisions. It's your core beliefs. It may seem like a minor distinction, but an investment philosophy must be determined before a portfolio strategy can be implemented.

The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor

Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Big Tech, bilateral investment treaty, bitcoin, blockchain, Bretton Woods, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, conceptual framework, Corn Laws, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, digital rights, Donald Trump, double helix, driverless car, Edward Glaeser, Ethereum, ethereum blockchain, facts on the ground, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, full employment, global reserve currency, Gregor Mendel, Hernando de Soto, income inequality, initial coin offering, intangible asset, investor state dispute settlement, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, land reform, land tenure, London Interbank Offered Rate, Long Term Capital Management, means of production, money market fund, moral hazard, offshore financial centre, phenotype, Ponzi scheme, power law, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Robert Solow, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, seminal paper, shareholder value, Silicon Valley, smart contracts, software patent, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, trade route, Tragedy of the Commons, transaction costs, Wolfgang Streeck

Ponzi, who ran one of the most audacious Ponzi schemes in the 1920s. See Minsky, Stabilizing an Unstable Economy, pp. 230–232, where he compares hedge, speculative, and Ponzi finance. 61. Johann Plenge, Gründung und Geschichte des Crédit Mobilier (Tübingen: Verlag der H. Laupp’schen Buchhandlung, 1903); the book includes the articles of incorporation of the bank. 62. For a short definition and the description of the original Ponzi scheme, see https://www.investopedia.com/terms/p/ponzischeme.asp (last accessed August 8, 2018). n ote s to c h a P te r 5 255 63. Robert Lenzner, “Bernie Madoff ’s $50 Billion Ponzi Scheme,” December 12, 2008, available online at www.forbes.com. 64.

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The company paid high dividends to boost the value of Crédit Mobilier’s share price, thereby keeping existing shareholders happy and attracting new ones; but to sustain the scheme over time, it was not enough to attract new shareholders or bondholders and take their contributions to pay out dividends or fixed returns to old shareholders and old bondholders. This resembles a Ponzi scheme, named after an ItaloAmerican of the early twentieth century who attracted investors by promising them extraordinary returns, when in fact he simply used the money that new investors paid in to pay out dividends to the previous ones.62 This works as long as enough investors show up every day; indeed, it can work for decades even under the eyes of powerful financial market regulators, such as the SEC, as Bernard Madoff ’s secretive Ponzi scheme, which blew up only after the 2008 crisis, has demonstrated.63 Still, at some point some investments must produce some real returns for the company to survive—a tall order in the case of Crédit Mobilier, given that most investments were made in infrastructure projects that, by nature, are long-term investments.

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., 49 Pennsylvania University, 113 pensions, 63, 75, 83, 106, 255n71 Péreire brothers, 102–3 Pfizer Pharmaceuticals, 121–22, 124 pharmaceutical industry: Eli Lilly and, 138– 42, 152–55, 261n17, 261n19; intellectual property and, 129; Pfizer and, 121–22, 124; sovereignty and, 138; trade secrets and, 129 Piketty, Thomas, 4–5 plaintiffs, 32, 58, 69, 113, 142, 214, 265n5, 275n17 poison pills, 163–64, 266n15, 266n17 Poland, 133 Polanyi, Karl von, 11, 19, 128, 133, 220, 228, 276n29 Ponzi schemes, 103, 254n60, 254n62 Portugal, 133, 255n66 Posner, Eric A., 230, 232 power structures, 185, 206 Pratt, Ed, 121–22 PRIMA (place of the relevant intermediary approach), 136 priority rights: capital rule and, 206–7, 215; cloning legal persons and, 55–56, 63; code masters and, 158, 161; coding land and, 24–25, 29, 37, 39, 46; digital code 293 and, 193; durability and, 14; empire of law and, 13–14, 16, 18; enforcement of, 16; global code and, 149, 156; landlords and, 206; lawyers and, 158, 161; legal entities and, 14; minting debt and, 97, 107; Native Americans and, 34, 192–93; nature’s code and, 110; shielding and, 54–56, 107, 215; trade secrets and, 126 private law, ix; capital rule and, 20, 209–19; cloning legal persons and, 68; code masters and, 169–73, 182; contracts and, 2 (see also contracts); crytocurrency and, 198; digital code and, 198; empire of law and, 20–21; first-mover advantage and, 214–15; global code and, 133, 136, 154; international, 68, 136; law’s inherent incompleteness and, 210–13; minting debt and, 107; public power and, 216–19; trust law and, 3, 5, 44, 78, 211, 219, 226 private money: code masters and, 175; Crédit Mobilier and, 102–6; crytocurrency and, 198–99, 202; digital code and, 198–99, 202; future growth and, 102; Germany and, 101; minting debt and, 86, 89, 92, 101–7, 147, 202; Péreire brothers and, 102–3; risk and, 187, 198– 99; state money and, 15, 238n52 Privy Council, 27–29, 126 productivity, 39, 79, 117, 244n64 property: absolute, 30, 33; acquired rights and, ix–x, 42–45; capital rule and, 206, 209, 212–20, 222, 224, 230, 276n24; cloning legal persons and, 47, 68; code masters and, 158–60, 164, 172, 177; coding land and, 23–39, 42–46, 240n2, 241n10, 241n13, 242n27, 242n36, 243n41, 245n75; Cohen on, 137–38; Conveyance Act and, 38–39; courts and, 17, 23–28, 30, 38–39, 43–44, 96–97, 126, 136, 140, 143, 159–60, 172, 214–15, 218, 262; Debt Recovery Act and, 39–40; digital code and, 184–86, 191–94, 198, 203–4, 272n28; discovery doctrine and, 34–35; as dominium, 138; emerging land market and, 32; empire of law and, 1–5, 11–14, 17, 19, 21, 238n44, 238n48, 238n50, 239n56, 240n68; enclosure and, 29–35, 39, 229, 256n14; Enclosure Acts and, 29–30; eviction and, 41, 233; exclusive use rights and, 35, 209; feudalism and, 30, 36, 128–29, 158, 218; foreclosure and, 39, 95–98, 253n44; France and, 218, 242n27; general, 30; global code and, 135–40, 143, 262n45; 294 indeX property (continued) growth and, 4; industrial policy and, 118– 22; intangible capital and, 13, 24, 115–21, 143, 212, 216; intellectual, 3, 138 (see also intellectual property); ISDS and, 136–38, 140, 155–56, 261n22; labor and, 120; landlords and, 29–32, 35, 59, 93, 112–13, 158–59, 192, 206, 214, 244n64; landowners and, 24, 34–39, 42, 45, 56, 78, 128, 158–59, 166; legal entities and, 24, 44–47, 136, 159, 217, 224; legal title and, 24–29, 31, 33–34, 45–46; Maya people and, 23–29, 230, 261n21; minting debt and, 78, 86, 95–97, 107; monopolies and, 119–21 (see also monopolies); Native Americans and, 34, 192–93; nature’s code and, 108–9, 114–30; Norman conquest and, 30; numerus clausus and, 160; occupancy and, 31; ownership and, 30; patents and, 118–22; residual rights and, 191–92; rise of West and, 4; securitization and, 43, 78; Settled Land Acts and, 38–39; settlers and, 33–35, 42, 125, 192–93; sovereignty and, 26–27, 33, 120–21, 135–43, 160; squatters and, 34; Statute of Enrollments and, 44; Statute of Uses and, 44; Szabo on, 192–93, 198; titles and, 13, 25–27, 30–35, 37, 43, 46, 75, 96–97, 110, 125, 194, 206; treaty law and, 120; trust law and, 42–45; turning land into private, 29–35; US Constitution and, 25; wealth and, 4–5, 12, 14, 19, 21, 24, 36, 42–43, 46, 108, 130, 209, 217, 222, 224, 237n38, 240n68 Prussia, 93–95, 172–73, 242n27 public power, 216–19 put option, 55, 64, 226 Qatar, 84 Quarterly Journal of Economics, 94 radical markets, 230–33 rate of return, 4–5, 147 rating agencies, 80, 86–87, 98–100, 251n6, 251n19 rational choice theorists, 208, 216 real estate mortgage investment conduits (REMIC), 95, 253n41 reform: capital rule and, 218, 231; code masters and, 158–59, 171; coding land and, 38–41, 244n58, 244n64; digital code and, 273n46; empire of law and, 1; English land law and, 158, 244n58; minting debt and, 101, 106, 255n73; TRIPS and, 124–25 regulation: arbitrage and, 48, 56, 73–76, 90–91, 226; capital rule and, 211, 213, 216–17, 221, 224–27, 274n1; code masters and, 160–63, 168, 171–77, 182, 267n37, 268n42; coding land and, 44; convertibility and, 226–27; corporations and, 47–48, 50, 56, 68, 73–75, 249n46; digital code and, 185–86, 190, 271n17, 272n30; empire of law and, 7; global code and, 132, 135, 137, 141, 143, 145, 148, 151–54, 264n58, 264n67; insurance, 271n17; lawyers and, 160–63, 168, 171–77, 182, 267n37, 268n42; minting debt and, 85, 90–91, 99–100, 103–7, 251n6, 255n73; private, 264n58; REMIC and, 253n41; US Securities and Exchange Commission (SEC) and, 103, 195 Regulation and Administration of Safe Custody and Global Settlement (RASCAL), 73–75, 250n60, 250n62 regulatory arbitrage, 48, 73–76, 90–91, 226 religion, 90, 236n26 repurchase agreements (Repos), 74, 76, 145, 148, 211, 262n45 residential mortgage-backed securities (RMBS), 87, 94, 103, 108 residual rights, 191–92 retirement, 65 R.

Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals by David Aronson

Albert Einstein, Andrew Wiles, asset allocation, availability heuristic, backtesting, Black Swan, book value, butter production in bangladesh, buy and hold, capital asset pricing model, cognitive dissonance, compound rate of return, computerized trading, Daniel Kahneman / Amos Tversky, distributed generation, Elliott wave, en.wikipedia.org, equity risk premium, feminist movement, Great Leap Forward, hindsight bias, index fund, invention of the telescope, invisible hand, Long Term Capital Management, managed futures, mental accounting, meta-analysis, p-value, pattern recognition, Paul Samuelson, Ponzi scheme, price anchoring, price stability, quantitative trading / quantitative finance, Ralph Nelson Elliott, random walk, retrograde motion, revision control, risk free rate, risk tolerance, risk-adjusted returns, riskless arbitrage, Robert Shiller, Sharpe ratio, short selling, source of truth, statistical model, stocks for the long run, sugar pill, systematic trading, the scientific method, transfer pricing, unbiased observer, yield curve, Yogi Berra

If the late 1990s was a price bubble, it seems to be ending with many intervening pauses. 370 METHODOLOGICAL, PSYCHOLOGICAL, PHILOSOPHICAL, STATISTICAL FOUNDATIONS Self-Organizing Ponzi Schemes The feedback theory of price bubbles is appealing because of its plausibility and the numerous historical examples that seem to confirm its validity. However, it is hard to prove that a simple feedback mechanism involving heightened investor focus, imitative behavior, and exaggerated investor confidence is truly operational in financial markets. Nevertheless, Yale economist Robert Shiller believes actual cases of pyramid frauds known as Ponzi schemes offer evidence that confirms the feedback theory. The scheme, named after the infamous Charles Ponzi, who invented the idea in the 1920s, involves promising investors a high rate of return from some sort of business venture or investment.

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The moths dive into the flame. Shiller contends that speculative bubbles are naturally occurring Ponzi schemes that emerge spontaneously in financial markets, without requiring the machinations of a fraudulent promoter.82 Such self-organizing phenomena are common in complex systems. There is no need for false stories because there is always some buzz about the stock market anyway. A trend Theories of Nonrandom Price Motion 371 of rising prices acts as a call to action much like the gains of early investors in a Ponzi scheme. The message is then amplified by Wall Street’s salesmen, and they need not tell lies.

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The message is then amplified by Wall Street’s salesmen, and they need not tell lies. They simply pitch the upside potential while downplaying the risk side of the story. The parallels between Ponzi schemes and speculative bubbles are so clear in Shiller’s opinion that the burden of proof is on those who deny the similarity. Competing Hypotheses of Behavioral Finance A mathematical model quantifies a scientific hypothesis about some aspect of the world, This allows quantitative predictions to be made that can be tested against future observations. Of course, those proposing the model hope its predictions will coincide with said observations. Nevertheless, if they should clash, a true scientist stands ready to formulate a new model that both explains the discordant observations and makes additional predictions that can be tested against further observations.

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, assortative mating, bank run, barriers to entry, Bear Stearns, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, digital divide, diversification, Dunbar number, East Village, eat what you kill, Elon Musk, eurozone crisis, fake it until you make it, family office, financial engineering, financial repression, Gini coefficient, glass ceiling, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, Jim Simons, John Meriwether, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Roose, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, Money creation, money market fund, Myron Scholes, NetJets, Network effects, no-fly zone, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Ponzi scheme, power law, public intellectual, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, rolodex, Satyajit Das, search costs, shareholder value, Sheryl Sandberg, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, subprime mortgage crisis, systems thinking, tech billionaire, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, Tyler Cowen, women in the workforce, young professional

.: The Financial Shadow Capital IMF Meetings in Istanbul: Dancing on the Titanic Power Summit: The Bilderberg Conference Stealth Power: Family Office Gatherings Feeding Off Power: Power Lunches Power Workout: Networking, Working, and Working Out “Superhub-Nobbing”: Private Parties The Higher Purpose of Networking: The Charity Circuit CHAPTER 8 OPPORTUNITY COSTS: THE DOWNSIDE OF THE UPSIDE Missing Out on Memorable Moments Stress Test: When Being a Superhub Is Not So Super Married to Their Jobs: Work-Family Life Imbalance Media Madness: Living Under a Microscope Super-Sick: Paying the Ultimate Price Clash of the Titans: Close Combat and Coups d’État Triumph and Defeat: A Turbulent Career CHAPTER 9 “WOMENOMICS”: THE MISSING LINK The Gender Gap: Women Missing in Action The Access Gap: Exclusive Means Excluding The Networking Gap: Schmooze or Lose The Assessment Gap: Performance versus Potential The Wage Gap: Selling Women Short The Failure Gap: Demoting Promotions The Mentoring Gap: Missing Out on Mentoring The Sexism Gap: The Wolves of Wall Street on the Prowl The Resilience Gap: Male Might and Female Feebleness Closing the Gender Gap: Superhub Christine Lagarde CHAPTER 10 REVOLVING SUPERHUBS: CREATING NETWORK MONOPOLIES Psychological Kidnapping The Revolving Door The Oscillating Megahub: Robert Rubin Open Doors: Tony Blair Cross-Connections: Cooperating Constructively in Times of Crises Launching a President “Legalized Corruption”: The Best Democracy Money Can Buy Purchasing Political Protection Relationship Power: Diffusing the Euro Time Bomb Super-Entity: The Capitalist Network That Runs the World CHAPTER 11 DE-LINKED: EXPULSION AND COMEBACK Sent into Exile: Dick Fuld Shock-Resistant: Larry Summers’s Network Meteoric Rise Against All Odds The Bull in Charge of the China Shop Den of Thieves: Mike Milken Complete Network Collapse: Dominique Strauss-Kahn Ponzi Schemes and Sex Scandals: Buddy Fletcher and Ellen Pao Omni-Connected: Michael Klein CHAPTER 12 SUPER-CRASH: “EXECUTIVE CONTAGION” The Crash of a Titan: John Meriwether The Big Picture: Capitalism in Crisis Debt and Financialization Wealth Gap and Inequality Globalization Winners versus Globalization Losers Approaching the Tipping Point When an Irresistible Force Meets an Immovable Object: Brexit The Next Crisis: Systemic Failure and Contagion The Culprit: The Superhubs or the System?

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While any official position at least for the time being seems inconceivable, the stigma surrounding him has somewhat subsided—though it will likely never fully disappear. The French establishment has slowly lowered its guard and begun opening up its ranks and including him again. Thus, while regaining his status as a superhub is highly unlikely, becoming a well-linked hub again seems feasible in the absence of further jaw-dropping scandals. PONZI SCHEMES AND SEX SCANDALS: BUDDY FLETCHER AND ELLEN PAO Minorities in high finance are rare; rarest of all are minority couples in which both partners are superhubs. One of those power couples was Buddy Fletcher and Ellen Pao. In network terms, they started out as nodes at the fringes of the system before equipping themselves with the preconditions and qualities needed to move to the center of the financial network.

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It also surfaced that Fletcher had financed his brother Geoffrey’s movie Violet & Daisy with $7.7 million of public-pension-fund money, an investment that unfortunately yielded a multimillion-dollar unrealized loss.13 According to the trustee’s report, “In many ways, the fraud here has many of the characteristics of a Ponzi scheme, where, absent new investor money coming in, the overall structure would collapse.”14 While building his impressive portfolio of prime real estate, cars, and relationships, Fletcher also continued to build an impressive portfolio of high-profile lawsuits. In addition to his racial discrimination suits against Kidder Peabody and the Dakota, he was sued by two of his Harvard friends-turned-employees, Michael Meade and Stephen Cass, who alleged sexual harassment after being fired for spurned advances.

The Infinite Machine: How an Army of Crypto-Hackers Is Building the Next Internet With Ethereum by Camila Russo

4chan, Airbnb, Alan Greenspan, algorithmic trading, altcoin, always be closing, Any sufficiently advanced technology is indistinguishable from magic, Asian financial crisis, Benchmark Capital, Big Tech, bitcoin, blockchain, Burning Man, Cambridge Analytica, Cody Wilson, crowdsourcing, cryptocurrency, distributed ledger, diversification, Dogecoin, Donald Trump, East Village, Ethereum, ethereum blockchain, Flash crash, Free Software Foundation, Google Glasses, Google Hangouts, hacker house, information security, initial coin offering, Internet of things, Mark Zuckerberg, Maui Hawaii, mobile money, new economy, non-fungible token, off-the-grid, peer-to-peer, Peter Thiel, pets.com, Ponzi scheme, prediction markets, QR code, reserve currency, RFC: Request For Comment, Richard Stallman, Robert Shiller, Sand Hill Road, Satoshi Nakamoto, semantic web, sharing economy, side project, Silicon Valley, Skype, slashdot, smart contracts, South of Market, San Francisco, the Cathedral and the Bazaar, the payments system, too big to fail, tulip mania, Turing complete, Two Sigma, Uber for X, Vitalik Buterin

Many of the scams that mushroomed in 2017 started getting uncovered. Plexcoin was one of the many obvious Ponzi schemes, with promoters guaranteeing 1,300 percent monthly returns. The SEC shut them down in January. The two creators of CentraTech, the company behind the ICO promoted by Floyd Mayweather and DJ Khaled, were arrested for securities fraud. A Vietnamese company called Modern Tech, which had raised $660 million in two ICOs, simply disappeared with the money. Probably the most notorious scam was Bitconnect, another Ponzi scheme, infamous for a cultlike gathering where spokesman Carlos Matos half-danced, half-jumped around onstage as he told the cheering crowd how he was putting his money in the scheme even as his wife and friends told him it was a scam.

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Matthew, who was editor in chief at the time, resigned in September 2012, just four months after the first issue shipped. His departure was a consequence of his decision to throw his support behind a crypto project called “Pirate” that was rumored to be a scam. On BitcoinTalk, he challenged those saying the project was a Ponzi scheme or fraud to comment on his post saying how much they were willing to bet him the project was legitimate. If he won, he would pay them back double the amounts committed. Not surprisingly, with a name like Pirate, the project closed with allegations of lost investments discussed in online forums.

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The first post said, “it simply is NOT fair and safe or possibly even legal what these guys are doing and if regulation is looming and imposed without warning you people out there supporting crap like this could wound [sic] up waking up tomorrow with charges laid against you.” It added, “Bottom line it’s a dumb idea and it’s an IPO and IPO’s in crypto are ALL scams.” Farther down the thirty-page thread someone wrote, “Ethereum is a ponzi scheme ran [sic] by a few wealthy investors who think throwing bags of money to a coin will attract subsequent bags of money from subsequent investors.” Some went for personal attacks on the cofounders. Joe Lubin’s connection with Goldman Sachs was brought up as a reason to be wary, while a more vicious user wrote, Anthony is some Oliver Twist–esque Fagin character and Vitalik is an anointed coding genius that is utilized to play the role of lead dev.

The End of the Suburbs: Where the American Dream Is Moving by Leigh Gallagher

Airbnb, big-box store, bike sharing, Burning Man, call centre, car-free, Celebration, Florida, clean water, collaborative consumption, Columbine, commoditize, crack epidemic, demographic winter, East Village, edge city, Edward Glaeser, extreme commuting, Ford Model T, General Motors Futurama, gentrification, helicopter parent, Home mortgage interest deduction, housing crisis, Jane Jacobs, Kickstarter, Lewis Mumford, low skilled workers, Mark Zuckerberg, McMansion, Menlo Park, microapartment, mortgage tax deduction, negative equity, New Urbanism, peak oil, Peter Calthorpe, Ponzi scheme, Quicken Loans, Richard Florida, Robert Shiller, Sand Hill Road, Seaside, Florida, Silicon Valley, Steve Jobs, Stewart Brand, streetcar suburb, TED Talk, the built environment, The Death and Life of Great American Cities, Tony Hsieh, Tragedy of the Commons, transit-oriented development, upwardly mobile, urban planning, urban sprawl, Victor Gruen, walkable city, white flight, white picket fence, young professional, Zipcar

The amount of tax revenue their low-density setup generates, he says, doesn’t come close to paying for the cost of maintaining the vast and costly infrastructure systems, so the only way to keep the machine going is to keep adding and growing. “The public yield from the suburban development pattern is ridiculously low,” he says. One of the most popular articles on the Strong Towns Web site is a five-part series Marohn wrote likening American suburban development to a giant Ponzi scheme. Here’s what he means. The way suburban development usually works is that a town lays the pipes, plumbing, and infrastructure for housing development—often getting big loans from the government to do so—and soon after a developer appears and offers to build homes on it. Developers usually fund most of the cost of the infrastructure because they make their money back from the sale of the homes.

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His house, which he and his wife had built in 1995 and refinanced a few times, has lost value; it was assessed at $272,000 a few years ago and he thinks it would sell today for $200,000. But he’s more concerned for his brother, Brent, who lives forty-five minutes from Minneapolis in the exurb of Rogers, Minnesota—an area that, as Marohn puts it, “got very caught up in the entire growth Ponzi scheme”—and commutes to an inner-ring suburb. Brent’s house has dropped “tremendously” in value, Marohn says. He worries about his brother’s situation; the more gas prices go up, the fewer people there will be that can afford his house, forcing prices to drop further and further. At that point, Marohn believes, one of two things will happen: either a local economy will spring up in his brother’s town to provide jobs for its people so they don’t have to commute, or his brother’s house is going to continue to lose value until it’s ultimately worth nothing and sold for salvage.

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., 204 Las Vegas housing bust in, 72, 73–74 Zappos relocation to, 174–77 Lawrenceville, Pittsburgh, 202 Le Corbusier, 119 Lee, Annette, 85–86, 194 Leinberger, Christopher, 38, 64, 81–82, 130, 131, 135, 188 on housing market location, 199 reactions to ideas of, 195 on suburban development, 38 Lennar Corporation, 156 Levitt, William, 37 Levittown, 37, 43, 46, 65 Libertyville, Illinois, 140–41 LifeEdited, 22, 138–39, 159 Lifestyle centers, 127–28, 132 Lind, Diana, 208 Lindsay, Greg, 166 “Little Boxes” (song), 39 Littledigs.com, 138 Live/work spaces, 122 Living alone, rise of, 146 Llewellyn Park, West Orange, New Jersey, 31 Location-efficient mortgages, 101–3, 206 LoDo, Denver, 168 Loneliness of suburbanites, 91–92, 125, 132–33 Long Beach, California, 63 Lopez, Russ, 45–46 Loudoun County, Virginia, 13, 68 Lower East Side, New York City, 29 Lowe’s, 45 Lucy, William, 160–61, 199–200, 210 McGirr, Lisa, 179 McIlwain, John, 209 McLinden, John, 7, 140, 141–42, 200–201 McLives, 139–140 McMahon, Bob, 133 McMansions, 69–71, 136, 205 Malls. See Shopping malls Mangiamele, Paul M., 182 Mansueto, Joe, 173 Marohn, Charles, 53–61 background information, 53–56 on codes and standards, 63 on housing boom/bust, 74 Ponzi scheme, suburban development as, 58–60, 77–78 Strong Towns/Curbside Chat, 56–58 on suburban prosperity myth, 65, 207 Marriage average age of, 146 decline in rate of, 145–46 Mass-produced communities, 37–38, 46, 70 Matthews, Anne, 184 May, William, 154 Media, Pennsylvania, 10–13, 133, 201–2 Meeks, Rachel, 108 Melman, Stephen, 138 MetroWest, Washington, DC, 128 Meyer, Deborah, 128, 145 Millennials birth years of, 19 cities, preference for, 19–20, 157–59 delayed adulthood of, 152–54 driver’s license decline among, 20 in “first ring” suburbs, 202–3 as Generation Rent, 158 home-related needs of, 157–59 impact on housing market, 155–59 living with parents, 152–55 Miller, Nicole, 154, 161 Minimalism, post-Recession mentality, 138–140 Model T, 32, 82 Morristown, New Jersey, 128–29, 203 Mortgages cheap, and housing boom (2000s), 66, 69, 71 deduction, negative aspects of, 74–76 foreclosures and housing bust, 73–74 historical view, 35, 40, 61 interest tax deduction, 35, 61, 74–75 location-efficient mortgages, 101–3, 206 Moses, Robert, 47 Multifamily construction, 6, 16, 18, 198 Multigenerational homes, 156–57 Mumford, Lewis, 27, 33, 46, 48 My Favorite, 144 Narberth, Pennsylvania, 134–35, 171 National Association of Home Builders (NAHB), 39 National Homeownership Day, 65 National Homeownership Strategy, 66 Neighborhood Market, 18, 172 Neighborhood satisfaction, 91 Nelson, Arthur C., 20, 60, 159, 204 Newgeography.com, 193 Newtown Station, Pennsylvania, 129 New Urbanism, 113–142.

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

Alan Greenspan, asset-backed security, bank run, banking crisis, Bernie Madoff, bond market vigilante , bonus culture, Bretton Woods, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, deal flow, disintermediation, diversification, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, George Santayana, global reserve currency, Greenspan put, Home mortgage interest deduction, inverted yield curve, Isaac Newton, joint-stock company, junk bonds, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, low interest rates, margin call, market clearing, mass immigration, Money creation, money market fund, moral hazard, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Phillips curve, plutocrats, Ponzi scheme, profit maximization, proprietary trading, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, Suez canal 1869, systems thinking, tail risk, The Great Moderation, the long tail, the new new thing, the payments system, too big to fail, value at risk, very high income, War on Poverty, We are all Keynesians now, Y2K, yield curve

If the average person needs $40,000 a year to live in retirement and will on average live twenty years, that means that they need $800,000 over that period. Obviously, you and I can’t save that kind of cash. There are only two ways to solve the problem. One is pay-as-you-go ‘‘unfunded’’ government pensions like Social Security. These are classic Ponzi schemes, sort of Bernie Madoff on a much vaster scale. Today’s payroll taxes are not invested; individuals have no accounts and don’t have any legal right to a pension. Instead, people working today are taxed to pay benefits to people who are retired or on disability. As long as people mostly died before becoming eligible or didn’t live long in retirement, this worked fine.

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The banks misunderstood their real risks and had too much faith in financial rocket science, but even if we resent the enormous salaries and perks they gave themselves, there is scant evidence of illegality or even conscious recklessness related to the collapse. The poster child of the meltdown has become Bernie Madoff, just as Charles Ponzi is still remembered from the Roaring Twenties. Madoff ’s and other Ponzi schemes by money managers were discovered when the markets plunged, but his scheme was a classic investment scam that had run for decades under the noses of the regulators and had nothing to do with the bankers and instruments at the center of the meltdown. As Warren Buffett wrote, ‘‘It is only when the tide goes out that you see who has been swimming 175 176 FINANCIAL MARKET MELTDOWN naked.’’

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We can’t anticipate exactly what the market will do tomorrow, but we can hedge our bets and act on our own risk tolerance. We Conclusion can make our own decisions like grown-ups and take responsibility for the ones that go wrong. If something sounds too good to be true, it probably is, and those who are not skeptical of the claims of financial professionals can end up at the wrong end of a Ponzi scheme or an exploding interest-only mortgage. However, nobody is compelled to do anything. Markets are about choice. Political risk is different, as our founding fathers, who knew a lot of real history, well understood. When the state seizes the ‘‘commanding heights’’ of the economy like the banking system and replaces the millions of choices people make in markets with its own superior wisdom, bad things almost always follow.

Mastering Blockchain: Unlocking the Power of Cryptocurrencies and Smart Contracts by Lorne Lantz, Daniel Cawrey

air gap, altcoin, Amazon Web Services, barriers to entry, bitcoin, blockchain, business logic, business process, call centre, capital controls, cloud computing, corporate governance, creative destruction, cross-border payments, cryptocurrency, currency peg, disinformation, disintermediation, distributed ledger, Dogecoin, Ethereum, ethereum blockchain, fault tolerance, fiat currency, Firefox, global reserve currency, information security, initial coin offering, Internet of things, Kubernetes, litecoin, low interest rates, Lyft, machine readable, margin call, MITM: man-in-the-middle, multilevel marketing, Network effects, offshore financial centre, OSI model, packet switching, peer-to-peer, Ponzi scheme, prediction markets, QR code, ransomware, regulatory arbitrage, rent-seeking, reserve currency, Robinhood: mobile stock trading app, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Skype, smart contracts, software as a service, Steve Wozniak, tulip mania, uber lyft, unbanked and underbanked, underbanked, Vitalik Buterin, web application, WebSocket, WikiLeaks

Homero Joshua Garza Operated GAW Miners, a cryptocurrency mining firm that sold more units than it possessed in inventory. In this way, the operation acted like a Ponzi scheme. GAW Miners also sold customers “virtual miners,” or “Hashlets,” for future mining profits, which to the SEC appeared like securities. In 2018, Garza was sentenced to 21 months in prison for wire fraud. Mark Scott Acted as an attorney for OneCoin, a Ponzi scheme that generated billions in revenue. Scott was responsible for laundering $400 million of revenue through tax havens. OneCoin was a multilevel marketing operation that has seen prosecutions globally over false claims of its private blockchain-based cryptocurrency.

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This section lists a few examples of people or groups that have been penalized by US enforcement agencies: Trendon Shavers Created Bitcoin Savings & Trust, a scheme that took in over 764,000 BTC by promising investors a 7% return per week via arbitrage trading. Shavers was sentenced to one and a half years in prison and ordered to pay $1.23 million in restitution in 2015. This is widely known as the first Ponzi scheme conviction and first US criminal securities fraud case in cryptocurrency. Charlie Shrem Facilitated bitcoin transactions as an unlicensed money transmitting business. Using his company BitInstant, Shrem helped a broker provide bitcoin without KYC/AML to users of Silk Road. Over $1 million in bitcoin transactions were conducted.

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Gox-Bitfinex multisignature wallet contracts, Multisignature Contracts-Multisignature Contracts N Namecoin, Altcoins naming services, Naming Services network hash rate, Block discovery networkscentralized versus decentralized versus distributed design, Distributed Versus Centralized Versus Decentralized Corda, The Corda networknodes having visibility into transactions, Corda ledger DAG design, DAGs Libra's centralization challenge, Novi transactions confirmed by network on Bitcoin, Transaction life cycle New York Department of Financial Services (NYDFS), FinCEN Guidance and the Beginning of Regulation NiceHash, NiceHash Nightfall blockchain, Nightfall nodes, Distributed Versus Centralized Versus Decentralizedin Avalance consensus mechanism, Avalanche Libra, validator and full nodes, How the Libra Protocol Works Lightning, Lightning nodes and wallets in proof-of-stake networks, Proof-of-Stake nonces, The mining processin block discovery on Bitcoin, The mining process running out of nonce space or overflow, The mining process in Satoshi Nakamoto's whitepaper, The Whitepaper noncustodial wallets, Wallet Types: Custodial Versus Noncustodial(see also wallets) nonfungible tokens, Fungible and Nonfungible TokensERC-721 standard for, ERC-721 Nothing-at-Stake problem, Proof-of-Stake Novi wallet, Novi NuBits, NuBits NXT blockchain, NXT O oligarchical model dominating the web, Web 3.0 Omni Core, Understanding Omni Layerlimitations of, Deploying and Executing Smart Contracts in Ethereum Omni Layer, Understanding Omni Layer-Adding custom logicadding custom logical operations to Bitcoin, Adding custom logic-Adding custom logic how it works, How Omni Layer works limitations of, Deploying and Executing Smart Contracts in Ethereum technical stack, overview of, Understanding Omni Layer Tether project built on, Tether opcodes, Gas and Pricing Open Systems Interconnection (OSI) model, The More Things Change operating system platform (EOS), Blockchains to Watch operators, ERC-777, ERC-1155 Optimistic Rollups, Other Altchain Solutions, Lightning nodes and wallets options, Derivatives OP_RETURN field, Adding custom logictranslation of metadata in, Adding custom logic Oracle, Blockchain Platform, Blockchain as a Service oracles, Important Definitionsmanipulation in Fulcrum attack, The Fulcrum Exploit order books, Order Booksthin, slippages and, Slippage over-the-counter (OTC) market, Slippage P paper wallets, Wallet Type Variations Parity, Parity Parity hack (2017), Parity participants, Participants passwordssecurity vulnerabilities, Zero-Knowledge Proof Thinbus Secure Remote Password protocol, Zero-Knowledge Proof pay-to-play, Tools for fundamental analysis payment channels, Lightningnode dropping or losing connection to, Lightning nodes and wallets opening by sending funding transaction, Funding transactions withdrawing funds from, Off-chain transactions payment systemsLibra, Borrowing from Existing Blockchains permissioned ledger uses of blockchain, Payments physical cash versus digital, Electronic Systems and Trust Permacoin, Alternative methods permissioned ledger uses of blockchain, Permissioned Ledger Uses-Paymentsbanking, Banking central bank digital currencies, Central Bank Digital Currencies gaming, Gaming health care, Health Care Internet of Things, Internet of Things IT systems, IT payments systems, Payments permissioned ledgers, Databases and Ledgers permissionless ledgers, Databases and Ledgers person-to-person trading of cryptocurrency, Evolution of the Price of Bitcoin phishing attacks, Security Fundamentals Plasma implementation of sidechains, Other Altchain Solutions Ponzi schemes in cryptocurrency, Skirting the Laws PotCoin, More Altcoin Experiments precompilation of zk-SNARKs, zk-SNARKs preminingissues with, Litecoin premined altcoin, Ixcoin, Altcoins prices (gas), Gas and Pricing Primecoin, Altcoins privacyand censorship resistance with dapps, Use Cases Ethereum-based privacy implementations, Ethereum-Based Privacy Implementations future developments in blockchains, Privacy information security in decentralizing finance and the web, Privacy-Ring Signaturesring signatures, Ring Signatures Zcash, Zcash zero-knowledge proof, Zero-Knowledge Proof zk-SNARKs, zk-SNARKs insufficient anonymity on Bitcoin, The Evolution of Crypto Laundering paired with scalability, Mimblewimble blockchain protocol, Mimblewimble, Beam, and Grin privacy-focused blockchains, PrivacyMonero, Blockchains to Watch-How Monero Works Zcash, Zcash privacy-focused cryptocurrencies, Privacy-Focused CryptocurrenciesDash, Dash Monero, Monero Zcash, Zcash private blockchain networks, Privacy private blockchains, The Enterprise Ethereum Alliance private keys, Public/private key cryptography(see also public/private key cryptography) products/services, buying or selling, Evolution of the Price of Bitcoin proof-of-history, Alternative methods proof-of-stake, Proof-of-Stake-Proof-of-StakeByzantine fault-tolerant algorithm, HotStuff, Borrowing from Existing Blockchains Casper algorithm in Ethereum 2.0, Ethereum Scaling proof-of-stake velocity, More Altcoin Experiments proof-of-storage, Alternative methods proof-of-work, Block Generation, Proof-of-Work-Confirmationsbit gold's client puzzle function type, Bit Gold block discovery, Block discovery confirmations by miners of blocks to include in blockchain, Confirmations criticisms of, Proof-of-Stake, Ripple and Stellar CryptoNote protocol, Monero Ethereum's Ethash protocol, Ethereum: Taking Mastercoin to the Next Level longest chain rule, The mining process mining process for block discovery on Bitcoin, The mining process mining process on Bitcoin, The mining process in Satoshi Nakamoto's whitepaper, The Whitepaper transaction life cycle, Transaction life cycle use by B-Money, B-Money use by Hashcash, Hashcash X11 ASIC-resistant, Dash protocols, Electronic Systems and Trust pseudonimity, KYC rules and, KYC and pseudonymity public keys, Public/private key cryptography(see also public/private key cryptography) public/private key cryptographyBitcoin's use of, Public/private key cryptography examples of public and private keys, Naming Services generating keys, Generating keys private key storage for digital wallets, Authoring a smart contract private keys for wallets, Private Keys public and private keys in cryptocurrency systems, Public and Private Keys in Cryptocurrency Systems-Public and Private Keys in Cryptocurrency Systems unauthorized access to private key, Bitcoin Transaction Security use in controlling access to personal information, Identity and the Dangers of Hacking pull transactions, Bitcoin Transaction Security, ERC-777 push transactions, Bitcoin Transaction Security, ERC-777 Q Quantum Ledger Database (QLDB), Blockchain as a Service Quorum blockchain, Quorum, JPMorgan R ransomware, CryptoLocker and, CryptoLocker and Ransomware rate limiting, Exchange Risk, Rate Limiting real estate transactions, using tokens on a blockchain, Tokens on the Ethereum Platform recovery seed, Recovery Seed recursive call vulnerability, Forking Ethereum and the creation of Ethereum Classic regulationof cryptocurrency exchanges, Jurisdiction FATF and the Travel Rule, The FATF and the Travel Rule FinCEN guidance and beginnings of, FinCEN Guidance and the Beginning of Regulation-FinCEN Guidance and the Beginning of Regulation regulatory challenges in cryptocurrency market, Regulatory Challenges-Basic Mistakes regulatory issues with ICOs, Tokenize Everything regulatory arbitrage, Avoiding Scrutiny: Regulatory Arbitrage-Crypto-Based StablecoinsICOs as example of, Initial Coin Offerings relational databases, Databases and Ledgers replay attacks, Replay attacksprotecting against, on Ethereum and Ethereum Classic, The Ethereum Classic Fork replication systems, Databases and Ledgers REST APIsEthereum network, Interacting with Code WebSocket versus, REST Versus WebSocket ring confidential transactions, Blockchains to Watch, How Monero Works ring signatures, Monero, Ring Signatures, Blockchains to Watchhiding public address of sender on Monero, How Monero Works Ripple, Other Concepts for Consensus, Rippleblock times, Float Configuration 2 Robinhood mobile app, Brokerages Rollups, Zero Knowledge (ZK) and Optimistic, Other Altchain Solutions, Lightning nodes and wallets Royal Mint, The Royal Mint S Santander, blockchain-issued bonds, Banking SAP, Blockchain as a Service, Blockchain as a Service satoshi, Gas and Pricing Satoshi Nakamotobitcoin address related to, The Evolution of Crypto Laundering efforts to establish identity of, Storing Data in a Chain of Blocks identity, guesses at, Bahamas Satoshi's Vision group (Bitcoin SV), The Bitcoin Cash Fork whitepaper, The Whitepaper savings services (DeFi), Savings scalabilitycentralized versus decentralized exchanges, Scalability discontent over Bitcoin network's scaling, The Bitcoin Cash Fork EOS solution to blockchain issues, Tokenize Everything privacy paired with, Mimblewimble blockchain potocol, Mimblewimble, Beam, and Grin Scalable Transparent ARguments of Knowledge (STARKs), STARKs scaling blockchains, Scaling Blockchains-Other Altchain Solutions, The Scaling Problem-Ethereum ScalingAvalanche consensus mechanism, Avalanche DAG network design, DAGs Ethereum, Ethereum Scaling-Ethereum Scaling Lightning solution, Lightning, Lightning-Lightning nodes and wallets Liquid multisignature wallet, Liquid other altchain solutions, Other Altchain Solutions SegWit, SegWit sharding, Sharding sidechains, Sidechains STARKs, STARKs Schnorr algorithm, Privacy Scott, Mark, Skirting the Laws SCP consensus protocol, Stellar scripted money, Improving Bitcoin’s Limited Functionality Scrypt mining, Altcoins, Litecoin Secret Network, Privacy securitiestokens proposed in ICOs, Different Token Types unregistered securities offerings, Skirting the Laws Securities and Exchange Commission (SEC), FinCEN Guidance and the Beginning of Regulation securityBitcoin transaction security, Bitcoin Transaction Security custody infrastructure for exchanges, Counterparty Risk detection of blockchain tampering with Merkle roots, The Merkle Root early vulnerability on Bitcoin, An Early Vulnerability exchanges taking care of private keys, Counterparty Risk flash loans exploiting vulnerabilities in DeFi platforms, The Fulcrum Exploit fundamentals for cryptocurrencies, Security Fundamentals-Recovery Seed identity and dangers of hacking, Identity and the Dangers of Hacking information security in decentralizing finance and the web, Privacy Lightning Network vulnerabilities, Lightning proof-of-stake consensus algorithm, criticisms of, Proof-of-Stake recursive call vulnerability, Forking Ethereum and the creation of Ethereum Classic replay attacks vulnerability, Replay attacks, The Ethereum Classic Fork sharding, vulnerabilities with, Other Altchain Solutions theft of cryptocurrencies in exchange hacks, Exchange Hacks-NiceHash theft of cryptocurrencies in other hacks, Other Hacks-Summary transaction malleability vulnerability, Lightning nodes and wallets security token offerings (STOs), Different Token Types security tokens, Token Economics seeds (recovery), Recovery Seedstorage of, Authoring a smart contract SegWit (Segregated Witness), SegWit, Lightning nodes and wallets self-sovereign identity, Identity and the Dangers of Hacking SHA-256 hash algorithm, Introducing the Timestamp Server, Hashes SHA256 and RIPEMD160 functions, Generating keys shadow market for disinformation, Tools for fundamental analysis sharding, Other Altchain Solutions, Shardingin Ethereum 2.0, Ethereum Scaling Shavers, Trendon, Skirting the Laws Shrem, Charlie, Skirting the Laws sidechains, Other Altchain Solutions, SidechainsLiquid technology and, Liquid Optimistic Rollups and, Lightning nodes and wallets Silk Road, Catch Me If You Cancriminal investigation tracking bitcoin address to operator, The Evolution of Crypto Laundering provision of bitcoin to users without KYC/AML, Skirting the Laws SIM swapping, SIM Swapping-SIM Swapping Singapore, regulatory arbitrage, Singapore single-shard takeover attacks, Other Altchain Solutions slashing algorithms, Proof-of-Stake slippage, Slippage smart contracts, Mastercoin and Smart ContractsDAML language for distributed applications, DAML for decentralized exchanges, Decentralized Exchange Contracts, Custody and counterparty risk deploying and executing in Ethereum, Deploying and Executing Smart Contracts in Ethereum-Interacting with Codeauthoring a smart contract, Authoring a smart contract deployment, Deploying a smart contract-Deploying a smart contract Ethereum Virtual Machine (EVM), The Ethereum Virtual Machine executing a smart contract, Executing a smart contract gas and pricing, Gas and Pricing interacting with a smart contract, Interacting with a smart contract programmatically interacting with Ethereum, Interacting with Code reading a smart contract, Reading a smart contract writing a smart contract, Writing a smart contract deployment for dapps, Challenges in Developing Dapps EOS platform, Blockchains to Watch ERC-20 compliantevents supported by, ERC-20 example of, ERC-20-ERC-20 methods implemented, ERC-20 ERC-compliant, library of, Decentralized Exchange Contracts flash loanscreating the contract, Creating a Flash Loan Contract-Deploying the Contract deploying the contract, Deploying the Contract manipulation of oracles in Fulcrum attack, The Fulcrum Exploit steps in process, Flash Loans Libra support for, Borrowing from Existing Blockchains Omni Layer providing, Understanding Omni Layer publicly viewable record of method call to Uniswap smart contract, Custody and counterparty risk-Exchange rate sending tokens to via push and pull transactions, ERC-777 third-party auditors of, Fungible and Nonfungible Tokens Uniswap contract viewable on Ethereum, Infrastructure social media, campaigns to influence cryptocurrencies, Tools for fundamental analysis soft forks, Understanding Forks software development, changes from use of cryptcurrency and blockchain, Web 3.0 software forks, Understanding Forks software wallets, Wallets Solidcoin, Altcoins Solidity language, Authoring a smart contract South Korean exchanges, Regulatory Challenges speculation in cryptocurrency, Market Infrastructure, Tulip Mania or the internet?

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

Airbnb, Alan Greenspan, altcoin, Apple Newton, bank run, banking crisis, bitcoin, Bitcoin Ponzi scheme, blockchain, Bretton Woods, buy and hold, California gold rush, capital controls, carbon footprint, clean water, Cody Wilson, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cross-border payments, cryptocurrency, David Graeber, decentralized internet, disinformation, disintermediation, Dogecoin, driverless car, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, Firefox, Flash crash, Ford Model T, Fractional reserve banking, Glass-Steagall Act, hacker house, Hacker News, Hernando de Soto, high net worth, informal economy, intangible asset, Internet of things, inventory management, Joi Ito, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, Money creation, money: store of value / unit of account / medium of exchange, Nelson Mandela, Network effects, new economy, new new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, off-the-grid, offshore financial centre, payday loans, Pearl River Delta, peer-to-peer, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, printed gun, profit motive, QR code, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Ross Ulbricht, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, underbanked, Vitalik Buterin, WikiLeaks, Y Combinator, Y2K, zero-sum game, Zimmermann PGP

A month later, the Securities and Exchange Commission filed charges against Trendon Shavers, a Texan accused of running a bitcoin Ponzi scheme under the moniker pirateat40. That the Feds were now taking bitcoin seriously was an alarming yet exhilarating proposition for bitcoiners, who were divided between those who wanted its lawlessness to continue and those who believed its growth depended on the legitimacy of regulation and enforcement against criminality. While the news of drug busts and Ponzi schemes bred some mainstream suspicion about this unfamiliar, anonymous currency, it also spurred curiosity among some who hadn’t yet cottoned on to bitcoin’s possibilities.

…

You read the paper every day, and enough stories have appeared to convince you that bitcoin is real, that some entrepreneurs, including the Winklevoss twins of Facebook fame, expect to make a lot of money from it. But the details don’t add up. You get it by doing math problems? No? By having your computer do math problems? How can that possibly work? At this stage, phrases like Ponzi scheme and tulip mania enter your mind. Stage Three: Curiosity. You’ve kept reading. It becomes clear that many people, even some seemingly sensible people such as Internet pioneer Marc Andreessen, people with a track record for being right about this stuff, are genuinely excited by it. But why all the fuss?

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Kenna had to return all the money his customers had entrusted to Tradehill and shut down the exchange. The only other option was to “turn into a fractional-reserve bank,” he said jokingly, referring to the bank model that allows banks to lend out deposits while holding only a fraction of those funds in reserve. “They call it a Ponzi scheme unless you have a banking license.” He’d sunk everything he had into Tradehill. Now, he was broke, so broke that he couldn’t afford rent. He figured the only way he could find shelter was to turn some place into a communal living space. If he could organize it, he figured, he could finagle the rent.

End the Fed by Ron Paul

affirmative action, Alan Greenspan, Bear Stearns, Bernie Madoff, Bernie Sanders, Bretton Woods, business cycle, crony capitalism, currency manipulation / currency intervention, fiat currency, Fractional reserve banking, guns versus butter model, hiring and firing, housing crisis, illegal immigration, invisible hand, Khyber Pass, Long Term Capital Management, low interest rates, market bubble, means of production, military-industrial complex, Money creation, moral hazard, Ponzi scheme, price mechanism, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, Savings and loan crisis, too big to fail, tulip mania, We are all Keynesians now, Y2K

Regulations must someday be directed toward the more deserving targets, such as the Fed, Treasury, FDIC, SEC, and the Exchange Stabilization Fund. The entire system of fiat money and fractional-reserve banking is like a super Ponzi scheme (if we can’t pay it back, let’s just create more!) and is the source of our problems. Why should we be surprised that, if our government runs a Ponzi scheme, some people feel morally justified doing the same? When did we accept this idea that governments have license to do what they want without moral restraints, and the people must live by a different standard? The answer, of course, is that government must follow the same rules that moral people are expected to.

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Congress accommodated and quickly passed the Sarbanes-Oxley legislation. Just as the SEC regulations of the 1930s aggravated and helped to prolong the Depression, the bear market starting in the year 2000 has been aggravated and prolonged by Sarbanes-Oxley. The argument following the Madoff revelation of a $50 billion Ponzi scheme prompted outcries about the deficiencies of the SEC and that we needed even more SEC regulators on the job. We have 3,500 bureaucrats in the SEC, and the argument is that we don’t have enough. Of course that’s enough, although the truth is that 20,000 SEC regulators wouldn’t suffice because they can’t police every business transaction and prevent fraud from being committed.

Trend Commandments: Trading for Exceptional Returns by Michael W. Covel

Alan Greenspan, Albert Einstein, Alvin Toffler, behavioural economics, Bernie Madoff, Black Swan, business cycle, buy and hold, commodity trading advisor, correlation coefficient, delayed gratification, disinformation, diversified portfolio, en.wikipedia.org, Eugene Fama: efficient market hypothesis, family office, full employment, global macro, Jim Simons, Lao Tzu, Long Term Capital Management, managed futures, market bubble, market microstructure, Market Wizards by Jack D. Schwager, Mikhail Gorbachev, moral hazard, Myron Scholes, Nick Leeson, oil shock, Ponzi scheme, prediction markets, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Sharpe ratio, systematic trading, the scientific method, three-martini lunch, transaction costs, tulip mania, upwardly mobile, Y2K, zero-sum game

His big question made me think: Ignition 7 “Taking a stand always stands out. Who do you want to take a shot at?”4 A valid question. My answer: Wall Street, the government, and media for starters. Let go of them. That is a breath of fresh air in an era of constant depression and recession talk, nonstop predictions, clueless economists, and Federal Reserve Ponzi schemes. Trend Commandments is for those who know deep down that there is a real way to make money in the markets, but just do not know how yet. However, you will be surprised that the secret is hiding in plain sight. There was a great story on author Seth Godin’s web site. He had a college professor who worked as an engineering consultant.

…

If you are able to apply such an unsound principle, you can keep on averaging down by buying 200 at 44, then 400 at 41, 800 at 38, 1600 at 35, 3200 at 32, 6400 at 29, and so on.1 “Don’t frown, double down!” Not smart strategy. Losses are a part of the game. You want no losses? You want positive returns every month? It does not work that way, that is, not unless you were lucky enough to be invested in the Bernard Madoff Ponzi-scheme—which has resulted in assorted criminal convictions and a few suicides. Losses are not your problem. It’s how you react to them. Ignore losses with no plan, or try to double down on your losses to recoup, and those losses will come back like a Mack truck to run over your account. You can’t win if you are not willing to lose.

…

In 2010, Brian Sack, a senior official at the New York Fed, admitted the need to keep stock markets artificially high: “Nevertheless, balance sheet policy can still lower longer-term borrowing costs for many households and businesses, If you close your and it adds to household wealth by keeping asset eyes, the monster prices higher than they otherwise would be.” will not go away. The Fed has essentially admitted to operating 2 a Ponzi scheme. Am I saying to not trade? No. A government-manipulated market is still a market. You lose money and you jump out the window, too bad. It’s your problem. Government should realize at the end of the day it’s investors who bear responsibility for their investments.3 With all of the extracurricular policy-making of the government aimed at rigging the markets to some unknown right level, trend following is the only sanity available.

Most Likely to Succeed: Preparing Our Kids for the Innovation Era by Tony Wagner, Ted Dintersmith

affirmative action, Airbnb, Albert Einstein, Bernie Sanders, Clayton Christensen, creative destruction, David Brooks, driverless car, en.wikipedia.org, Frederick Winslow Taylor, future of work, immigration reform, income inequality, index card, Jeff Bezos, jimmy wales, Joi Ito, Khan Academy, Kickstarter, knowledge economy, knowledge worker, language acquisition, low skilled workers, Lyft, Mark Zuckerberg, means of production, new economy, One Laptop per Child (OLPC), pattern recognition, Paul Graham, Peter Thiel, Ponzi scheme, pre–internet, school choice, Silicon Valley, Skype, Steven Pinker, TaskRabbit, TED Talk, the scientific method, two and twenty, uber lyft, unpaid internship, Y Combinator

“The battle over climate science.” Popular Science, June 21, 2012. http://www.popsci.com/science/article/2012-06/battle-over-climate-change (accessed December 30, 2014). 22 Jacobson, Louis. “Rick Perry says Social Security is a Ponzi scheme.” PolitiFact.com, September 12, 2011. http://www.politifact.com/truth-o-meter/statements/2011/sep/12/rick-perry/rick-perry-says-social-security-ponzi-scheme/ (accessed December 30, 2014). 23 Baker, Dean, and David Rosnick. “Basic facts on social security and proposed benefit cuts/privatization.” Center for Economic and Policy Research, March 2005. 24 Krugman, Paul. “Inventing a crisis.”

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Case Study: Future Financial Obligations At the federal, state, local, and private-sector levels, our society has large pools of collective funds in complex vehicles such as state and local pension funds, federal entities (Social Security, Medicare, and our national debt), or corporate pension funds. The aggregate amount of capital in such pools across our country approaches some $50 trillion. A vitriolic controversy rages in our country about the fiscal sustainability of these funds. We have prominent political figures calling them “Ponzi schemes”22 and other political influencers calling them the financial equivalent of the Rock of Gibraltar.23 Analyzing the financial footing of any of these large pools of money, including realistic estimates of future in-flows and out-flows, is a numbers-driven exercise. Determining under what circumstances a given pool will remain financially solvent shouldn’t be determined by political party affiliation.

…

Determining under what circumstances a given pool will remain financially solvent shouldn’t be determined by political party affiliation. Yet, as our parties have become more polarized, we see a sharp partisan divide on the issue of financial reality.24 Democrats Give Far Less Priority to Reducing the Budget Deficit While we wouldn’t use the ethically charged term “Ponzi scheme” to describe the financial underpinnings of these pools, it is quite clear that many of these vehicles are ticking financial time bombs. Despite overwhelming evidence that our future generation is being handed a huge financial mess, our civil society is stuck in the mud in making progress on reform.

The Enigma of Capital: And the Crises of Capitalism by David Harvey

accounting loophole / creative accounting, Alan Greenspan, anti-communist, Asian financial crisis, bank run, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, cotton gin, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, equal pay for equal work, European colonialism, failed state, financial innovation, Frank Gehry, full employment, gentrification, Glass-Steagall Act, global reserve currency, Google Earth, Great Leap Forward, Guggenheim Bilbao, Gunnar Myrdal, guns versus butter model, Herbert Marcuse, illegal immigration, indoor plumbing, interest rate swap, invention of the steam engine, Jane Jacobs, joint-stock company, Joseph Schumpeter, Just-in-time delivery, land reform, liquidity trap, Long Term Capital Management, market bubble, means of production, megacity, microcredit, military-industrial complex, Money creation, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Northern Rock, oil shale / tar sands, peak oil, Pearl River Delta, place-making, Ponzi scheme, precariat, reserve currency, Ronald Reagan, Savings and loan crisis, sharing economy, Shenzhen special economic zone , Silicon Valley, special drawing rights, special economic zone, statistical arbitrage, structural adjustment programs, subprime mortgage crisis, technological determinism, the built environment, the market place, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, Timothy McVeigh, too big to fail, trickle-down economics, urban renewal, urban sprawl, vertical integration, white flight, women in the workforce

Releasing money back into circulation to get more social power takes either an act of faith, or requires safe and trustworthy institutions where you can put your personal money at someone else’s disposal to pursue profit-making adventures (which is, of course, what banks traditionally do). Trust in the system becomes crucial. Ponzi schemes of whatever sort undermine that trust. Loss of confidence in the symbols of money (the power of the state to guarantee monetary stability) or in the quality of money (inflation) butts up against the possibility of monetary famine and the freezing up of the means of payment of the sort that occurred in autumn in 2008.

…

All manner of predatory practices as well as legal (usurious interest rates on credit cards, foreclosures on businesses by the denial of liquidity at key moments, and the like) can be used to pursue tactics of dispossession that advantage the already rich and powerful. The wave of financialisation that occurred after the mid-1970s has been spectacular for its predatory style. Stock promotions and market manipulations; Ponzi schemes and corporate fraud; asset stripping through mergers and acquisitions; the promotion of levels of debt incumbency that reduce whole populations, even in the advanced capitalist countries, to debt peonage; dispossession of assets (the raiding of pension funds and their decimation by stock and corporate collapses) – all these features are central to what contemporary capitalism is about.

…

Finally we need to note the role of crises. A crisis, after all, is nothing less than a massive phase of dispossession of assets (cultural as well as tangible). To be sure, the rich as well as the poor suffer, as the cases of housing foreclosures and losses from investing with Bernie Madoff’s crazy Ponzi scheme show. But this is how wealth and power get redistributed both within and between classes. Devalued capital assets left over from bankruptcies and collapses can be bought up at fire-sale prices by those blessed with liquidity and profitably recycled back into circulation. Surplus capital thus finds a new and fertile terrain for renewed accumulation.

Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio by Sal Arnuk, Joseph Saluzzi

algorithmic trading, automated trading system, Bernie Madoff, buttonwood tree, buy and hold, commoditize, computerized trading, corporate governance, cuban missile crisis, financial engineering, financial innovation, Flash crash, Gordon Gekko, High speed trading, latency arbitrage, locking in a profit, machine readable, Mark Zuckerberg, market fragmentation, National best bid and offer, payment for order flow, Ponzi scheme, price discovery process, price mechanism, price stability, proprietary trading, Sergey Aleynikov, Sharpe ratio, short selling, Small Order Execution System, statistical arbitrage, stocks for the long run, stocks for the long term, transaction costs, two-sided market, uptick rule, zero-sum game

Insider trading cases, including the recent, high-profile prosecution of Raj Rajaratnam from Galleon Group, certainly protect us from those gaining unfair advantages at the expense of long-term investors. However, the Rajaratnam case—the largest insider trading scandal in our nation’s history—centers around only $53 million in ill-gained profits. Compare that to the SEC’s failure to stop the $68 billion Bernie Madoff Ponzi scheme, despite being tipped multiple times. Although we praise the SEC for going after Rajaratnam, we can’t help but be disappointed in the agency’s seeming lack of action around HFT and the conflicts of interests in our market structure. HFT firms generate between $8 billion and $21 billion a year in profits.

…

The audience before her was filled with friends and acquaintances, people she had known for years during her decades-long career as a government and private sector regulator, and she was happy to be in front of what was certainly a friendly group. She needed friends. Appointed chairman of the SEC just over a year earlier, Schapiro was trying to reform a government agency reeling from one spectacular failure after another, especially the Madoff and Stanford Ponzi schemes and the SEC’s own role in the 2008 financial crisis. Madoff was an exceptionally deep wound. The SEC’s Inspector General had recently issued a scathing report on the agency’s failure to detect the scam. The report showed that despite many tips and warnings, some of them very detailed, and despite sending several teams of SEC examiners to Madoff’s offices over the years to look for fraud, Madoff swindled clients for 20 years under the SEC’s nose.

…

In April he wrote, “What retail investors fail to acknowledge is that the quants [HFT firms] close out a majority of their ultra-short term positions at the end of each trading day, meaning that the vanilla money is stuck as a hot potato bag holder to what can only be classified as an unprecedented Ponzi scheme.”10 In July, after a former Goldman Sachs programmer was arrested on charges he stole Goldman’s proprietary trading software, Tyler Durden wrote almost daily about the dominance and risks of hyperactive computer-driven trading strategies, drawing more attention to the practice than ever before.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition) by Burton G. Malkiel

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, beat the dealer, Bernie Madoff, bitcoin, book value, butter production in bangladesh, buttonwood tree, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, Detroit bankruptcy, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial engineering, financial innovation, financial repression, fixed income, framing effect, George Santayana, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Japanese asset price bubble, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, margin call, market bubble, Mary Meeker, money market fund, mortgage tax deduction, new economy, Own Your Own Home, PalmPilot, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Salesforce, short selling, Silicon Valley, South Sea Bubble, stock buybacks, stocks for the long run, sugar pill, survivorship bias, Teledyne, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond, zero-sum game

ZZZZ Best was accused of acting as a front for organized-crime figures who would buy equipment for the company with “dirty” money and replace their investment with “clean” cash skimmed from the proceeds of ZZZZ Best’s legitimate carpet-cleaning business. The spectacular growth of the company was produced with fictitious contracts, phony credit card charges, and the like. The operation was a giant Ponzi scheme in which money was recycled from one set of investors to pay off another. Minkow was also charged with skimming millions from the company treasury for his own personal use. Minkow and all the investors in ZZZZ Best were in wall-to-wall trouble. The next chapter of the story (after Chapter Eleven) occurred in 1989 when Minkow, then twenty-three, was convicted of fifty-seven counts of fraud, sentenced to twenty-five years in prison, and required to make restitution of $26 million he was accused of stealing from the company.

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The updraft encourages more people to buy the stocks, which causes more TV and print coverage, which causes even more people to buy, which creates big profits for early Internet stockholders. The successful investors tell you at cocktail parties how easy it is to get rich, which causes the stocks to rise further, which pulls in larger and larger groups of investors. But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools. Even highly respected Wall Street firms joined in the hot-air float. The venerable investment firm Goldman Sachs argued in mid-2000 that the cash burned by the dot-com companies was primarily an “investor sentiment” issue and not a “long-term risk” for the sector or “space,” as it was often called.

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And as Robert Shiller, author of the best-selling Irrational Exuberance, has noted, the process feeds on itself in a “positive feedback loop.” The initial price rise encourages more people to buy, which in turn produces greater profits and induces a larger and larger group of participants. The phenomenon is another example of the Ponzi scheme that I described in chapter 4, in connection with the Internet bubble. Eventually one runs out of greater fools. Such herding is not limited to unsophisticated individual investors. Mutual-fund managers have a tendency to follow the same strategies and herd into the same stocks. Indeed, a study by Harrison Hong, Jeffrey Kubik, and Jeremy Stein, three leaders in the field of behavioral finance, determined that mutual-fund managers were more likely to hold similar stocks if other managers in the same city were holding similar portfolios.

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo

affirmative action, Asian financial crisis, belling the cat, Bob Geldof, Bretton Woods, business cycle, buy and hold, colonial rule, correlation does not imply causation, credit crunch, diversification, diversified portfolio, en.wikipedia.org, European colonialism, failed state, financial engineering, financial innovation, financial intermediation, Hernando de Soto, income inequality, information asymmetry, invisible hand, Live Aid, low interest rates, M-Pesa, market fundamentalism, Mexican peso crisis / tequila crisis, microcredit, moral hazard, Multics, Ponzi scheme, rent-seeking, risk free rate, Ronald Reagan, seminal paper, sovereign wealth fund, The Chicago School, trade liberalization, transaction costs, trickle-down economics, Washington Consensus, Yom Kippur War

But micro-finance is not without its naysayers. This type of lending to the poor is criticized as loan-sharking (charging punitive and exorbitant rates), as fuelling Ponzi schemes (borrowing from one lender to pay off another) and as simply supporting reckless consumption. However, with ever-increasing numbers of micro-lenders, and growing participation in this type of lending, the interest rates charged inevitably become lower and, in this sense, more competitive. As to the Ponzi scheme criticism, the objection merely points to the need for more information concerning borrowers – who’s good and who’s bad (which, by the way, is exactly the information asymmetry that the Grameen model mitigates).

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D. 46 Heavily Indebted Poorest Country debt relief programme (HIPC) 53 HIV–AIDS pandemic 4–5, 7, 71–2 Hu Jintao 104, 108 Human Development Report (1994) 52 Hungary 85–6 IMF (International Monetary Fund) aid warning 47 appointment of Irwin Blumenthal 53 debt crisis 18–19 and foreign capital 63 inception 11–13 and Malawi 55–6 and ‘nit-picking’ 108–9 Structural Adjustment Facilities 21 In Search of Prosperity (Rodrik) 34 India 112, 117, 123, 132, 134, 137–8 India–Africa Forum 112, 123 Indonesia 34, 56 Industrial and Commercial Bank (China) 106 inflation 61–5 innovation 139–40 International Bank for Reconstruction and Development see World Bank International Development Association (IDA) 37–8 International Development and Food Assistance Act (US 1975) 16 International Peace Research Institute (Stockholm) 59 International Remittance Network 136 International Trade Organization 11 investment bonds 77–83, 87–96 borrowing costs 84–5 credit ratings 78, 83, 87–8 emerging markets 79–81, 85 portfolio diversification 80–82 Ireland 37, 125 Israel 134 Italy 125 Ivory Coast 109–10 Jamaica 136 Japan 99, 102–3, 112, 125 Johannesburg Stock Exchange 4 John Paul II, Pope 26 joint liability 129 Jubilee Debt Campaign 26 Kagame, President Paul 27–8, 148–9 Kanbur, Ravi 54 Kariba dam 15 Kenya and EBA 118 and exports 62 favourable view of China 109 fragile democracy 72 HIV prevalence rates 3 and long-term debt 87–8 money transfer systems 136 population 124 and rampant corruption 48 stake in the economy 152 trade-oriented commodity-driven economy 146 turbulent elections 2008 33 Keynes, John Maynard 11 Kibaki, Mwai 33 Kiva 130 Kurtzman, Joel 51 Lambsdorff, Graf 51 Landes, David 33–4, 147 least-developed countries (LDC) 123 Lensink, R. 136 Lesotho 118 life expectancy 5 Lin Yifu, Justin 153 Live Aid 26 Lumumba, Patrice 14 Lundin, Lukas 98 M-Pesa (money transfer system) 136 Mahajan, Vijay 132 McLiesh, Caralee 101 McNamara, Robert 16, 17 maize scandal (Malawi) 56 Malawi 55–6, 106, 117, 145 Mali 71–2, 94, 109–10, 116 Maren, Michael 60 Markit (data/index firm) 91 Marshall, George C. 12 Marshall Plan 12–13, 35–8 Mauritania 120 Mauritius 34, 89 Maystadt, Philippe 107 Mengistu Haile Mariam 14, 23 Mexico 18, 82, 84, 117, 132, 144, 151 micro-finance 126–32, 140 middle class 57–8 Millennium Challenge Corporation aid campaign (US) 40, 56 Millennium Development Goals (MDG) 45, 96–7 Mkapa, President Benjamin 26 Mobutu Sese Seko, President 14, 22–3, 48, 53, 108 Monterrey Consensus 2002 74 Moody’s Investors Service 83 morality 150 ‘More Aid for the Poorest’ (UK white paper) 16 mosquito net producer (example) 44–5, 114, 122, 130–31 Mozambique 117, 134 Mugabe, Grace 146 Mugabe, Robert 108, 146–7 Mwanawasa, President Levy 53 Mystery of Capital, The (de Soto) 137–8 Na’m, Moisés 107 Namibia 89, 93 ‘negative corruption’ 57; see also corruption Netherlands 63 New York City 151; see also United States New Zealand 121 Nicaragua 151 Nigeria and AGOA duty-free benefits 118 aid from World Bank 107–8 assets looted 48 banking sector 4 beneficiary of FDI 105 and the bond index 92 and corruption 23 cotton revenues 116 favourable view of China 109 humanitarian catastrophe 26 independence 71 and long-term credit ratings 88 Maiduguri money find 137 many tribes 32 natural-gas reserves development 112 rebuilding colonial-era railway 106 remittances 133 ‘No Donor Money, No Loans’ policy 128 North, Douglass 41 Norway 73 ODA (official aid) 25 Odinga, Raila 33 oil 17–18, 48–9, 82, 105–6, 108–9, 120 oil crisis 1979 17–18 Olson, Mancur 41 Olympics 2008 108 Organization of Economic Cooperation and Development (OECD) 115 Oxfam 117 Pakistan 34, 124 Pan-African Infrastructure Development Fund (PAIDF) 95 Paris Club of creditors 108 PEPFAR (AIDS Relief) 7 Peru 151 Peters Projection Map 121 Pew Report 2007 109 Philippines, the 135 PIMCO (bond investment organization) 91 Poland 8–6 Ponzi schemes 130 ‘positive’ corruption 56, 59; see also corruption Private Equity investments 4–5 programme aid 21 Protestantism 31 Przeworski, Adam 43 Raiffeisen, Friedrich 131 Rajan, Raghuram G. 142 Ramalho, Rita 101 Ramesh, Jairam 123 Reagan, Ronald 20, 22 Reichel, R. 46 remittances 133–6 Resource Flows to Africa (UN) 133 Revolutionary United Front (Sierra Leone) 59 Rodrik, Dani 34 Rosenstein-Rodan, Paul 39 Ruiz-Arranz, Marta 136 Russia 84, 87, 112 Rwanda 27, 32, 148 Sachs, Jeffrey 96–7 Sani Abacha, President 48 São Tomé and Principe 106 savings 137–40 Schulze-Delitzsch, Herman 131 Scottish Banks 139–40 Second Conference of Chinese and African Entrepreneurs 114 securitization 96 Sen, Amartya 42 Senegal 109–10 Short, Clare 56 Sierra Leone 59 Singapore 152 Singh, Manmohan 123 small/medium enterprises (SMEs) 125 social capital 58–9 Somalia 60, 118, 133 South Africa abandoning foreign aid 144 and AGOA duty-free benefits 118 and bond issues 89, 92–3 and credit league tables 82 1997 stock market fall 84 not reliant on aid 150 and PAIDF 95 remittances 133 setting an example 78 South Korea 45, 82, 87 Sovereign Wealth Funds 112 Spain 86 Spatafora, N. 133 stabilization programme 20 Standard & Poor’s rating agency 83, 87–8 Standard Bank 106 sterilization 64–5 stock market liquidity 4 Structural Adjustment Facilities 20–21 Subramanian, Arvind 142 subsidies 115–16 Sudan 105–6, 108, 120 sugar production 116–17 Svensson, J. 39, 52 Swaziland 5, 106 Sweden 73 Tanzam Railway 103–4 Tanzania 26, 56, 97, 103–4, 110, 124, 131 taxation 52, 66 Thailand 57 Thatcher, Margaret 20, 67 Togo 94, 116 Tokyo International Conference on African Development 112 Toxopeus, H. 136 trade 17, 19–21, 38–40, 62, 64, 112, 114, 117–24 Transparency International 51, 56, 71 Turkey 93, 112, 117 Uganda aid-fuelled corruption 53 and bonds 65, 97 favourable view of China 109 and HIV–AIDS 71 improved economic growth 101 plunderers and despots 108 population 124 remittances 134 trade-oriented commodity-driven economy 146 UN Conference on Trade and Development (UNCTAD) 102 United Kingdom 108, 120 United Nations Development Programme (UNDP) 25 United Nations Human Development Report 5 United States and African Growth and Opportunity Act 118 aid history 12–17, 40 bond comparisons 80 diplomatic ties with Zimbabwe 108 Energy Information Administration 103 Food For Peace budget 45 freer trade access for African countries 149 influence compared to China 109–10 and Malawi 56 public’s desire on aid 74 Soft Banks 139 and subsidies 115–16 trading partner status 119 2006 foreign aid 99–100 US Farm Security and Rural Investment Act 2005 115 USSR 14, 19, 24 Venezuela 86 venture capital (VC) 139 Wade, President Abdoulaye 149 Washington Consensus 21–2 Wealth and Poverty of Nations, The (Landes) 33–4, 147 Weber, Max 31 Weder, Beatrice 52 Wen Jibao 104, 114 West African Economic and Monetary Union 88 What makes Democracies endure?

Think Twice: Harnessing the Power of Counterintuition by Michael J. Mauboussin

affirmative action, Alan Greenspan, asset allocation, Atul Gawande, availability heuristic, Benoit Mandelbrot, Bernie Madoff, Black Swan, butter production in bangladesh, Cass Sunstein, choice architecture, Clayton Christensen, cognitive dissonance, collateralized debt obligation, Daniel Kahneman / Amos Tversky, deliberate practice, disruptive innovation, Edward Thorp, experimental economics, financial engineering, financial innovation, framing effect, fundamental attribution error, Geoffrey West, Santa Fe Institute, George Akerlof, hindsight bias, hiring and firing, information asymmetry, libertarian paternalism, Long Term Capital Management, loose coupling, loss aversion, mandelbrot fractal, Menlo Park, meta-analysis, money market fund, Murray Gell-Mann, Netflix Prize, pattern recognition, Performance of Mutual Funds in the Period, Philip Mirowski, placebo effect, Ponzi scheme, power law, prediction markets, presumed consent, Richard Thaler, Robert Shiller, statistical model, Steven Pinker, systems thinking, the long tail, The Wisdom of Crowds, ultimatum game, vertical integration

Greenspan, a professor of psychology, explained why we allow other people to take advantage of us and discussed gullibility in fields including finance, academia, and the law. He ended the book with helpful advice on becoming less gullible. The second was the exposure of the greatest Ponzi scheme in history, run by Bernard Madoff, which cost its unsuspecting investors in excess of $60 billion. A Ponzi scheme is a fraudulent operation in which a manager uses funds from new investors to pay off old investors. Since there is no legitimate investment activity, it collapses when the operator can’t find enough additional investors. Madoff’s scheme unraveled when he couldn’t meet requests for redemptions from the investors stung by the financial meltdown.

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Madoff’s scheme unraveled when he couldn’t meet requests for redemptions from the investors stung by the financial meltdown. The irony is that Greenspan, who is bright and well regarded, lost 30 percent of his retirement savings in Madoff’s Ponzi scheme.1 The guy who wrote the book on gullibility got taken by one of the greatest scammers of all time. In fairness, Greenspan didn’t know Madoff. He invested in a fund that turned the money over to the scheme. And Greenspan has been gracious in sharing his story and explaining why he was drawn to investment returns that looked, in retrospect, too good to be true.

Survival of the Richest: Escape Fantasies of the Tech Billionaires by Douglas Rushkoff

"World Economic Forum" Davos, 4chan, A Declaration of the Independence of Cyberspace, agricultural Revolution, Airbnb, Alan Greenspan, Amazon Mechanical Turk, Amazon Web Services, Andrew Keen, AOL-Time Warner, artificial general intelligence, augmented reality, autonomous vehicles, basic income, behavioural economics, Big Tech, biodiversity loss, Biosphere 2, bitcoin, blockchain, Boston Dynamics, Burning Man, buy low sell high, Californian Ideology, carbon credits, carbon footprint, circular economy, clean water, cognitive dissonance, Colonization of Mars, coronavirus, COVID-19, creative destruction, Credit Default Swap, CRISPR, data science, David Graeber, DeepMind, degrowth, Demis Hassabis, deplatforming, digital capitalism, digital map, disinformation, Donald Trump, Elon Musk, en.wikipedia.org, energy transition, Ethereum, ethereum blockchain, European colonialism, Evgeny Morozov, Extinction Rebellion, Fairphone, fake news, Filter Bubble, game design, gamification, gig economy, Gini coefficient, global pandemic, Google bus, green new deal, Greta Thunberg, Haight Ashbury, hockey-stick growth, Howard Rheingold, if you build it, they will come, impact investing, income inequality, independent contractor, Jane Jacobs, Jeff Bezos, Jeffrey Epstein, job automation, John Nash: game theory, John Perry Barlow, Joseph Schumpeter, Just-in-time delivery, liberal capitalism, Mark Zuckerberg, Marshall McLuhan, mass immigration, megaproject, meme stock, mental accounting, Michael Milken, microplastics / micro fibres, military-industrial complex, Minecraft, mirror neurons, move fast and break things, Naomi Klein, New Urbanism, Norbert Wiener, Oculus Rift, One Laptop per Child (OLPC), operational security, Patri Friedman, pattern recognition, Peter Thiel, planetary scale, Plato's cave, Ponzi scheme, profit motive, QAnon, RAND corporation, Ray Kurzweil, rent-seeking, Richard Thaler, ride hailing / ride sharing, Robinhood: mobile stock trading app, Sam Altman, Shoshana Zuboff, Silicon Valley, Silicon Valley billionaire, SimCity, Singularitarianism, Skinner box, Snapchat, sovereign wealth fund, Stephen Hawking, Steve Bannon, Steve Jobs, Steven Levy, Steven Pinker, Stewart Brand, surveillance capitalism, tech billionaire, tech bro, technological solutionism, technoutopianism, Ted Nelson, TED Talk, the medium is the message, theory of mind, TikTok, Torches of Freedom, Tragedy of the Commons, universal basic income, urban renewal, warehouse robotics, We are as Gods, WeWork, Whole Earth Catalog, work culture , working poor

Two months later, the dotcom bubble burst, the NASDAQ crashed, and the very same newspapers that had celebrated the AOL–Time Warner merger were now decrying it as an epic failure on the part of Time Warner’s CEO, a former director of the New York Stock Exchange no less, Gerald Levin. People blamed his poor judgment on the trauma of losing his son, and watched, stunned, as $200 billion of shareholder money seemingly evaporated. The Internet Revolution was derided as a Ponzi scheme. Moreover, the marriage of old and new media did not infuse Time Warner with the disruptive values of internet culture. The resulting company didn’t become more adventurous or innovative. Quite the contrary: it became much more traditionally corporate in spirit, obsessed with the bottom line.

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As Ted Turner later explained it in characteristic hyperbole, “the Time Warner–AOL merger should pass into history like the Vietnam War and the Iraq and Afghanistan wars. It’s one of the biggest disasters that have occurred to our country.” And at the time they thought I was being pessimistic. The AOL failure exposed the Ponzi scheme underlying the early internet. The broader dotcom crash that followed erased $5 trillion, or 78 percent, of the NASDAQ index by October 2002. Yes, the markets eventually recovered. But the relationship of technology to capital was forever changed. Money was no longer seen as a way to fund new technologies; new technologies became understood purely as ways of making fast money—as long as you could get out in time.

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Once addicted to exponential growth, it’s hard for an entrepreneur, a company, or an entire economy to slow down. Everyone’s “cap tables” are modeled on continuing expansion at ever-increasing rates. That’s how the debt-based economy works. The 2008 Lehman Brothers collapse showed us what happens when the Ponzi scheme breaks down. But not to worry. While their ability to increase the raw speed of their machines may have reached certain limits, the digital environment offers them another way to go from creatio ex nihilo to deux ex machina . They just go “meta.” 7 Exponential WHEN YOU CAN GO NO FURTHER, GO META I got mugged in front of my apartment building while I was taking out the garbage.

The Social Life of Money by Nigel Dodd

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", accounting loophole / creative accounting, bank run, banking crisis, banks create money, behavioural economics, Bernie Madoff, bitcoin, Bitcoin Ponzi scheme, blockchain, borderless world, Bretton Woods, BRICs, business cycle, capital controls, capitalist realism, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, currency risk, David Graeber, debt deflation, dematerialisation, disintermediation, Dogecoin, emotional labour, eurozone crisis, fiat currency, financial engineering, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, gentrification, German hyperinflation, Goldman Sachs: Vampire Squid, Herbert Marcuse, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kickstarter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, Minsky moment, mobile money, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, National Debt Clock, Neal Stephenson, negative equity, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, post-Fordism, Post-Keynesian economics, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, risk free rate, Robert Shiller, Satoshi Nakamoto, scientific management, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

Another cause was that the very feature that was meant to ensure that Bitcoins were sound money (just like gold) in the first place—their finite supply—became a source of speculation, and a Bitcoin bubble.35 Arguably, Bitcoins were being mined primarily not in order to be used but rather to be hoarded. This phenomenon prompted some critics to liken the currency to a Ponzi scheme. The comparison seems flawed: unlike entrants to a Ponzi scheme, holders of Bitcoins are not—per se—victims of fraud. But according to Eric Posner, Bitcoin “investors” are likely to suffer the same fate: “Bitcoin will collapse when people realize that it can’t survive as a currency because of its built-in deflationary features, or because of the emergence of bytecoins, or both. A real Ponzi scheme takes fraud; Bitcoin, by contrast, seems more like a collective delusion.”36 Viewed simply as a currency, Bitcoin’s biggest pitfall is likely to be price deflation (and, in extremis, hyperdeflation), not inflation.

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Bureau of Economic Analysis, see http://www.bea.gov/scb/pdf/2011/07%20July/0711_brief_indy_tables.pdf. 34 Source: Federal Deposit Insurance Corporation, see http://www.fdic.gov/bank/statistical/. 35 Source: World Bank, see http://search.worldbank.org/quickview?name=%3Cem%3EBank%3C%2Fem%3E+capital+to+assets+ratio+%28%25%29&id=FB.BNK.CAPA.ZS&type=Indicators&cube_no=2&qterm=bank+debt+leverage. 36 The latter is a reference to Charles Ponzi, origin (but not originator) of the term “Ponzi scheme.” A Ponzi scheme is a fraudulent investment scheme that pays returns to its investors not from earned profits but from the monies paid into the scheme from new investors. Ponzi operated such a scheme, via his Securities Exchange Company based in Boston, which collapsed in 1920. He spent the next fourteen years in and out of prison (Zuckoff 2006). 37 The sophistication increases when nonbank financial institutions use bank debt, open-market debt, and long-term bonds to acquire debts and a “layering” of debt occurs (Minsky 1975: 121). 38 “Thus investment becomes ‘safe’ for the individual investor over short periods.”

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According to Krugman, “the vast riches being earned … in our bloated financial industry undermined our sense of reality.”25 In a similar vein, Slavoj Žižek called the Bernard Madoff case “an extreme but therefore pure example of what caused the financial breakdown itself” (Žižek 2009: 36). Madoff’s crime (his wealth management business operated as a Ponzi scheme for many years before its collapse in 2008, costing investors around $18 billion) was merely a manifestation of a form of reasoning that is inscribed into the very system of capitalist relations, namely, that the sphere of circulation must be expanded—using “fraudulent” monetary instruments, if necessary—to keep the machinery running: “the temptation to ‘morph’ legitimate business into a pyramid scheme is part of the very nature of the capitalist circulation process” (Žižek 2009: 36).

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

"World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Bear Stearns, Ben Bernanke: helicopter money, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, BRICs, business climate, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Dr. Strangelove, Edward Snowden, eurozone crisis, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global macro, global reserve currency, global supply chain, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Herman Kahn, high-speed rail, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, junk bonds, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market design, megaproject, Modern Monetary Theory, Money creation, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shale / tar sands, open economy, operational security, plutocrats, Ponzi scheme, power law, price stability, public intellectual, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, Solyndra, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

Bank sponsors of WMPs address the problems of nonperforming assets and maturity mismatches by issuing new WMPs. The new WMP proceeds are then used to buy the bad assets of the old WMPs at inflated values so the old WMPs can be redeemed at maturity. This is a Ponzi scheme on a colossal scale. Estimates are that there were twenty thousand WMP programs in existence in 2013 versus seven hundred in 2007. One report on WMP sales in the first half of 2012 estimates that almost $2 trillion of new money was raised. The undoing of any Ponzi scheme is inevitable, and the Chinese property and infrastructure bubbles fueled by shadow banking are no exception. A collapse could begin with the failure of a particular rollover scheme or with exposure of corruption associated with a particular project.

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CHAPTER 4 CHINA’S NEW FINANCIAL WARLORDS Most countries fail in the reform and adjustment process precisely because the sectors of the economy that have benefitted from . . . distortions are powerful enough to block any attempt to eliminate those distortions. Michael Pettis Peking University December 2012 China’s shadow banking sector has become a potential source of systemic financial risk. . . . To some extent, this is fundamentally a Ponzi scheme. Xiao Gang Chairman, Bank of China October 2012 ■ History’s Burden To contemporary Western eyes, China appears like a monolithic juggernaut poised to dominate East Asia and surpass the West in wealth and output in a matter of years. In fact, China is a fragile construct that could easily descend into chaos, as it has many times before.

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A more likely scenario is that money printing will continue in both nations long after 2 percent inflation is achieved. At that point, the risks are all on the side of much higher inflation as the change in expectations becomes difficult to reverse, especially in the United States. A Chinese collapse. The seventh sign will be financial disintegration in China as the wealth-management-product Ponzi scheme collapses. China’s degree of financial interconnectedness with the rest of the world is lower than that of the major U.S. and European banks, so a collapse in China would be mainly a local affair, in which the Communist Party will use reserves held by its sovereign wealth funds to assuage savers and recapitalize banks.

The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal by Duncan Mavin

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Adam Neumann (WeWork), air freight, banking crisis, Bernie Madoff, Big Tech, Boeing 737 MAX, Boris Johnson, Brexit referendum, British Empire, carbon footprint, coronavirus, corporate governance, COVID-19, Credit Default Swap, democratizing finance, Donald Trump, Eyjafjallajökull, financial engineering, fixed income, global pandemic, global supply chain, Gordon Gekko, Greensill Capital, high net worth, Kickstarter, lockdown, Long Term Capital Management, low interest rates, Masayoshi Son, means of production, Menlo Park, mittelstand, move fast and break things, NetJets, Network effects, Ponzi scheme, private military company, proprietary trading, remote working, rewilding, Rishi Sunak, rolodex, Silicon Valley, skunkworks, SoftBank, sovereign wealth fund, supply chain finance, Tim Haywood, Vision Fund, WeWork, work culture

And it’s also a tale of the stock market, where heady valuations are fuelled by massive global investors who never seem to lose, even when a company they bet on turns out to be a failure. This is a story that echoes many of the biggest financial and business scandals of all time. Politicians have accused Lex of running a Ponzi scheme, named for a 1920s Italian-born US financier. Like Lex, Charles Ponzi was a natty dresser, and an outsider who slipped into high society. Ponzi convinced investors to part with their money and offered them huge profits. But his investments were an illusion, using money from new investors to pay off older investors.

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Money was flowing in because Credit Suisse’s bankers encouraged it to flow in. Performance was steady because the funds didn’t have to recognize when loans went bad – instead, they could just roll the loan over. It was a kind of ‘extend and pretend’ approach. More than one Credit Suisse executive later told me it was the definition of a Ponzi scheme. The only way the funds would be forced to show their true performance was if investors withdrew so much money, so quickly, that Greensill would have to liquidate its assets, revealing which loans had gone bad or could not be repaid in a hurry. Under any other circumstances, so long as money kept rolling in, Lex could write up whatever performance he wanted.

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Lex said how sad he was for his staff, Greensill’s clients and the investors in Greensill’s funds. And then he blamed someone else. ‘It’s deeply regrettable that we were let down by our leading insurer, whose actions assured Greensill’s collapse.’ Though Lex was typically verbose, the panel interview went downhill from there. MPs said he was running a Ponzi scheme. They asked if he was a fraud. Lex read out an email exchange with the former Treasury minister, Paul Myners, including personal details of Myners’ health issues, in a crude attempt to undermine earlier testimony from Myners that had been critical of Greensill. He launched into a strange dispute with one MP over the use of the phrase ‘prospective receivables’ instead of ‘future receivables’.

The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street by Robert Scheer

Alan Greenspan, banking crisis, Bear Stearns, Bernie Madoff, Bernie Sanders, business cycle, California energy crisis, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, do well by doing good, facts on the ground, financial deregulation, fixed income, Glass-Steagall Act, housing crisis, invisible hand, Long Term Capital Management, low interest rates, mega-rich, mortgage debt, new economy, old-boy network, Ponzi scheme, profit motive, Ralph Nader, rolling blackouts, Ronald Reagan, Savings and loan crisis, too big to fail, trickle-down economics

Nonsense, argued Eliot Spitzer, who as New York attorney general was way ahead of the curve in challenging Wall Street arrogance. Writing in Slate on November 23, 2009, Spitzer pointed out: “Pressuring Goldman and the other counterparties to offer concessions would have forced them to absorb the consequences of making suspect deals with an insurance company that was essentially a Ponzi scheme.” The Ponzi scheme brings us back full circle to the Clinton bubble. As the inspector general’s report stated: “In 2000, the [Clinton administration-backed] Commodity Futures Modernization Act (CFMA) . . . barred the regulation of credit default swaps and other derivatives.” Why did the financial geniuses of the Clinton administration seek to prevent that obviously needed regulation?

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That was because of the wonders of securitization of debt to be sold in that unregulated commodities market, which seventeen months later the Commodity Futures Modernization Act signed by Clinton would guarantee to remain unregulated. The press release marked this enormous shift in the marketing of mortgages, quoting Mozilo: “This new strategic agreement between Fannie Mae and Countrywide is an unprecedented milestone in mortgage banking history.” Key to the new era of the housing Ponzi scheme was the reduction of capital required to back up the unsavory mortgages as the Countrywide press release clearly stated: “The strategic agreement contemplates efforts by Fannie Mae and Countrywide to work together to create capital structures that reduce the intensive capital demands of mortgage banking.

The Payoff by Jeff Connaughton

Alan Greenspan, algorithmic trading, bank run, banking crisis, Bear Stearns, Bernie Madoff, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, desegregation, Flash crash, Glass-Steagall Act, locking in a profit, London Interbank Offered Rate, London Whale, Long Term Capital Management, naked short selling, Neil Kinnock, plutocrats, Ponzi scheme, proprietary trading, risk tolerance, Robert Bork, Savings and loan crisis, short selling, Silicon Valley, TED Talk, too big to fail, two-sided market, uptick rule, young professional

Predictably, Breuer dodged Ted’s questions and instead proffered generalities (“The department has engaged in a robust and comprehensive investigation”), statistics on garden-variety financial fraud cases (“between October 2009 and June 2010, nearly three thousand defendants were sentenced to prison for financial fraud, and more than sixteen hundred of these defendants have received sentences of greater than twelve months”), and details of recent cases that had nothing to do with Wall Street and the financial crisis (“on September 15, 2010, Nevin Shapiro, the former CEO of Capital Investments USA Inc., pleaded guilty in Newark, New Jersey, to fraudulently soliciting funds for a non-existent grocery distribution business”). Sitting behind Ted, I tried hard not to roll my eyes as Breuer touted the successful prosecution of a grocer for a small-time New Jersey Ponzi scheme. He was ducking the main issue and continuing to assure Ted and the rest of the committee that the department was being “thorough” and “robust” in its effort to bust big-time fraudsters. To the department’s credit, the U.S. attorney in the Eastern District of Virginia, Neil MacBride (a former Biden chief counsel), had recently indicted Lee Bentley Farkas, the former CEO of Taylor, Bean & Whitaker Mortgage Corporation (TBW).

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In his testimony, Khuzami was more clear and detailed. He at least separated the cases the SEC had brought into two categories: those related to the financial crisis (like civil actions against Goldman Sachs, Citigroup, State Street, and several other major players) and those unrelated to the crisis (like Ponzi schemes and insider trading). Khuzami stressed that in the last nine months the SEC had brought enforcement actions (and obtained hundreds of millions of dollars in settlement penalties) against companies and individuals that: concealed from investors the risks and exposures from subprime mortgage-based securities; concealed business strategies that heightened the risks relating to mortgage-based securities; failed to disclose to investors the involvement of adverse parties in structuring complex mortgage-based securities; concealed that investment funds contained high-risk mortgage-based securities; marketed high-risk mortgage-based securities while secretly divesting themselves of their own holdings.

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She responded by reiterating her pledge, which she’d made publicly in response to Ted’s letter, that the SEC would conduct a comprehensive review of market-structure issues and HFT. She added that she had many other issues on her plate. And indeed she had. America had just been through the biggest financial disaster in sixty years; Bernie Madoff’s Ponzi scheme had gone undetected by the SEC for years despite repeated warnings from whistleblowers; investors were rattled and worried that the SEC was toothless. Nevertheless, it was obvious to me that she only had one choice if history was to judge her well: she had to do something. Ted must have been thinking the same thing.

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity by Charles L. Marohn, Jr.

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, A Pattern Language, American Society of Civil Engineers: Report Card, anti-fragile, bank run, big-box store, Black Swan, bread and circuses, Bretton Woods, British Empire, business cycle, call centre, cognitive dissonance, complexity theory, corporate governance, Detroit bankruptcy, Donald Trump, en.wikipedia.org, facts on the ground, Ferguson, Missouri, gentrification, global reserve currency, high-speed rail, housing crisis, index fund, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jane Jacobs, Jeff Bezos, low interest rates, low skilled workers, mass immigration, megaproject, Modern Monetary Theory, mortgage debt, Network effects, new economy, New Urbanism, paradox of thrift, Paul Samuelson, pensions crisis, Ponzi scheme, quantitative easing, reserve currency, restrictive zoning, Savings and loan crisis, the built environment, The Death and Life of Great American Cities, trickle-down economics, Upton Sinclair, urban planning, urban renewal, walkable city, white flight, women in the workforce, yield curve, zero-sum game

Incremental Growth Complex versus Complicated Buildings Neighborhood Renewal The Stifling Nature of High Land Values Private and Public Investment The Party Analogy Note Chapter 3. An Infinite Game An Infinite Game Revenues and Expenses Infrastructure Not as a Means, but as an End The Municipal Ponzi Scheme The Illusion of Wealth Understanding Detroit Notes Chapter 4. The Infrastructure Cult The American Society of Civil Engineers Real Investment, Paper Returns Accounting for Infrastructure Assuming Secondary Effects A Real Return on Investment The Data Doesn’t Lie Notes Chapter 5.

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It was Upton Sinclair who said, “It is difficult to get a man to understand something when his salary depends on his not understanding it.” With a few notable exceptions, I found Sinclair’s observation maddeningly insightful. For me, the evidence was pointing to a conclusion I found difficult to believe, yet impossible to ignore: The more our cities build, the poorer they become. The Municipal Ponzi Scheme When local governments need professional assistance, they often issue what is called a request for proposal (RFP). Consultants like myself respond to the RFP and, if successful, there is an interview. I’ve done many such interviews, answering questions from city staff as well as elected and appointed public officials.

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Any neighborhoods deemed “at risk” also didn’t qualify for government support, the left hand of government policy destroying urban land values while the right hand kept people trapped there – at this point, largely economically stressed minority populations – from sharing in the spoils of new growth. By the time the United States reached the end of the first generation of the post-war boom, the first iteration of what I’ve termed the Municipal Ponzi Scheme, the bulk of the country felt so prosperous it embarked on a massive campaign to end poverty – the Great Society – as it simultaneously fought an expensive war in Vietnam. By many economic measurements, this is the high-water mark of the twentieth century, particularly for America’s middle class.

The Key Man: The True Story of How the Global Elite Was Duped by a Capitalist Fairy Tale by Simon Clark, Will Louch

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, An Inconvenient Truth, anti-communist, Berlin Wall, Bernie Madoff, British Empire, clean water, collapse of Lehman Brothers, colonial rule, coronavirus, corporate governance, COVID-19, dark triade / dark tetrad, do well by doing good, Donald Trump, fake news, forensic accounting, high net worth, impact investing, income inequality, Jeffrey Epstein, Kickstarter, load shedding, low cost airline, Mahatma Gandhi, megacity, Menlo Park, Michael Milken, Mohammed Bouazizi, Nelson Mandela, offshore financial centre, planetary scale, plutocrats, Ponzi scheme, profit maximization, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, SoftBank, sovereign wealth fund, Suez crisis 1956, TED Talk, The Fortune at the Bottom of the Pyramid, trade route, Virgin Galactic, WikiLeaks, young professional

If one of the world’s largest auditors couldn’t detect wrongdoing at Abraaj it was unlikely investors could either. Taking money from one private equity fund to benefit investors in another fund amounted to a crude kind of fraud known as a Ponzi scheme. This kind of fraud was named after Charles Ponzi, an Italian-born swindler active in the United States in the 1920s who used money from new investors to pay off earlier investors. Ponzi schemes like the one operated by the American fund manager Bernard Madoff can go undetected for years and usually come to light during an economic downturn, when investors ask for their money back and the fraudster can’t raise funds from new investors to pay them off.

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The dark side of globalization—a shadowy hinterland of political intrigue and illicit offshore money flows—lurked behind the bright vision of the future Arif championed in public. His investments, in truth, were too good to be true, and his firm had been insolvent for years. Stolen cash propped up Abraaj in what the famed Bernard Madoff investigator Harry Markopolos described to us as a Ponzi scheme with leverage. Abraaj had become one of the largest corporate frauds in history, and Arif, accused of wrongfully holding on to $385 million of the funds he had taken, faced 291 years in a high-security jail. Abraaj employees who naively believed in Arif and his mission of making money and doing good were at a loss to explain what went wrong.

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Agency for International Development’s investment in Abraaj fund for, 98 U.S. attempts at stabilization of, 59, 65 U.S. support of military dictator in, 14 Pakistan Banking Council, 15 Palestine, 72, 77–78, 90, 197–98 Parasie, Nicolas, 5, 260 Participant Media, 129 partnership capital, 106, 193 patient capitalism, 87 Patterson, Anne, 64 Pearl, Daniel, 58 Pearl Initiative, 104, 159–60 Peres, Shimon, 78 philanthrocapitalism, 42, 191 Polman, Paul, 45, 222 Ponzi, Charles, 156 Ponzi schemes, 7, 156–57 poverty programs Arab Spring and, 82 of Bill and Melinda Gates Foundation, 164 CDC Group and, 92–93, 94 emerging markets and, 45–46, 91–93 Arif Naqvi’s involvement in, 2, 6, 46, 83, 91–92, 149–50 Barack Obama on, 74–75 poverty conference in Italy, 85–88 C. K. Prahalad on, 45–46 of United Nations, 2, 147–49, 152 Powell, Colin, 35 Prahalad, C.

Pandemic, Inc.: Chasing the Capitalists and Thieves Who Got Rich While We Got Sick by J. David McSwane

Affordable Care Act / Obamacare, commoditize, coronavirus, COVID-19, disinformation, Donald Trump, Elon Musk, fake it until you make it, fake news, global pandemic, global supply chain, Internet Archive, lockdown, Lyft, Mark Zuckerberg, microaggression, military-industrial complex, obamacare, open economy, Ponzi scheme, race to the bottom, ransomware, remote working, ride hailing / ride sharing, shareholder value, side hustle, Silicon Valley, social distancing, statistical model, stem cell, Steve Bannon, stock buybacks, TaskRabbit, telemarketer, uber lyft, Y2K

Department of Justice, July 28, 2021, https://www.justice.gov/opa/pr/texas-man-sentenced-24-million-covid-19-relief-fraud-scheme. In Georgia, a reality TV personality “Reality TV Star Sentenced for PPP Fraud and for Operating a Multimillion-Dollar Ponzi Scheme,” U.S. Department of Justice, September 15, 2021, https://www.justice.gov/usao-ndga/pr/reality-tv-star-sentenced-ppp-fraud-and-operating-multimillion-dollar-ponzi-scheme. more than 120 people “CARES Act Fraud Tracker,” Arnold & Porter, October 28, 2021, https://www.arnoldporter.com/en/general/cares-act-fraud-tracker. the Justice Department had charged “DOJ Continues to Combat COVID-19 Fraud with ‘Historic’ Levels of Enforcement: Enforcement Edge: Blogs,” Arnold & Porter, April 2, 2021, https://www.arnoldporter.com/en/perspectives/blogs/enforcement-edge/2021/04/doj-continues-to-combat-covid-fraud.

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He used $40,000 to pay child support, which is nice but still illegal. Less impressive—he leased a Rolls-Royce with $136,000 and paid $50,000 in restitution for a previous fraud conviction. As FBI investigators dug into his finances, they learned he paid $230,000 to associates involved in a multistate Ponzi scheme in which he’d defrauded twenty people going back to 2013. He would later be sentenced to seventeen years in prison. In the program’s first year, including two waves of loans, more than 120 people would be criminally charged by the Justice Department. Counting PPP fraud and looting of similar relief programs, such as the Economic Injury Disaster Loan program, the Justice Department had charged more than 470 defendants, involving about $570 million in taxpayer-guaranteed and largely forgivable loans.

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See also masks; N95 respirators; ventilators Boston Capital Consultants and, 212–214 Disaster Leadership Group meetings and, 29 exported to China, 40–41 halting export of, 36 Navarro on hoarding, 67 NYC’s efforts to obtain, 72–78 Polowczyk’s goals on, 55, 57 Project Airbridge and, 60–61 states requesting, 46, 52 Pfizer, 234, 236, 237 Pfizer-BioNtech vaccine, 230–231, 234, 236 Phlow, 83–84 “pirates,” 98, 121–122, 123 Pittsburgh Post-Gazette, 247 POL (proof of life), 211 Polowczyk, John FEMA and, 52, 53 HHS requesting logistics planning by, 49–50 on Kushner’s shadow task force, 57, 59–60 meeting at HHS, 51, 52 meeting with Paul Mango, 53 meeting with Pence and Kushner, 53–55 Phlow deal and, 84 Project Airbridge and, 60–61 Ponzi scheme, 197 Potbelly Sandwich, 198 presidential election (2020), January 6th insurrection and, 226–227 Prestige Ameritech, 23–24, 26–27, 30, 151, 258–259 Preston, Richard, 16 price gouging Federal Government Experts contract with VA, 5, 93, 211 during the Great Influenza, 121–122 by Kaleo, 83 law enforcement and, 3–4 N95 respirators, 5, 42, 66 by Romano, Ronald, 66, 70 by Stewart, Robert Jr., 5, 110, 210–211 prison, Delta variant in, 260 profiteering, 65, 66–68.

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance by Eswar S. Prasad

access to a mobile phone, Adam Neumann (WeWork), Airbnb, algorithmic trading, altcoin, bank run, barriers to entry, Bear Stearns, Ben Bernanke: helicopter money, Bernie Madoff, Big Tech, bitcoin, Bitcoin Ponzi scheme, Bletchley Park, blockchain, Bretton Woods, business intelligence, buy and hold, capital controls, carbon footprint, cashless society, central bank independence, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, deglobalization, democratizing finance, disintermediation, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, Ethereum, ethereum blockchain, eurozone crisis, fault tolerance, fiat currency, financial engineering, financial independence, financial innovation, financial intermediation, Flash crash, floating exchange rates, full employment, gamification, gig economy, Glass-Steagall Act, global reserve currency, index fund, inflation targeting, informal economy, information asymmetry, initial coin offering, Internet Archive, Jeff Bezos, Kenneth Rogoff, Kickstarter, light touch regulation, liquidity trap, litecoin, lockdown, loose coupling, low interest rates, Lyft, M-Pesa, machine readable, Mark Zuckerberg, Masayoshi Son, mobile money, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, offshore financial centre, open economy, opioid epidemic / opioid crisis, PalmPilot, passive investing, payday loans, peer-to-peer, peer-to-peer lending, Peter Thiel, Ponzi scheme, price anchoring, profit motive, QR code, quantitative easing, quantum cryptography, RAND corporation, random walk, Real Time Gross Settlement, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, risk/return, Robinhood: mobile stock trading app, robo advisor, Ross Ulbricht, Salesforce, Satoshi Nakamoto, seigniorage, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, smart contracts, SoftBank, special drawing rights, the payments system, too big to fail, transaction costs, uber lyft, unbanked and underbanked, underbanked, Vision Fund, Vitalik Buterin, Wayback Machine, WeWork, wikimedia commons, Y Combinator, zero-sum game

The Bottom Line on Mobile Money One example of mobile money allegedly fueling illicit activities comes from Zimbabwe. In May 2020, the Reserve Bank of Zimbabwe accused mobile money operator EcoCash of running a Ponzi scheme that was devaluing the Zimbabwean dollar by facilitating overdraft facilities that were, in effect, creating counterfeit money. See Tawanda Karombo, “Zimbabwe’s Central Bank Says the Dominant Mobile Money Platform Is Running a Ponzi Scheme,” Quartz Africa, May 12, 2020, https://qz.com/africa/1855919/zimbabwes-reserve-bank-says-ecocash-running-ponzi-scheme/. Somalia’s per capita income is estimated by the IMF in its annual country reports. The World Bank estimates that, in 2015, remittances supported 23 percent of Somalia’s GDP.

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High and rising real estate valuations seemed to be based on the notion that all it took to make money from a house purchased at inflated prices was to find just one buyer—an even greater fool than oneself—willing to pay an even higher price. Carney’s speech came on the heels of another by Agustín Carstens, head of the Bank for International Settlements; he described Bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster.” Skeptics, including central bankers and academics, correctly note Bitcoin’s extremely volatile prices and the periodic price collapses it has experienced. Indeed, from an economist’s perspective, there is no logical reason Bitcoin should be priced beyond its value in providing a pseudonymous payment mechanism, let alone the sort of value it commands.

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Financial Stability The main goal of financial regulation is to ensure that finance works well in supporting economic activity and attaining the other objectives for which it is designed and, more importantly, that it does not become a source of instability itself. The notion that market forces favor safer and more efficient firms and cull riskier and less efficient ones does not seem to hold in finance. From Ponzi schemes à la Bernie Madoff to large investment banks such as Bear Stearns and Lehman Brothers that took on vast amounts of risk and came crashing down, finance run amok causes pain across broad swaths of society. When stock markets fall, investors take a hit to their portfolios. When a company files for bankruptcy, owners of that company’s equities or debt could lose their investments.

The Price of Time: The Real Story of Interest by Edward Chancellor

"World Economic Forum" Davos, 3D printing, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, asset allocation, asset-backed security, assortative mating, autonomous vehicles, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, bitcoin, blockchain, bond market vigilante , bonus culture, book value, Bretton Woods, BRICs, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cashless society, cloud computing, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, commodity super cycle, computer age, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cryptocurrency, currency peg, currency risk, David Graeber, debt deflation, deglobalization, delayed gratification, Deng Xiaoping, Detroit bankruptcy, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, double entry bookkeeping, Elon Musk, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, everywhere but in the productivity statistics, Extinction Rebellion, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global reserve currency, global supply chain, Goodhart's law, Great Leap Forward, green new deal, Greenspan put, high net worth, high-speed rail, housing crisis, Hyman Minsky, implied volatility, income inequality, income per capita, inflation targeting, initial coin offering, intangible asset, Internet of things, inventory management, invisible hand, Japanese asset price bubble, Jean Tirole, Jeff Bezos, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, land bank, large denomination, Les Trente Glorieuses, liquidity trap, lockdown, Long Term Capital Management, low interest rates, Lyft, manufacturing employment, margin call, Mark Spitznagel, market bubble, market clearing, market fundamentalism, Martin Wolf, mega-rich, megaproject, meme stock, Michael Milken, Minsky moment, Modern Monetary Theory, Mohammed Bouazizi, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, Northern Rock, offshore financial centre, operational security, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, peer-to-peer lending, pensions crisis, Peter Thiel, Philip Mirowski, plutocrats, Ponzi scheme, price mechanism, price stability, quantitative easing, railway mania, reality distortion field, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk free rate, risk tolerance, risk/return, road to serfdom, Robert Gordon, Robinhood: mobile stock trading app, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, Second Machine Age, secular stagnation, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, stock buybacks, subprime mortgage crisis, Suez canal 1869, tech billionaire, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tim Haywood, time value of money, too big to fail, total factor productivity, trickle-down economics, tulip mania, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, Walter Mischel, WeWork, When a measure becomes a target, yield curve

Trillions of dollars of buybacks effected a ‘slow-motion leveraged buyout of the entire [stock] market’.41 Thanks to the miracle of financial engineering, the earnings per share of S&P 500 companies grew faster than reported profits and sales.42 Even companies with declining profits were able to report a rise in per-share earnings.43 Some firms, including Exxon and IBM, operated what were in effect Ponzi schemes by distributing more in buybacks and dividends than they earned by way of profit.44 THE FINANCIALIZED FIRM Under the influence of shareholder value, the distinction between financial and non-financial corporations was eroded. Corporate finance took precedence over ordinary business operations as the financial operations within firms accounted for an increasing share of profits.45 As one commentator put it, ‘the productive activities of the modern corporation are therefore incidental to the restructuring of corporate balance sheets and the making of money by buying and selling subsidiaries.’46 Thorstein Veblen would have understood what was going on.

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Easy money encouraged Turkish corporations to take on too much debt, borrowing in liras and foreign currencies. Easy money fuelled the rising inflation, which peaked at 25 per cent in 2018. As the tenth anniversary of Lehman’s bankruptcy approached, Turkey’s real estate market resembled Spain’s on the eve of the global financial crisis. What a leading Istanbul estate agent called a ‘big Ponzi scheme’ was broken. Residential developments ground to a halt, as Turkey’s housing market was weighed down with a couple of million unsold houses. One incomplete development, the Brooklyn Dream project on the Asian side of Istanbul, had been marketed to ‘those who want an active and dreamlike life in the center of the city’.

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Any bank that offered too little interest would lose clients.15 The advent of cryptocurrencies has the potential to realize Hayek’s vision. Cryptocurrencies are already lent on various platforms (one of which calls itself ‘Compound’). Interest on crypto loans is charged at suspiciously high rates, suggesting the existence of Ponzi schemes, and the early history of cryptocurrencies has been marked by seamy behaviour and uncertainty regarding their true scarcity. Still, it’s possible that one day a cryptocurrency may emerge which is safe to store, efficient for transactions and limited in supply. The trouble is that governments won’t willingly give up their money monopoly.

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, Alan Greenspan, anti-communist, bank run, banking crisis, Basel III, Bear Stearns, benefit corporation, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, export processing zone, failed state, fake news, falling living standards, family office, financial deregulation, financial engineering, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, Global Witness, high net worth, Ida Tarbell, income inequality, index fund, invisible hand, Jeff Bezos, junk bonds, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, megaproject, Michael Milken, Money creation, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, stock buybacks, Suez crisis 1956, The Chicago School, Thorstein Veblen, too big to fail, Tragedy of the Commons, transfer pricing, two and twenty, vertical integration, Wayback Machine, wealth creators, white picket fence, women in the workforce, zero-sum game

BCCI infested US politics too: when Jack Blum, one of the lawyers who eventually helped bring the bank down, started investigating it he soon came up against the CIA and ‘an army of people working in Washington on all sides’. BCCI wasn’t just a global octopus of murder and organised crime; it was also a giant Ponzi scheme for ripping off its depositors and investors, and turned out to be the biggest banking fraud of the twentieth century.1 It bamboozled everyone by splitting its main operations three ways: between two separate holding companies in Luxembourg and Cayman, and its headquarters in London. By this stage of the book it should be obvious why Abedi chose Cayman and London.

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Luxembourg has the world’s second-largest mutual funds sector after the United States, but a courts system ‘the size of a small provincial town’ as one lawyer put it. They can’t possibly police the financial oceans that roil through here – and they don’t want to; competitive policing of finance is after all, part of the point.8 Many of the funds that channelled European investors’ savings into Bernie Madoff’s giant Ponzi scheme were run out of Luxembourg, and ‘the whole set-up violated European law,’ said Erik Bomans, a partner in Deminor, a financial recovery firm representing some 3,000 defrauded Madoff investors. ‘There were no control mechanisms, no yearly due diligence, nothing, nothing, nothing,’ Bomans told me.

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Here in America we assume everyone who handles other people’s money has the potential to be a criminal. And we legislate for the possibility.”’6 As Bosworth-Davies and his colleagues faced this influx of crime, the BCCI scandal exploded in Britain. As I described in Chapter 5, BCCI combined organised crime and murder with risky mechanisms threatening financial stability in a single Ponzi-scheme package run out of the bank’s global headquarters in London. It was arguably the biggest single banking fraud of the twentieth century. As the scandal unfolded in the early 1990s, Britain and the Bank of England actively worked to frustrate US efforts to shut the rogue bank down. Robert Morganthau, the Manhattan district attorney who led the attempts to close BCCI down, remembers the Cayman attorney general, ‘a crotchety British guy’, refusing to help.

Endless Money: The Moral Hazards of Socialism by William Baker, Addison Wiggin

Alan Greenspan, Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Black Swan, bond market vigilante , book value, Branko Milanovic, bread and circuses, break the buck, Bretton Woods, BRICs, business climate, business cycle, capital asset pricing model, carbon tax, commoditize, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, foreign exchange controls, Fractional reserve banking, full employment, German hyperinflation, Great Leap Forward, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, land bank, land reform, liquidity trap, Long Term Capital Management, lost cosmonauts, low interest rates, McMansion, mega-rich, military-industrial complex, Money creation, money market fund, moral hazard, mortgage tax deduction, naked short selling, negative equity, offshore financial centre, Ponzi scheme, price stability, proprietary trading, pushing on a string, quantitative easing, RAND corporation, rent control, rent stabilization, reserve currency, risk free rate, riskless arbitrage, Ronald Reagan, Savings and loan crisis, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, stocks for the long run, Tax Reform Act of 1986, The Great Moderation, the scientific method, time value of money, too big to fail, Two Sigma, upwardly mobile, War on Poverty, Yogi Berra, young professional

Of course, the disinfectant of transparency goes a long way, but common sense is the most effective tool at our disposal to avoid being sucked into such schemes. The centerpiece of operational risk for our time has to be the Bernie Madoff scandal, which broke in December 2008. However, the continual financial market meltdown has revealed other giant Ponzi schemes, such as the failure of the $50 billion Stanford Group in February 2009. Oddly, most mainstream professional money managers had never heard of Madoff, yet he had raised over $50 billion. The public response will likely be a vociferous demand for yet more intensive regulation of the financial industry (a topic examined in detail later in this book), yet Madoff ’s operation was not in fact a hedge fund.

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When practiced in its purest form, it involves buying and selling calls, puts, and an underlying equity such that risk of price movement is hedged away. Under these circumstances the market has long offered essentially Treasury bill type returns, because arbitrage has narrowed spreads since at least the 1970s. In contrast to other risky investments, Madoff ’s returns were not off the charts. Just like any good Ponzi scheme they were plausibly in the low double digits, with never a down month and rarely if ever a sub-par result. However, they aroused suspicion in the options community. Madoff ’s competitors, assailed with feedback from the capital-raising specialists that they were incompetent because they could not replicate the effortlessly sellable Madoff track record, were appalled.

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Presently the government is hooked on debt and does not feel its pinch due to generationally low interest rates. Legislators maintain high spending to maintain voter support from the left. As socialization spreads to the mainstream, spending increasingly helps the lower-middle class, which might vote conservative otherwise. Government can essentially operate a Ponzi scheme, fooling buyers of Treasury bonds into believing that other dupes, be they taxpayers or other bond buyers, will be there to make good on the next coupons as they are presented for payment. We have operated this way for decades, causing layer upon layer of debt to be added, but in the Bush presidency the problem became intractable due to the math of compounding, despite generally having had manageable deficits as a percentage of GDP.

Dangerous Personalities: An FBI Profiler Shows You How to Identify and Protect Yourself From Harmful People by Joe Navarro, Toni Sciarra Poynter

Bernie Madoff, business climate, call centre, Columbine, delayed gratification, impulse control, Louis Pasteur, Norman Mailer, Peoples Temple, Ponzi scheme, social intelligence, Steve Jobs, Ted Kaczynski, Timothy McVeigh

The narcissist worked for and got what he wanted, so what’s the problem when he comes home drunk, smelling of other women? What his wife wants doesn’t matter; the only thing that matters is what he feels he’s entitled to. He has used attentiveness to ensnare, but he doesn’t really care. In real life, financier Bernard Madoff used connections and friendships to ensnare trusting people in his Ponzi scheme. The crushing difference between what they expected and what they got is the terrible truth of relationships with a narcissistic personality. You expect to be treated as an equal, as a friend, but a narcissist has no equal. For the narcissistic personality, friends are functional. They serve a purpose: to provide the narcissist with something wanted or needed.

…

These individuals are persistently calculating, manipulative, and aggressively predatory. When you read about someone who meticulously planned and executed a crime, who stalked and staked out his victim, who’s been committing criminal acts for a long time, who traveled distances to achieve an illicit endeavor, or who’s constructed elaborate Ponzi schemes, you’re reading about predators. Similarly, when you hear of someone who’s always in trouble with the law, is a serial sex offender, a recidivist, or someone who is scheming to cheat others of their money, you’re hearing about a predator. Expect predators to frequently change jobs, change plans, fail to repay loans, ruin or end relationships, disappoint or take advantage of others, and shirk responsibilities.

…

Forero-Parra replied. “As he was being led into the jail, he asked, ‘How does my hair look?’ ” Sometimes, predators are palpably narcissistic. This was one of those times. Indeed, we often see some of the features of the predator with the narcissist. Bernard Madoff, mastermind and architect of the largest Ponzi scheme in US history, who took advantage of his own family and friends, appears to have many of the features of the narcissist, whose behaviors say, “I can do anything, by any means, without restraint” and the predator, whose behaviors say, “I will take advantage of whom I can, when I can, without remorse.”

Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino by Jim McTague

Alan Greenspan, algorithmic trading, automated trading system, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Monday: stock market crash in 1987, Bretton Woods, buttonwood tree, buy and hold, computerized trading, corporate raider, creative destruction, credit crunch, Credit Default Swap, financial innovation, fixed income, Flash crash, High speed trading, housing crisis, index arbitrage, junk bonds, locking in a profit, Long Term Capital Management, machine readable, margin call, market bubble, market fragmentation, market fundamentalism, Myron Scholes, naked short selling, Nixon triggered the end of the Bretton Woods system, pattern recognition, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, uptick rule, Vanguard fund, Y2K

No one else had noticed what they had noticed. Regulators had been asleep. They hadn’t blown any time-out whistles or thrown any penalty flags for spoofing or momentum ignition or pinging. This was outrageous, because the SEC and FINRA were supposed to be cleaning up their act after missing abuses like Bernie Madoff’s outrageous Ponzi scheme. But after the two traders disseminated the white paper, nothing happened—nothing at all. Investors in December 2008 had other things on their minds. They were consumed by bailouts, failures, bankruptcies, and the incoming Democratic administration of Barack Obama. The white paper was little more than background noise.

…

In the end, the SEC would maintain its turf, but the historic legislation would end up saddling the SEC a to-do list containing more than 80 new chores, including studies and the adoption of new regulations, and a deadline of two years for most of them. Simultaneously, Schapiro struggled to reinvigorate the agency, to make it more aggressive. The SEC had missed uncovering the Bernie Madoff Ponzi scheme because somnambulant bureaucrats had ignored direct complaints between 1992 and 2008. There had been a pair of half-hearted investigations and some cursory exams of Madoff’s firm but, according to a report by the SEC’s inspector general, “a thorough and competent investigation or examination was never performed.”

…

The Trouble with Mary—and Gary The Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) chiefs in charge of the Flash Crash investigation had a litany of strengths but also a cart full of heavy baggage that could affect its progress. Mary Schapiro, the first female to head the SEC, had to live down her imperfect record while at the helm of Financial Industry Regulatory Authority (FINRA), the brokerage industry’s self-regulatory agency. Two big scandals had broken on her watch—the Madoff Ponzi scheme and the alleged, $8 billion, R. Allen Stanford investment scam—and she had been faulted for not uncovering them. Gary Gensler, chairman of the CFTC, had opposed the regulation of the credit derivatives market while serving in the U.S, Treasury under Bill Clinton. Inadequate regulation of this market had been a major cause of the credit market meltdown from 2007 to 2008 that put seven million people out of work and required federal bailouts of major Wall Street banks and brokerage houses.

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, fixed income, George Akerlof, Glass-Steagall Act, greed is good, Greenspan put, hedonic treadmill, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, junk bonds, Kickstarter, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, low interest rates, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, off-the-grid, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, shareholder value, South Sea Bubble, statistical model, Tax Reform Act of 1986, The Great Moderation, the payments system, too big to fail, tulip mania, Tyler Cowen, value at risk

Much of this doctrinaire laissez-faire involved the nonenforcement of the rules which already existed. An activist SEC, for instance, would never have allowed Bernard Madoff to run his Ponzi scheme; the very consistency of his returns—the funny smell alluded to above—would have been enough to draw their close attention to his accounts. In 2005, a professional investor named Harry Markopolos, a mild-mannered Boston accountant, wrote a twenty-one-page letter to the SEC, pointing out the high probability that Madoff’s fund was a Ponzi scheme. The only alternative explanation Markopolos could come up with wasn’t that Madoff was legit; it was that he was doing something called “front running,” using private information gleaned from his stockbroking operation to make profits for his other funds.

…

., 115–17, 157–58 liabilities, 31–35 in balance sheets, 25–28, 31–34, 37 of banks, 25, 32–35, 37, 41, 204 of individuals, 27–28, 35 leverage and, 35, 41, 60 libel law, 93 life expectancies, 17, 213 liquidity, 212 housing and, 28–29, 90, 96–97 investments and, 60–61 Lloyds TSB, 36, 38–40 loans, lending, 74–76, 108–9 in balance sheets, 27, 30, 34 of banks, 22, 24, 27, 33–36, 41–42, 58–60, 67, 69–70, 74, 83–84, 91–94, 102, 117, 127, 129–30, 143, 146, 165, 187, 216–17, 229 credit and, 209, 216–17 derivatives and, 50–51, 55, 66–75, 80, 121–22 Exxon deal and, 67–68 interest rates and, 59–60, 66, 74, 102, 108, 145, 172–73 paying the bill and, 220–21 predatory, 122, 127–32 risk and, 66–67, 69–72, 74–75, 80, 95, 117, 145, 174 securitization in, 69, 74 see also mortgages London, 53, 84 housing in, 88–90 see also City of London Long-Term Capital Management (LTCM): collapse of, 142, 162, 164–65, 230–31 derivatives and, 54–56, 80 loss aversion, 137 Lovelock, James, 231 Lowenstein, Roger, 161 Macmillan, Harold, 216 Madoff, Bernard, 105, 171, 191–92, 195 Mailer, Norman, 172 Manias, Panics, and Crashes (Kindleberger), 104 manufacturing, 4, 13, 58, 109, 229 and financial vs. industrial interests, 197, 199 Marxist analysis of, 15–16 stocks and, 148–49 market discipline, 183–84 Markopolos, Harry, 192 Markowitz, Harry, 147–49, 158 mark to market, 42, 105–6 Marx, Karl, 15–16 Maryland, housing in, 125–31 Masters, Blythe, 68, 121 mathematics, 5, 231 derivatives and, 47–48, 52–54, 115–17, 166 risk and, 46, 55–56, 74, 133, 136, 146–50, 154, 158, 160–67, 202 of share pricing, 147–48 Meriwether, John, 54 Merrill Lynch, 39, 77, 120, 190, 227 Merton, Robert, 54–55 microeconomics, 137 Minsky, Hyman, 104 Monetary Policy Committee, 178–79 money: assumptions based on primacy of, 202–4 cost of, 102–3 flows of, 7–9, 26 inconceivable amounts of, 8 Money Machine, The (Coggan), 25 Moody’s Investors Service, 62, 70, 114, 119, 208, 210 Morgan, John Pierpont, 20, 64 Morgan Stanley, 40, 64, 227 Morris, Charles, 42 mortgages, 38–40, 83–87, 89–95, 97–102, 110–32 in balance sheets, 27–28 balloon payments on, 100 and buy-to-let properties, 177 conforming, 112, 124 credit ratings and, 123–24, 126 of Cutter family, 126–27 defaults on, 159–60, 163, 165, 229 derivatives and, 38, 57–58, 75–76, 112–22, 132, 157–60, 172, 210–12 discriminatory practices and, 99–101, 127 durations of, 95 endowment, 86–87, 89–90, 146 Iceland’s economic crisis and, 10–11 interest and, 8, 58, 86, 89, 91–92, 95, 100, 102, 108, 110, 112–14, 122, 128, 145–46, 174, 176, 212 “liar,” 126, 132 “no doc,” 132 No Income, No Job or Assets (NINJA), 126 piggyback, 132 predatory lending and, 122, 127–32 regulation and, 99–100, 185 risk and, 145, 158–60, 163–65 sizes of, 92–94 subprime, 38, 75, 83, 100, 113–19, 122–25, 127, 132, 157–59, 165, 202, 210 see also houses, housing, home ownership Nasdaq, 104 nationalization, 24, 39–40, 228–30 New York Times, The, 77, 98, 208 “Night in Tunisia, A,” 45 Nikkei 225, 51–52, 54 9/11 terrorist attacks, 2, 107 Northern Rock, 5, 39, 94, 194, 206 Obama, Barack, 77, 205 regulation and, 188, 190, 223–24 Objectivism, 142–43, 173 oil, 3–4, 107–8, 148–49 “On Default Correlation” (Li), 116 options, 50–52, 151, 174, 184 how they work, 46–47, 50–51 Osaka exchange, 54 Pacioli, Luca, 26 panic of 1893, 64 panic of 1907, 20, 64 Parker, Charlie, 45 Paulos, John Allen, 8 pensions, 76–77, 165, 204 in balance sheets, 27–28, 31 Phillips, Julia, 199 politics, politicians, 5–6, 19–21, 23–25, 81, 118–19, 169–70, 176–78, 217–26, 228–32 AIG bailout and, 76–78 banks and, 25, 33, 43, 182, 186, 195, 202, 207, 211, 217, 228–31 bonds and, 29–30, 61–62, 103, 109, 118, 144, 176–77, 208–9 derivatives and, 57, 183–86 financial industry’s ascent and, 19–20 free-market capitalism and, 14–15, 19, 21, 23–24 housing and, 87–89, 91, 96–101, 177–78 Iceland’s economic crisis and, 9–10, 12, 24, 223 interest rates and, 102–3, 107–8, 172–80, 221 paying the bill and, 219–23 regulation and, 15, 19–21, 24, 169, 180–92, 195, 199, 201, 223–26 risk and, 142–43, 164–66, 174, 184 Ponzi, Charles, 105 Ponzi schemes, 191–92 poor, poverty, 3–4, 13, 21, 82, 179, 196 housing and, 100, 113, 118, 121–23, 126–27, 130–31, 163 pork bellies, 48–49 portfolio insurance, 151–52, 162 “Portfolio Selection” (Markowitz), 147 Posner, Richard A., 120, 174, 182, 193 Powell, Anthony, 62 price, prices, 105–11, 203 and banking-and-credit crisis, 216–18, 220 bonds and, 61, 63, 102–3, 108–10, 144 derivatives and, 38, 46–52, 54, 56, 75, 158–59, 166 of houses, 5, 28–29, 37–38, 61, 71, 86–91, 101, 109–11, 113, 115, 125, 157, 160, 164–66, 173–76, 194, 208 of oil, 3–4, 107–8, 148–49 risk and, 145–50, 158–59, 164–66 of stocks, 102, 105–6, 109–10, 147–51, 158, 174 of toxic assets, 37–38, 42 volatility of, 47–48, 148–50 “Pricing of Options and Corporate Liabilities, The” (Black and Scholes), 45, 47–48, 147 probabilities, 46, 55, 74, 115, 141, 145, 153–55, 160–63 profits, 20, 28, 104–6, 110, 192, 226–28, 230 banks and, 33, 35, 67, 78, 227–28 and benefits of debt, 59–60 derivatives and, 50, 54, 57, 63, 65, 106, 114, 121–22 Enron and, 105–6 regulation and, 204, 226 risk and, 150, 226 Protection of Homeowners in Foreclosure Act, 131 “Quiet Coup, The” (Johnson), 19–20, 185–86 Ragtime (Doctorow), 64 Rand, Ayn, 142–43, 173 Reagan, Ronald, 14, 19–20, 24, 142, 185 recessions, 42, 89, 94, 142, 171, 175, 219 regulation, deregulation, 15, 19–22, 24, 169, 180–202 banking and, 21, 33, 180–91, 194–96, 199–200, 202, 204–5, 208, 211, 223–27 bond ratings and, 208–9 derivatives and, 68, 70, 73, 153, 183–86, 200–201 framework and regime of, 189–92 market discipline and, 183–84 mortgages and, 99–100, 185 proposals for, 223–26 risk and, 143, 153, 164, 187–88, 191, 195, 202, 204–5, 212, 224, 226 in U.K., 21–22, 105n, 180–82, 194–96, 199–201, 218 in U.S., 181, 184–92, 195, 199–200, 223–24, 227 Reykjavík, 10, 12, 170 risk, risks, 49–58, 66–76, 133–36, 141–67, 211–12, 219 AIG and, 75–76 assessment of, 46, 55–56, 74, 133, 135–36, 141–43, 145–67, 187–88, 191, 202, 205, 212, 216, 226 banks and, 19, 34–37, 41, 133, 135–36, 143, 150–54, 156–57, 160, 165–66, 174, 187–88, 191–95, 202, 204–7, 216, 224, 226, 228, 230 bonds and, 61–63, 103, 118, 144, 154, 208 derivatives and, 46–47, 49–52, 54–55, 57–58, 66–75, 78–80, 114–15, 117–22, 151, 153, 158–60, 163, 166–67, 184–85, 205, 212 desirability of, 144, 146, 150, 206–7 diversification and, 146–48 Greenspan and, 142–43, 164–66, 174, 184 hedging of, 49–50, 52, 58, 115, 205 historical data and, 163, 166 housing and, 88, 94–97, 112–13, 125, 129, 145, 158–60, 163–65 investing and, 5, 68, 70, 88, 103, 144, 146–53, 158, 165, 184, 190 leverage and, 35–36 LTCM and, 55–56 overconcentration of, 72–73 regulation and, 143, 153, 164, 187–88, 191, 195, 202, 204–5, 212, 224, 226 securitization and, 69–70, 163, 165 of stairs, 134–35 VAR and, 151–57, 162–63 risk-adjusted return on capital (RAROC), 150–51 Ritholtz, Barry, 219–20 Robinson, Phillip, 128–31 Rogers, Jim, 221 Royal Bank of Scotland (RBS), 34–36, 120, 227 bailout of, 32, 40, 204 Russia, 3, 15–16, 18, 53 bond default of, 55–56, 162, 164–65 Salomon Brothers, 63 Sanford, Charles, 150 Santander, 40 savings, 28, 86, 107, 177, 179, 187 savings and loan crisis, 73, 185, 220 Scholes, Myron, 45, 47–48, 54–55, 147 Securities and Exchange Commission (SEC), 195 credit ratings and, 209–10 regulation and, 153, 186, 189–92 securitization, 20, 22, 200 derivatives and, 69–70, 74, 113–14, 117–19, 122, 212 risk and, 69–70, 125, 163, 165, 212, 224 selling, sales, 34, 42, 104, 174, 203 of bonds, 59, 61–63, 144 derivatives and, 46–50, 52, 56, 65, 67–68, 73–74, 120 of equity, 58–59 of houses, 28–29, 71, 89–90 risk and, 151–52, 165, 224 Shiller, Robert, 106, 145n, 194 Simon, David, 83–84 Singapore exchange, 54 Skilling, Jeffrey, 106 small numbers, law of, 137 Sociét Générale, 51, 77 solvency, insolvency, 28–29 of banks, 36–38, 40–43, 64, 74–75, 120 Spain, 15, 40, 177, 214 contracting economy of, 222–23 housing in, 92, 110 special purpose vehicles (SPVs), 70, 120 stairs, deaths caused by, 134–35 Standard & Poor’s (S&P), 62, 114, 151, 209 statistics, 160–62 Stefánsdóttir, Rakel, 9–10, 12 stock market, stocks, 22, 54–55, 61, 76, 80, 101–11, 115, 226 bubbles and implosions in, 3, 42, 103–9, 142, 175–76 derivatives and, 50–52, 54 investing in, 59, 73, 101–7, 111, 146–52, 158, 175, 192 new-economy, 103 1929 crash of, 152, 199, 213 October 1987 crash of, 142, 151–52, 161–62, 164–65 prices of, 102, 105–6, 109–10, 147–51, 158, 174 structured investment vehicles (SIVs), 120 Summa de Arithmetica (Pacioli), 26 Summers, Lawrence, 43, 74, 188 Taleb, Nassim, 53, 155–56 Tax Reform Act of 1986 (TRA), 100 technology, 42, 104, 149, 155, 166 terrorism, 2, 12, 18, 107 Tett, Gillian, 121, 193 Thatcher, Margaret, 199, 217, 222 free-market capitalism and, 14, 21, 24 on housing, 87, 91, 98 regulation and, 21, 195–96 torture, end of ban on, 18 tranching, 117–18, 122 Treasury, British, 181–82 Treasury, U.S., 43, 54, 64, 74, 76–78 AIG bailout and, 76, 78 regulation and, 188–90 Treasury bills (T-bills), 29–30, 62, 103, 118, 144, 208 China’s investment in, 109, 176–77 Trichet, Jean-Claude, 92 Trillion Dollar Meltdown, The (Morris), 42 Troubled Assets Relief Program (TARP), 37, 189 Turner, Adair, 181 Tversky, Amos, 136–38, 141 UBS, 36, 120 uncertainty, 96 fair value theory and, 147–48 risk and, 55–56, 153, 163 United Kingdom, 9, 11–12, 18, 28–29, 61, 122–24, 134, 139, 194–202, 216–18 banking in, 5, 11, 32–36, 38–40, 51–54, 76–77, 89, 94, 120, 146, 180, 194–96, 199, 202, 204–6, 211–12, 217, 227–28 bill of, 220–22, 224 and City of London, 21–22, 32, 195–97, 200, 217–18 credit ratings and, 123–24, 209 derivatives and, 72, 200–201 financial vs. industrial interests in, 196–99 free-market capitalism in, 14–15, 21, 230 GDP of, 32, 214, 220 Goodwin’s pension and, 76–77 housing in, 38, 87–98, 110, 122, 177–78 interest rates in, 102, 177–80 personal debt in, 221–22 prosperity of, 214, 216 regulation in, 21–22, 105n, 180–82, 194–96, 199–201, 218 United Nations, 4 United States, 17–22, 34, 62–71, 120–31, 134n, 165, 199–201 AIG bailout and, 76–78 banks of, 36–37, 39–40, 43, 63–71, 73, 75, 77–78, 84, 116, 120–21, 127, 150, 152, 163, 183, 185, 190, 195, 204, 211–12, 219–20, 225, 227–28 bill of, 219–20 China’s investment in, 109, 176–77 credit and, 109, 123–24, 195, 208–9, 211 free-market capitalism in, 14–15, 230 housing in, 37, 82–86, 95, 97–101, 109–10, 114–15, 122, 125–31, 157–58, 163 interest rates in, 102, 107–8, 173–77 regulation in, 181, 184–92, 195, 199–200, 223–24, 227 urban desolation in, 81–86 value, values, 42, 74–75, 78–80, 103–4, 179, 181, 217–18, 220, 227 bonds and, 61, 103 derivatives and, 38, 48–49, 185, 201 housing and, 28–29, 71, 90, 92–95, 111, 176 investing and, 60–61, 104, 198 LTCM and, 55–56 notional, 38, 48–49, 80 value at risk (VAR), 151–57, 162–63 Vietnam War, 18, 220 Viniar, David, 163 volatility, 20, 158 risk and, 47–48, 148–50, 161 Volcker, Paul, 20 Waldrow, Mary, 127 Wall Street, 22, 53, 64, 129, 188 Washington Post, The, 18 wealth, 4, 10, 19–21, 64, 204, 206 financial industry’s ascent and, 20–21 in free-market capitalism, 15, 19, 230 housing and, 87, 90, 121 Keynes’s predictions on, 214–15 in West, 218–19 Weatherstone, Dennis, 152 Wells Fargo, 84, 127 Wessex Water, 105n West, 14–18, 43, 213, 231 conflict between Communist bloc and, 16–18 free-market capitalism in, 14–15, 17, 21, 23 wealth in, 218–19 wheat, 49n, 52 When Genius Failed (Lowenstein), 161 Williams, John Burr, 147 Wilson, Lashawn, 130–31 Wire, The, 83–84 World Bank, 58, 65, 69 * GDP, which will be mentioned quite a few times in this story, sounds complicated but isn’t: it’s nothing more than the value of all the goods and services produced in an economy.

Molly's Game: The True Story of the 26-Year-Old Woman Behind the Most Exclusive, High-Stakes Underground Poker Game in the World by Molly Bloom

housing crisis, Ponzi scheme, Steve Jobs

Glen was in for $400,000, so we ordered lunch, more cigarettes, and more vodka. We put on the sports channels for the guys: I had several television screens in my living room for this very purpose. But I was close to cutting Glen off because I couldn’t afford a hit this big if he decided not to pay. Most game runners are essentially running Ponzi schemes. They extend massive credit without actually having the capital to back it up: that’s why most games die. I didn’t work this way—I didn’t extend credit I couldn’t back up, and I always covered. I couldn’t afford to die. Luckily, Glen started winning somehow. He smiled and winked at me, and again, his flirtation affected me.

…

I never got the call I was expecting from Vinny . . . or anyone else. I couldn’t believe how lucky I was. MY LUCK DIDN’T LAST FOR LONG: A subpoena arrived via certified mail. Brad Ruderman, one of my players from my old L.A. game had been indicted by the federal government. Allegedly his fund had been a Ponzi scheme. “Bad Brad” Ruderman was known in my games in Los Angeles as “free money.” It became routine after I sent out the invitation text for the weekly game that everyone responded with, “Is Brad playing?” He was so bad it often felt like he was trying to lose. No one could actually play the cards that poorly after two years of steady practice.

…

Brad had already disclosed information about the game, the players, the amount he lost, who the checks went to, and allegedly that the game was run and orchestrated by me. I kept reading the subpoena. Brad was claiming that I lured him into my games and that in these clandestine rooms he had developed a gambling addiction which led him to lose sight of his morals, culminating in the Ponzi scheme. So I flew to Los Angeles. MY OLD, L.A. ATTORNEY picked me up at the airport. The deposition was as unpleasant as I had expected. After hours of skirting questions and only confirming innocuous details, I was exhausted. The questions dredged up memories of my L.A. life, which I had pushed into that corner of my mind that I refused to visit.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, backtesting, Bear Stearns, beat the dealer, Bernie Madoff, book value, BRICs, butter production in bangladesh, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial engineering, financial innovation, fixed income, framing effect, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Japanese asset price bubble, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, margin call, market bubble, Mary Meeker, money market fund, mortgage tax deduction, new economy, Own Your Own Home, PalmPilot, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, stock buybacks, stocks for the long run, sugar pill, survivorship bias, The Myth of the Rational Market, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond

ZZZZ Best was accused of acting as a front for organized-crime figures who would buy equipment for the company with “dirty” money and replace their investment with “clean” cash skimmed from the proceeds of ZZZZ Best’s legitimate carpet-cleaning business. The spectacular growth of the company was produced with fictitious contracts, phony credit card charges, and the like. The operation was a giant Ponzi scheme in which money was recycled from one set of investors to pay off another. Minkow was also charged with skimming millions from the company treasury for his own personal use. Minkow and all the investors in ZZZZ Best were in wall-to-wall trouble. The next chapter of the story (after Chapter Eleven) occurred in 1989 when Minkow, then twenty-three, was convicted of fifty-seven counts of fraud, sentenced to twenty-five years in prison, and required to make restitution of $26 million he was accused of stealing from the company.

…

The updraft encourages more people to buy the stocks, which causes more TV and print coverage, which causes even more people to buy, which creates big profits for early Internet stockholders. The successful investors tell you at cocktail parties how easy it is to get rich, which causes the stocks to rise further, which pulls in larger and larger groups of investors. But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools. Even highly respected Wall Street firms joined in the hot-air float. The venerable investment firm Goldman Sachs argued in mid-2000 that the cash burned by the dot-com companies was primarily an “investor sentiment” issue and not a “long-term risk” for the sector or “space,” as it was often called.

…

And as Robert Shiller, author of the best-selling Irrational Exuberance, has noted, the process feeds on itself in a “positive feedback loop.” The initial price rise encourages more people to buy, which in turn produces greater profits and induces a larger and larger group of participants. The phenomenon is another example of the Ponzi scheme that I described in chapter 4, in connection with the Internet bubble. Eventually one runs out of greater fools. Such herding is not limited to unsophisticated individual investors. Mutual-fund managers have a tendency to follow the same strategies and herd into the same stocks. Indeed, a study by Harrison Hong, Jeffrey Kubik, and Jeremy Stein, three leaders in the field of behavioral finance, determined that mutual-fund managers were more likely to hold similar stocks if other managers in the same city were holding similar portfolios.

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money by Nathaniel Popper

4chan, Airbnb, Alan Greenspan, Apple's 1984 Super Bowl advert, banking crisis, Ben Horowitz, Benchmark Capital, bitcoin, Bitcoin Ponzi scheme, blockchain, Burning Man, buy and hold, capital controls, Colonization of Mars, crowdsourcing, cryptocurrency, David Graeber, Dogecoin, Edward Snowden, Elon Musk, Extropian, fiat currency, Fractional reserve banking, Jeff Bezos, Julian Assange, Kevin Roose, Kickstarter, life extension, litecoin, lone genius, low interest rates, M-Pesa, Marc Andreessen, Mark Zuckerberg, Max Levchin, Neal Stephenson, Occupy movement, off-the-grid, PalmPilot, peer-to-peer, peer-to-peer lending, Peter Thiel, Ponzi scheme, price stability, QR code, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Simon Singh, Skype, slashdot, smart contracts, Startup school, stealth mode startup, the payments system, transaction costs, tulip mania, Tyler Cowen, Virgin Galactic, Vitalik Buterin, WikiLeaks

Just as the Internet took power from big media organizations and put it in the hands of bloggers and dissidents, Bitcoin held out the promise of taking power from banks and governments and giving it to the people using the money. This was all rather high-minded stuff and it attracted plenty of derision—most ordinary folks imagined it falling somewhere on the spectrum between Tamagotchi pet and Ponzi scheme, when they heard about it at all. But Bitcoin had the good fortune of entering the world at a utopian moment, in the wake of a financial crisis that had exposed many of the shortcomings of our existing financial and political system, creating a desire for alternatives. The Tea Party, Occupy Wall Street, and WikiLeaks—among others—had divergent goals, but they were united in their desire to take power back from the privileged elite and give it to individuals.

…

Practically no one was promising to take Bitcoin for anything. The primary value the coins had at this point was the expectation that they would be worth more in the future, allowing current holders to cash out for more than they paid. To some cynics, that description made Bitcoin sound suspiciously like a less savory sort of financial invention: a Ponzi scheme. FROM THE OUTSIDE, it would have been easy to conclude that Charlie and BitInstant were somehow dodging all these problems. Charlie was shopping for new, larger real estate for his company and eventually settled on a well-appointed suite in an office tower. Charlie had finally managed to move out of his parents’ basement in Brooklyn.

…

Gox collapse, 309 2014 Bitcoin Pacifica (Lake Tahoe), 346–348 Anoncoin (digital currency), 270–271 Anti-state.org (website), 29 Argentina, 153–161, 182, 240–242, 259, 277–280, 286, 349–353 ASIC (computer chip), 189–190, 259, 329–330 Assange, Julian, 56–57 Athey, Susan, 345 Atlantis, 245 Australia, 44–45, 117, 168, 171 Automated Clearing House (ACH), 133 Avalon (ASIC), 190, 206 Back, Adam, 17–22, 339, 348 Baidu (Chinese search engine), 261–262 bank bailout of 2008, 32, 111 Bank of America, 272 Bates, Richard, 75–77, 115–116 bee-te-bee (Chinese Bitcoin), 255–256 Beijing Summer Olympics (2008), 145 Benchmark Capital, 282, 293, 305 Bernanke, Ben, 266 Bezos, Jeff, 353 Bharara, Preet, 299–300 Bill and Melinda Gates Foundation, 353–355 Bitcoin arrival of Gavin Andresen, 44–47 arrival of Martti Malmi, 29–30 building trust, 24–25, 33, 48, 61–62, 69, 99–100, 279, 315, 339 buying/selling with, 43–44, 82, 119–120, 129–130 changing business model, 236–239 characterization as “cryptocurrency,” 36 comparison to gold, 157–158, 165, 182 comparison to paper money, 219, 286–287 creation and operation of original code, 4–6, 20–24 disappearance of Satoshi Nakamoto, x–xiii hacking and scandals, 91–99 increasing price/value, 38, 66–69, 79, 81–85, 89–91, 131, 175, 180, 184, 193–196, 204–206, 210–211, 250–253, 262–264, 267, 271–275, 284–285 legality/government regulation, 196–198, 251 limitations based upon computers, 347 Mt. Gox collapse busts bubble, 308–317 origin and ideology, vii–xv, 5, 113–114 as Ponzi scheme, 220 proof-of-work, 18–19 Bitcoin Foundation candidacy of Bobby Lee, 345 dealing with Bitcoin collapse, 314–315 Gavin Andresen as member, 192 involvement in Senate hearing, 265–267, 270, 300–302 Patrick Murck as member, 176 planning and creation of, 138–142 regulatory problems, 217–219, 233–236 resignation of Charlie Shrem, 302 Bitcoinica, 237 Bitcoin Investment Trust, 314 Bitcoin Meetups.

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

"World Economic Forum" Davos, Admiral Zheng, Alan Greenspan, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, full employment, G4S, George Akerlof, German hyperinflation, Gini coefficient, Great Leap Forward, guns versus butter model, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, junk bonds, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low interest rates, low skilled workers, market clearing, Martin Wolf, mass immigration, Meghnad Desai, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, Savings and loan crisis, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, We are all Keynesians now, women in the workforce, working-age population, Y2K, Yom Kippur War

As they did so, they allowed banks to raise funds well beyond their deposits through the creation of securitized products. Many of these funds were lent to US households with questionable credit histories in the form of sub-prime mortgages. Some of the funds raised, though, were lent back to the emerging economies. This wasn’t quite a Ponzi scheme (although Ponzi schemes, most obviously Bernard L. Madoff Investment Securities LLC, nevertheless developed), but it had much the same effect. The combination of rapidly growing emerging economies, 1990s Asian failures and a hunt for yield left investors with the belief that capital gains had to be plucked from the tree without any real regard for risk.

…

(i), (ii) Permanent Income Hypothesis (i) Persia (i), (ii) Philippines (i), (ii), (iii) Pike, Rob (i) Pingali, Prabhu (i) plague (i), (ii) Plaza accord (i) pogroms (i), (ii) Poland (i) political economy inequalities (i) education (i) the emerging gap (i) emerging nations and income inequality in the developed world (i) food shortages (i) globalization (i) living with inequality (i) new modes of distribution (i) not getting just rewards (i) a three-country model (i) too much domesticity (i) United Kingdom (i) winners and losers (i) market forces (i) return of political economy (i) scarcity (i) state capitalism (i) politics (i), (ii), (iii), (iv), (v) Ponzi schemes (i) population ageing anarchy in capital markets (i), (ii) command over limited resources (i) demographic dividends and deficits (i), (ii), (iii), (iv) globalization (i) government debt (i) Japan (i) migration (i), (ii), (iii), (iv), (v) nationalism (i) pensions and healthcare (i) political economy and inequalities (i), (ii) savings (i) trade (i) population demographics China (i), (ii) demographic dividends and deficits (i) demographic dynamics (i), (ii) globalization (i), (ii) infant mortality (i) Japan (i) migration (i) pensions and healthcare (i) political economy and inequalities (i) scarcity (i), (ii), (iii), (iv), (v) population of working age (i), (ii), (iii), (iv), (v), (vi) porcelain (i) ports (i) Portsmouth FC (i) Portugal (i), (ii), (iii) Potosí (i) poverty globalization (i), (ii), (iii) migration (i) political economy and inequalities (i), (ii), (iii) price stability and economic instability (i) scarcity (i) Spain and silver (i) price stability anarchy in capital markets (i), (ii) political economy and inequalities (i), (ii), (iii), (iv) price stability brings economic instability (i) back to the 1970s (i) defining and controlling inflation (i) emerging economies (i), (ii) inflation as an instrument of income and wealth distribution (i) inflation as a result of currency linkages (i) overview (i), (ii) from stability to instability (i), (ii) we are not alone (i) scarcity (i), (ii), (iii) state capitalism (i), (ii) trade (i), (ii) printing money (i), (ii) privatization (i), (ii) productivity anarchy in capital markets (i) land grabs (i) political economy and inequalities (i), (ii), (iii) population demographics (i), (ii), (iii), (iv) price stability (i), (ii), (iii), (iv), (v) rent-seeking behaviour (i) scarcity (i), (ii), (iii), (iv) Spain and silver (i) state capitalism (i) trade (i) Western progress (i), (ii) profits anarchy in capital markets (i), (ii) price stability (i), (ii), (iii), (iv) scarcity (i), (ii) state capitalism (i) trade (i) property rights population demographics (i) scarcity (i), (ii), (iii) secrets of Western success (i), (ii) the West’s diminished status (i), (ii), (iii), (iv) Prophet Mohammed (i) prostitution (i) protectionism anarchy in capital markets (i), (ii) globalization (i) migration (i) nineteenth century (i) political economy and inequalities (i), (ii), (iii) secrets of Western success (i), (ii), (iii) trade (i) the West’s diminished status (i), (ii), (iii), (iv), (v) Prussia (i) public sector (i), (ii) purchasing power parity (i), (ii), (iii) Putin, Vladimir (i), (ii), (iii) Qu Hongbin (i) racism (i), (ii), (iii), (iv) railways (i), (ii) Rauh, Joshua (i) Rawls, John (i) raw materials (i), (ii), (iii), (iv), (v), (vi), (vii) Reagan, Ronald (i), (ii) real estate (i), (ii), (iii), (iv), (v), (vi) recession (i), (ii), (iii), (iv), (v), (vi), (vii) Reformation (i) regulation (i), (ii), (iii) religion (i), (ii), (iii), (iv), (v) remittances (i), (ii) renminbi (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) rent-seeking behaviour (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) reserve currency (i), (ii), (iii), (iv), (v), (vi), (vii) Reserve Fund for Future Generations (i) reserves see foreign-exchange reserves resources population demographics (i), (ii), (iii) price stability and economic instability (i) scarcity (i), (ii), (iii), (iv), (v), (vi) state capitalism (i) the West’s diminished status (i), (ii), (iii) retirement (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Ricardo, David (i), (ii), (iii), (iv), (v), (vi) rice (i), (ii) risk (i), (ii), (iii) Rockefeller Center (i), (ii), (iii) Rocket steam locomotive (i) Roman Empire (i), (ii), (iii) Romania (i), (ii), (iii) Rover Group (i) Royal Navy (i), (ii) rural populations (i), (ii), (iii), (iv), (v), (vi) Russian Revolution (i), (ii) Russia/Russian Federation pogroms (i), (ii) political economy and inequalities (i), (ii), (iii) population demographics (i), (ii), (iii) a post-dollar financial order (i), (ii), (iii) price stability and economic instability (i), (ii) Russian default (i), (ii), (iii) scarcity (i), (ii) secrets of Western success (i), (ii), (iii) state capitalism (i), (ii), (iii), (iv) trade (i), (ii), (iii), (iv), (v) the West’s diminished status (i), (ii), (iii), (iv), (v) Saddam Hussein (i) Samsung (i) Samuelson, Paul (i), (ii) sanitation (i), (ii) Saudi Arabia (i), (ii), (iii), (iv), (v), (vi), (vii) savings anarchy in capital markets (i), (ii), (iii), (iv), (v) economic models (i), (ii) political economy and inequalities (i) population demographics (i), (ii), (iii) price stability and economic instability (i), (ii) state capitalism (i), (ii), (iii), (iv) trade (i) the West’s diminished status (i), (ii), (iii) Scandinavia (i) scarcity (i) back to the classical economists (i) faith in the market (i) history (i) opportunity for all (i) overview (i) population demographics (i), (ii) price stability and economic instability (i) technology replication and resource scarcity (i) the West’s diminished status (i), (ii) Wimbledon and the Olympics (i) Schröder, Gerhard (i), (ii) Schumer, Charles (i) science (i), (ii), (iii) SCO see Shanghai Co-operation Organization Scotland (i) Seat (i) Second World War (i), (ii), (iii), (iv) securities (i), (ii), (iii), (iv) Sen, Amartya (i) Seoul (i) Sevilla, Jaypee (i) Shah, Saef (i) Shanghai (i), (ii) Shanghai Co-operation Organization (SCO) (i), (ii), (iii) Shinawatra, Thaksin (i) Shinkasen (‘Bullet’ train) (i) ships (i), (ii), (iii) Siemens (i) Silicon Valley (i) silk (i), (ii), (iii) Silk Road (i), (ii), (iii) silver (i), (ii) Singapore (i), (ii), (iii) Sinopec (i) SIVs see special investment vehicles Škoda (i) slavery political economy and inequalities (i) population demographics (i), (ii), (iii) scarcity (i), (ii) secrets of Western success (i) Spain (i) Slovakia (i) Slovenia (i) Smetters, Kent (i) Smith, Adam (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Smoot–Hawley trade tariff (i), (ii) smuggling (i), (ii) soccer clubs (i), (ii), (iii), (iv), (v) social security (i), (ii), (iii), (iv), (v), (vi) soft knowledge (i), (ii) software development (i), (ii), (iii) South Korea (i), (ii), (iii), (iv), (v), (vi) South Stream (i), (ii), (iii), (iv) sovereign wealth funds (SWFs) (i), (ii), (iii), (iv), (v) Soviet communism (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Soviet Union (i), (ii), (iii), (iv), (v) Spain (i), (ii), (iii), (iv) special investment vehicles (SIVs) (i), (ii) specialization (i), (ii), (iii), (iv), (v) spending power (i), (ii), (iii), (iv) spice trade (i), (ii), (iii) sports (i), (ii), (iii), (iv) stagflation (i), (ii) Standard Bank (i), (ii) ‘Starbucks effect’ (i), (ii) state (i), (ii), (iii), (iv) state capitalism indulging the US no more (i), (ii), (iii) migration (i) political economy and inequalities (i), (ii), (iii), (iv) protectionism (i) rise of state capitalism (i) dynamics of excess saving (i) excess savings and command over assets (i) food prices (i) heading East (i) overruling the market (i) ownership versus control (i) rise of Russian power politics (i) rise of sovereign wealth funds (i) sleeping giants no more (i) unwilling sellers (i) who owns what?

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan

algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, data science, Donald Trump, Elliott wave, eurozone crisis, family office, financial engineering, Flash crash, Great Grain Robbery, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, land bank, margin call, market design, market microstructure, Market Wizards by Jack D. Schwager, Navinder Sarao, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, proprietary trading, Ralph Nelson Elliott, Reminiscences of a Stock Operator, Ronald Reagan, selling pickaxes during a gold rush, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Timothy McVeigh, Tobin tax, tulip mania, yield curve, zero-sum game

and I said, ‘On a good day, nine hundred grand.’ They said, ‘That’s crazy.’ ” A week later, after Nav sent them his statements, RCG turned him down. When he asked why, they told him they didn’t think it was possible for a trader in his bedroom to make that much money. “They said they believe that it’s a Ponzi scheme,” Nav recounted. “They thought I was Bernie Madoff!” Nav hoped he’d found an alternative when Knight Capital agreed to take him on, but then the firm lost $460 million and he was left brokerless once again. Unable to trade and with few other interests, Nav returned to the proverbial garage to work on his trading machine.

…

The judge asked Nav to confirm he agreed to forfeit the $12.87 million, and Burlingame said he did, although so far Kobre & Kim had still only managed to retrieve $6.5 million—essentially what was seized from the R. J. O’Brien trading account. “Judge, if I might, we’ve been engaged in a process with the CFTC for the last sixteen months of attempting to collect the defendant’s assets all of which have been stolen from…I mean, he invested in a Ponzi scheme,” the lawyer explained. In lieu of the full amount, the judge agreed for Nav’s parents and brother, Jasvinder, to place a lien on their homes to the value of $750,000. To confirm the arrangement, she placed a call to Hounslow that was played on the courtroom’s speakers. “Good evening. My name is Judge Kendall, and you are on the record and in open court.

…

It was one of those rare finance stories that cross into the mainstream—the genius kid from the wrong side of the tracks who finds himself in the crosshairs of the U.S. government—and I watched with fascination as the Hound of Hounslow butted up against the UK and U.S. legal systems. Then his lawyer revealed in court that, despite making tens of millions of pounds, the master manipulator of the S&P 500 couldn’t pay his fine because he himself had been the victim of a Ponzi scheme, and I knew someone had to write a book. This is a work of nonfiction. All the characters and events I describe are real, and no details have been changed or exaggerated for effect. The narrative was built using both public and private documents, which I detail extensively in the notes, as well as interviews with over 150 people from every facet of the story, many numerous times.

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, democratizing finance, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, extractivism, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, green new deal, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Jeremy Corbyn, job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low interest rates, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Phillips curve, Ponzi scheme, Post-Keynesian economics, post-war consensus, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, Robert Solow, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

But when Carillion collapsed in 2017, the government did not step in to help — perhaps because of the public outrage at the incredible irresponsibility of the firm. When the auditors came in to manage Carillion’s bankruptcy, they found that the company had just £29m in cash and owed £1.2bn to the banks, meaning that it didn’t even have enough money to pass through administration before entering liquidation. Carillion had become a giant, state-sponsored Ponzi scheme, siphoning off money from the taxpayer and channelling it into the pockets of wealthy shareholders. Whilst many of those shareholders who did not sell on the first signs of trouble have now lost out, the real losers have been the contractors and workers hired by Carillion, many of whom have found themselves out of pocket.

…

More money enters the financial system, pushing up asset prices even further and creating a self-reinforcing cycle of optimism-driven asset price inflation. Eventually, the financial cycle enters a phase of “Ponzi finance”, with investors piling into assets one after another based purely on the speculation-driven price rises of the recent past. Just like a Ponzi scheme which uses new recruits to pay off old lenders, investors end up taking out debt simply to repay interest. This underlies Minsky’s famous insight that “stability is destabilising”: when investors experience an extended period of high returns without any crashes, they become overexuberant about the prospects of future growth and take risks they otherwise might not.

…

In doing so, they were attempting to disguise the chronic shortfall in demand finance-led growth threatened to create, and to make the system politically sustainable. Rising mortgage lending increased house prices, eventually inflating a bubble that saw the British and American housing markets turned into a giant Ponzi scheme. Banks took this mortgage debt, packaged it up and sold it on international financial markets, disguising the amount of risk they were taking. Capital flooded into the US and the UK to take advantage of the boom, and repressed activity in the rest of the economy. The spark that set the whole thing alight came from the US, but the fallout extended throughout the financialised economies of the global North, and was particularly severe in Britain, whose economy had been buoyed by rising debt and asset prices for decades.

The Wrecking Crew: How Conservatives Rule by Thomas Frank

"Hurricane Katrina" Superdome, affirmative action, Alan Greenspan, anti-communist, barriers to entry, Berlin Wall, Bernie Madoff, British Empire, business cycle, classic study, collective bargaining, corporate governance, Credit Default Swap, David Brooks, disinformation, edge city, financial deregulation, full employment, George Gilder, guest worker program, Ida Tarbell, income inequality, invisible hand, job satisfaction, Michael Milken, Mikhail Gorbachev, Mont Pelerin Society, mortgage debt, Naomi Klein, Nelson Mandela, new economy, P = NP, plutocrats, Ponzi scheme, Ralph Nader, rent control, Richard Florida, road to serfdom, rolodex, Ronald Reagan, school vouchers, shareholder value, Silicon Valley, stem cell, stock buybacks, Strategic Defense Initiative, Telecommunications Act of 1996, the scientific method, too big to fail, Triangle Shirtwaist Factory, union organizing, War on Poverty

The system is corruption itself. In its heyday, conservative Washington was saturated with these ideas: The Federal Reserve as a “legal counterfeiter” because it is empowered to adjust the nation’s money supply. The Community Reinvestment Act, which outlaws redlining, as “a blackmail tool.” Social Security as a “Ponzi scheme.” The EPA as “the Gestapo of government.” The operations of city governments as “looting.” As for taxation, wrote Grover Norquist, “your average street mugger is an improvement. He knows it’s your wallet. He knows you earned the money. He just wants it for himself and he is straightforward enough to say, ‘Give me your money, I have a knife.’

…

Its overworked staffers, whose pay was comparable to that of other federal employees, were expected to face down some of the most highly paid corporation lawyers in the world—a disparity that led, here as elsewhere, to the revolving door. By the time of the crash, the SEC was so utterly clueless that it completely missed the greatest Ponzi scheme of all time, the investment firm run by Bernard Madoff, despite having received numerous tips on the megafraud. It took years for conservatives to transform the SEC into the laughingstock it became in 2008. Their vandalism began, as we have seen elsewhere, with personnel decisions: Before the 1980s, SEC commissioners were drawn from within the agency; from Reagan’s presidency on, they came from Wall Street.

…

Our ancestors understood that capitalism requires supervision; when you take it away—or when you defund the supervisors, or make them answer to the supervised, or replace them with a “voluntary compliance” program—suddenly you’ve got diseased factories shipping salmonella-laced peanut butter throughout the country. You’ve got worthless mortgage-backed securities—rated triple-A, backed up by useless appraisals, issued by defunct banks—sickening financial institutions from San Diego to Budapest. You’ve got the world’s greatest Ponzi scheme spreading its gift of bankruptcy throughout the land. Thus did the conservative movement keep its appointment with destiny. Free-market techniques secured for it a world of free markets; criminal techniques gave it a land in which crime was triumphant. And with their eyes fixed firmly on their nineteenth-century utopia, its armies of privatizers, pressure boys, PAC men, political entrepreneurs, and professional victims made the world safe for predation.

The System: Who Rigged It, How We Fix It by Robert B. Reich

"World Economic Forum" Davos, Adam Neumann (WeWork), affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bernie Madoff, Bernie Sanders, Big Tech, Boeing 737 MAX, business cycle, Carl Icahn, clean water, collective bargaining, Cornelius Vanderbilt, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, crony capitalism, cryptocurrency, Donald Trump, ending welfare as we know it, financial deregulation, Glass-Steagall Act, Gordon Gekko, green new deal, Greta Thunberg, immigration reform, income inequality, independent contractor, Jeff Bezos, job automation, junk bonds, London Whale, Long Term Capital Management, market fundamentalism, mass incarceration, Michael Milken, mortgage debt, Occupy movement, opioid epidemic / opioid crisis, Paris climate accords, peak TV, Ponzi scheme, race to the bottom, Robert Bork, Ronald Reagan, Savings and loan crisis, shareholder value, Sheryl Sandberg, stock buybacks, too big to fail, trickle-down economics, union organizing, WeWork, women in the workforce, working poor, zero-sum game

In the bank’s 2013 quarterly report, its list of legal imbroglios ran to nine pages of small print: improper energy trading, fraud in collecting credit card debt, misrepresenting the quality of mortgages in securities sold to investors, misleading credit card customers, bribing officials in foreign countries to buy certain securities, illegally foreclosing on mortgages, covering up Bernie Madoff’s Ponzi scheme, manipulating the foreign exchange market. That year the bank paid out more than $20 billion to settle the claims but still made a profit of $17.9 billion. So JPMorgan’s board voted to boost Dimon’s pay to $20 million, a 74 percent increase over the year before, which came out to about $1 million for every billion dollars JPMorgan had been fined for illegal activities.

…

In fact, Dimon’s star actually rose at the bank when, due to his personal connections, he negotiated with the government directly. He reached out to then attorney general Eric Holder to get a $13 billion settlement on claims of mortgage fraud. A few months later, he personally approached Preet Bharara, the United States attorney in Manhattan who had led the investigation into the Madoff Ponzi scheme, and settled that one, too. Still, JPMorgan’s board struggled to strike the right balance in determining Dimon’s compensation, according to the people briefed on the matter. Cutting his pay would have sent a message to bank regulators that the firm understood it had done wrong, but might have angered Dimon.

The Big Short: Inside the Doomsday Machine by Michael Lewis

Alan Greenspan, An Inconvenient Truth, Asperger Syndrome, asset-backed security, Bear Stearns, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, facts on the ground, financial engineering, financial innovation, fixed income, forensic accounting, Gordon Gekko, high net worth, housing crisis, illegal immigration, income inequality, index fund, interest rate swap, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, medical residency, Michael Milken, money market fund, moral hazard, mortgage debt, pets.com, Ponzi scheme, Potemkin village, proprietary trading, quantitative trading / quantitative finance, Quicken Loans, risk free rate, Robert Bork, short selling, Silicon Valley, tail risk, the new new thing, too big to fail, value at risk, Vanguard fund, zero-sum game

To sift every pool of subprime mortgage loans took him six months, but when he was done he came out of the room and gave Eisman the news. All these subprime lending companies were growing so rapidly, and using such goofy accounting, that they could mask the fact that they had no real earnings, just illusory, accounting-driven, ones. They had the essential feature of a Ponzi scheme: To maintain the fiction that they were profitable enterprises, they needed more and more capital to create more and more subprime loans. "I wasn't actually a hundred percent sure I was right," said Vinny, "but I go to Steve and say, 'This really doesn't look good.' That was all he needed to know.

…

They were doing what they were doing without thinking very much about it. It was in Las Vegas that Eisman and his associates' attitude toward the U.S. bond market hardened into something like its final shape. As Vinny put it, "That was the moment when we said, 'Holy shit, this isn't just credit. This is a fictitious Ponzi scheme.'" In Vegas the question lingering at the back of their minds ceased to be, Do these bond market people know something we do not? It was replaced by, Do they deserve merely to be fired, or should they be put in jail? Are they delusional, or do they know what they're doing? Danny thought that the vast majority of the people in the industry were blinded by their interests and failed to see the risks they had created.

…

"The minute Steve starts to speak," said Vinny, "the stock starts to fall." As Eisman explained why no one in his right mind would own the very shares he had bought sixteen hours earlier, Danny dashed off text messages to his partners. 9:49. Oh my--Bear at 47 "If [the U.S. financial system] sounds like a circular Ponzi scheme it's because it is." 9:55. Bear is 43 last OMG "The banks in the United States are only beginning to come to grips with their massive loan problems. For instance, I wouldn't own a single bank in the State of Florida because I think they might all be gone." 10:02. Bear 29 last!!!! "The upper classes of this country raped this country.

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown by Detlev S. Schlichter

bank run, banks create money, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, currency peg, fixed income, Fractional reserve banking, German hyperinflation, global reserve currency, inflation targeting, Kenneth Rogoff, Kickstarter, Long Term Capital Management, low interest rates, market clearing, Martin Wolf, means of production, Money creation, money market fund, moral hazard, mortgage debt, open economy, Ponzi scheme, price discovery process, price mechanism, price stability, pushing on a string, quantitative easing, reserve currency, rising living standards, risk tolerance, savings glut, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, We are all Keynesians now, Y2K

Money has been exchanged for a claim against a bank, which—one hopes—is almost as good as money. Inevitably it comes with extra risk, and the interest income it provides can be considered compensation for this risk. It would not be entirely incorrect to compare fractional-reserve banking with a Ponzi scheme. The depositors pool their money holdings in a bank and get paper receipts in return. They know that the banker will issue more receipts as part of his lending business so that ultimately considerably more paper tickets circulate than is money in the bank to pay out every holder of a paper ticket.

…

The disastrous and misguided idea of state-sponsored “cheap credit” has to be abandoned completely. The state has to exit, once and for all, the sphere of money and banking. Personally, this would be my preferred solution. I do not think that fractional-reserve banking should be outlawed by the state. The practice can correctly be called a Ponzi scheme, but in a free society people should still be allowed to join such schemes. As long as the fallout from this practice is not being socialized through central banking and other support mechanisms by the state, we should trust voluntary cooperation on free markets to properly guide and restrict this activity.

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See also money, paper money Enron equilibrium, economic European Central Bank (ECB) evenly rotating economy F Fannie Mae Federal Reserve establishment of fiat money fiduciary model Fisher, Irving foreign exchange market Foster, William Trufant fractional-reserve banking as Ponzi scheme controls of misconceptions about stability of state and understanding franc France, paper money and Freddie Mac Friedman, Milton functions of money G GDP. See gross domestic product Geldwertstabilisierung und Konjunkterpolitik The General Theory of Employment, Interest, and Money Germany, paper money and global foreign exchange market global reserve currency global state fiat money standard gold gold standard Nixon and resurrecting Roosevelt and goldsmiths Goldtheorie und Konjunkturtheorie goods production, money production versus government debt, monetization of government, funding Great Depression greenbacks Gresham’s law gross domestic product (GDP) effect of money injections on H Harrison, Henry Hayek, Fredrich August von hyperinflation I IMF.

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", "there is no alternative" (TINA), "World Economic Forum" Davos, affirmative action, Alan Greenspan, Albert Einstein, algorithmic trading, Andy Kessler, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, BRICs, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, carbon credits, Carl Icahn, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, Daniel Kahneman / Amos Tversky, deal flow, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Dr. Strangelove, Dutch auction, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial engineering, financial independence, financial innovation, financial thriller, fixed income, foreign exchange controls, full employment, Glass-Steagall Act, global reserve currency, Goldman Sachs: Vampire Squid, Goodhart's law, Gordon Gekko, greed is good, Greenspan put, happiness index / gross national happiness, haute cuisine, Herman Kahn, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", job automation, Johann Wolfgang von Goethe, John Bogle, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Michael Milken, Mikhail Gorbachev, Milgram experiment, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, National Debt Clock, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Phillips curve, planned obsolescence, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, Reminiscences of a Stock Operator, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk free rate, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, stock buybacks, survivorship bias, tail risk, Teledyne, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, two and twenty, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game