$50 BILLION ponzi Scheme

interesting read

nice! Read it on the Paper.

ive always been interested in ponzi schemes
very...interested.... -_----

A really incredible story considering the amounts of money involved and the previously stellar reputation of the person involved. Really something.

apparently according to cnbc not even his sons knew about the scheme and they were running the firm.

wonder if he is just covering for them

Wow. My wife used to be a trader there. Not since 2001, but still, more stuff to give her shit about

Money must make people like this guy crazy. He was already rich and was able to make lots of money but it just wasn't enough? What an idiot.

he should have lived in nigeria

Piss in the ocean. Wanna know a ponzi scheme worth trillions? Check out Federal Reserve.

thats different cause they can print there own money when ever they want or need

Probably more and more of these will get uncovered now...

See what I mean?

That's what makes it unspectacular. It's par for the course.

Is it an unwritten rule that someone is required to spout this nonsense in every GFY thread regardless of the subject?

Very interesting

Let's see, how is it nonsense and how is it unrelated to the subject? Please enlighten me, I'd be grateful if you showed me the truth.

How disappointing. Based on the thread title, I thought this thread was going to be about one of the hidden pre-checked, un-uncheckable, uncancelable, cross-selling programs. I thought we were finally getting somewhere.

I fail to see what your no doubt principled opposition to the US monetary system has to do with someone running a massive investment fund ponzi scheme. Perhaps you can enlighten me on what makes the US central bank and monetary system fundamentally different or worse than the central banks and monetary systems that exist in most other industrialized nations? How does it fundamentally differ from the Bundesbank or the European Central Bank?

I have heard a lot of criticism of the Federal Reserve from people on this board and much of that criticism seems to come from people who live in countries that have similar systems featuring independent central banks and fiat currencies. I have not heard too many alternatives proposed except a return to the mythical "gold standard." Perhaps you can explain to me your proposed alternative as well as the implications of such a change. Perhaps you would also like to enlighten me on how the monetary system in your country is superior to the US system. I thank you advance for showing me the truth.

OK, let us dissect this, shall we?

The ponzi scheme relation lies in several factors. The first is the fractional reserve system, which per se isn't unique to the Fed, although its existence and morality can can be debated despite it being legal. But I digress, what I wanted to say is that the (private) owners of the Federal Reserve became shareholders through the simple magic of fractional reserve upon the US government depositing its share of the initial capital. The Fed "loaned out" the money for the remaining shares (multiplied thanks to the fractional reserve requirement) to its other shareholders, who then "deposited" it back in as capital to cover the purchasing of their shares.

Now, you are no doubt aware that the Fed can engage in market operations which, in layman's terms, mean that they can purchase equities, securities, commodities as well as goods from John Doe, if needed. The Fed's market operations used to be restricted to purchasing government securities, then expanded to foreign governments' securities, then expanded further and further and further. Today, the Fed can purchase or sell pretty much anything. How does it pay for this? By adding an entry to either side of a T account in its books. No actual money ever switches hands, it's created out of thin air. What this means, in practice, is that the Fed can purchase your house, your car, your local bank, your local Walmart or Mickey Dee's and pay for it with an electronic transaction, thus acquiring real value at the price of... nothing, really. You get worthless money, they get your house. Of course all this is subject to additional clarifications to why it would be utterly dumb of the Fed to actually go out and buy these things, but I hope I've illustrated my point. The Fed has actually spent a few trillion the past couple of months buying up stuff, the nature and value of which it declared to be "counterproductive" to disclose.

Neither the Bundesbank nor the ECB have private owners, as far as I know. That would be the biggest difference, which would allow the Bundesbank/ECB to print debt-free money and not pay interest on it to a privately-owned FOR PROFIT corporation. Other than that, yes, the fractional reserve system and lender of last resort practices are the same, specifically as Bundesbank was created with the Federal Reserve as a model and the ECB later modelled after it.

Neither independant central banks nor fiat currencies are inherently bad. I may personally have a problem with the fractional reserve banking, but then again that one has been tried and deemed legal. The main problem arises when you have to pay interest on the money the central bank issues, along with allowing the central bank's operations to extend to buying more than just securities. The risk of someone, somewhere pulling a fast one and exchanging electronic transactions for real value is too big and no central bank should really be allowed that power. We need to remember that money in itself is really worthless and currency only exists to facilitate the exchange of other goods goods and services.

I am not a professional economist so I will not enter into a lengthy debate on whether my ideas would be better than what is currently in use. However, to raise a few points, I am personally against a gold standard for various reasons, not least of which being the uncertainty of the whereabouts of the gold itself. I believe the last president who audited Fort Knox's gold inventory was Eisenhower, so few people really know how much gold, if any, is still kept there.

Something else I would propose is nationalizing all central banks. Give them independence from the government itself and a clear independent mandate, but eliminate the need for profits to line the pockets of private ownership. Furthermore allow the central banks to only operate in the securities market, predominantly government securities.

Anyway, this ended up being longer than I had initially intended it to be, but I hope I at least succeeded in illustrating my own point of view on the matter. I am sure you may have a differing opinion, which I will gladly listen to.

You seem to have a reasonable grasp of the fact and the issues involved. I disagree slightly with some of your points (I am also no economist) but it seems safe to say that you do not believe the US central bank or monetary system is massive organized fraud or carefully orchestrated conspiracy. Your acknowledgment that it is essentially the same in most fundamental respects to the monetary systems of Europe indicates that you understand that most of the discussions on this subject that take place on GFY are unadulterated nonsense.

In your original post it seemed you were drawing a direct parallel between the Federal Reserve system and the massive organized fraud that was the subject of this thread which is why I objected. There are likely plenty of substantive discussions that could be had regarding various aspects of Fed policy but the ridiculous conspiracy theories and accusations which are commonplace around here regarding the US central bank and monetary policy offer nothing of value to the discussion.

big cash!

wow that insane, especially considering the assets involved

All of the banks in most developed countries are/were backed, funded and modeled by the same people. This is why there is the sense of "conspiracy." All answer to the World Bank/IMF which again was created by the same people. It is a fact that ALL countries not within this system are labeled Terrorist countries.

I DO believe that the Federal Reserve, through the combination of corruption, private ownership and fractional reserve system, resembles a Ponzi scheme fairly well.

people like this greedy bastard created the entire credit crisis

He was qouted saying, 'it was unfortunate incident'

Who cares he'll do 39 months in Club Fed.

I feel sorry for the people who have lost money indirectly, but for the direct investors - at some point they must have realised it seemed too good to be true. Risk vs reward becomes pure greed.

Close - more like Social Security. The money previous generations put in were for the generations before them, the money we're putting in is for the previous generations, and the generations after us will be fronting the money for us. It's not designed to be a SCAM but if that's not ponzi...

Maybe the only difference is the government cheats and burns through a bunch of it on stuff they aren't supposed to, lol.