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The Largest Ponzi Scheme of All
On March 12, 2009, disgraced former NASDAQ chairman and Wall Street investor Bernard Madoff pleaded guilty to cheating investors out of $65 billion. Across America there was an eruption of public outrage, even greater than what accompanied the trials of the September 11th conspirators. He became the villain, the target, for us to direct all of the anger that has been building up inside of us. Since the early 1990s, he had been running a ponzi scheme, “ponzi” referring to the 1920s American immigrant and conman Charles Ponzi. According to the Securities and Exchange Commission, a ponzi scheme is when you “Rob Peter to Pay Paul.” The FBI reports that Madoff perpetrated the largest scam ever in history, but actually the largest scam is still going on, and it involves the government, the American people, and even you.
What Madoff did was run an investment advisory business under the name of Bernard L. Madoff Investment Securities LLC, where he managed and invested the money of charities, businesses, and wealthy individuals. However, he never really invested their money—except in his own pockets. Whenever his clients sought to withdraw money or receive their quarterly returns, he would pay them from their own money or the money of new investors, as a fake profit. He had started doing this during a past recession, to satisfy his customers, who still expected high returns investing with him.
In February, the American Recovery and Reinvestment Act, formerly known as “The Stimulus,” took $787 billion from the American people to stimulate the nation’s economy. Like Bernie Madoff’s scheme, it started in the midst of a recession, to keep the taxpayers, who expected their economic condition to continue to improve, satisfied. In March, a month later, the economy did show some improvement, with Wall Street seeing growth return to the markets, just like Madoff showed his customers making a profit. However, that purported growth was merely the taxpayer’s own money being put back into the economy as “growth.” Instead of robbing Peter to pay Paul, Peter was taxed to pay Paul. Wall Street did not become more profitable and productive all of a sudden. The increased earnings were merely the addition of the money that was handed back to them by the stimulus. In other words, the government siphoned fuel out of each of our cars, and then suddenly filled them back up, making the dial temporarily go up.
While Bernard Madoff was able to keep his scam going for a decade, it is unlikely that the government will be able to perpetrate this fraud on the American people as long as that. Madoff only had a few thousand investors, while there are hundreds of millions of taxpayers in this country. Madoff’s fraud unraveled once he ran out of new clients and new revenue. Since the only source of revenue for the government’s scheme is our tax dollars, once the bailouts end, the economy will fall and unfortunately, be even worse than before. Imagine all of the pain and destruction that was wrought by Madoff, except on a mass scale.
It is ironic and outrageous that while the government and the American people are prosecuting Bernie Madoff for his ponzi scheme, we are all participating in the biggest one of them all. There has been an excoriation against capitalism and greedy Wall Street businessmen like Bernie Madoff for causing our economic woes. But you know, all Madoff did was redistribute wealth, albeit his investors wealth. He did not allow his investors to make a profit, and just shifted their money around while it was in his hands, just as President Obama and Congress are doing with our money now. Bernie Madoff was a first rate socialist, and socialism is the largest ponzi scheme of all.