Explaining Ponzi.

In the news there’s been a lot of talk about a Ponzi scheme.  Here’s a brief rundown of what it is before I head to lunch.  In fact, this rundown will be so brief I may leave out key, necessary facts, which will leave you dumber than before you started reading this.

Do you want to be dumber?  Then continue.

A Ponzi scheme is simple.  Suppose I take $100 from you, and tell you I’ll pay you back $150 at the end of the month.  You’ll probably dig that and give me your money.  Then I ask twenty more people for $100 with the same promise.

At the end of the month I tell you, “here’s your $50, you can cash out your entire $150 or leave it with me and I’ll keep producing more and more interest for you.”  What do you think you’d do?

Except, behind the scenes, I’m actually not growing your money.  I’m just taking the funds from the other guys that have lent me money and paying you the $50 so you feel like your money is growing.  I could even send you a statement showing your funds and your growth in big bold letters.

If you trusted me, you’d keep your money in there.

Now, imagine the $100 is actually a $1 million.  And I have thousands and thousands of investors, including national banks, nation states, governments from across the world.  If they wanted to all withdraw at the same time, I’m completely screwed.

That’s when Ponzi fails.

Now you know.  But if you still don’t get it, do you have $100 you want to invest?

Trust me, I’m good for it.

ponzi

The man who started it all, Ponzi, was known to friends as “the asshole who took all my money”

  • Ponzi Security

    Now imagine that I make it the law that you have to join the pyramid.

    Now imagine that I just take it out of your paycheck instead of getting you to sign up.

    Now imagine that instead of ‘paying you back’ every month, I wait to pay you back until you turn 59, I mean 62, I mean 65, I mean 67… uh 72 for sure….

    Now imagine that if you try to get out of it, I just take your bank accounts, stocks, your car, your house and even send SWAT teams to your house.

    Now imagine that’s called Freedom.

  • Several Wall Street lawyers doubt convicted Ponzi-schemer Bernard Madoff's argument that banks and hedge funds “knew or should have known” about his multi-billion dollar fraud. …

  • Two lawsuits have been unsealed since yesterday that might help explain why. In separate suits, the New York Mets and JPMorgan Chase are accused of repeatedly ignored warning signs about Madoff's multi-billion dollar ponzi scheme. .

  •  Then I ask twenty more people for $100 with the same promise.

  •  Then I ask twenty more people for $100 with the same promise.