Sunday, December 28, 2008

Madoff as Metaphor

A short essay on human nature: the desire to believe in things that do not exist

Thoughtful Llewelyn H. Rockwell piece from the Ludvig von Mises Institute website, putting the Bernard Madoff Ponzi ripoff in context. We incorporate the opening paragraphs below:
The mystery of Bernard Madoff will be storied a hundred years from now. As history's biggest financial criminal, he took a cheap ripoff that you can use at home—the Ponzi scheme—and turned it into a global empire worth some $50 billion.
One ingredient was financial intelligence. Madoff had buckets of it. Early in his career, he was the real deal, an actual innovator. He combined this with an amazing lack of conscience, for his scam was rooted most fundamentally in lying and stealing. The difference between him and all who came before was his grand scale, the grandest scale imaginable.
There is a saying in the world of Austrian economics about the business cycle. The puzzle is not to explain business failures. Those are part of the normal course of life, and the sign of a healthy economy. The puzzle is to explain the "cluster of errors" that appears at the beginning of a recession. How could so many have been so wrong about so much at the same time? The business cycle is a system-wide failure, not merely the mistaken judgment of a few.
So it is with Modoff's scheme. The mystery isn't how one person was able to fool a few. The scheme in which yesterday's "investors" are paid off with the money of today's victims is known in all places and probably all times—and it always goes belly up to the originator's complete disgrace. It is a classic example of how moral laws are self-enforcing in the world of economics.
The critical difference this time is that Madoff ran his scheme during an economic boom, a time when people's normal sense of incredulity is put on the shelf. This is part of the grave cultural distortion introduced by funny money. Money is the most widely demanded good in society, and the Fed is making new quantities of it not as a reflection of new real wealth, but purely as an administrative decree.
The author warns that the government is presently using Madoff's tactics to convince you that the injection of multi-billions in federal "funny money" will lift us out of recession, and asserts, effectively we think, that "the whole scheme partakes of the same sense of denying reality that characterized Madoff's scheme."

Read Mr. Rockwell's full article here:
Madoff as Metaphor
Something to consider on another slow Emerald City news day, we believe.

6 comments:

ozboy said...

Interesting stuff revealed in this economic postmortem. If you go through the article and change a few of the names, faces and places it is pretty amazing how closely it all defines the Lil' Lord on Nine!

Some scribblings from the article that fit his lordship and the circle of empty suits he surrounds himself with:

"He combined this with an amazing lack of conscience, for his scam was rooted most fundamentally in lying and stealing."

"The difference between him and all who came before was his grand scale"

"How could so many have been so wrong about so much at the same time?"

"There is a sense in which funny money literally drives everyone crazy, leading to what is sometimes called the "madness of crowds."

"With artificial stimulation from the credit machine, multitudes are willing to believe in something that cannot possibly be true."

"(they) believed that we could all become millionaires ..... In other words, (they) believed that something out of nothing was possible, and anyone who didn't believe it was a chump (naysayer)."

"(they) believed that buying these stocks (Junktion, River project, ice wall, etc) constituted not consumption, but savings for the future."

"....they used every sign of downturn as an excuse to keep the illusion going"

"We are talking about human nature: the desire to believe in things that do not exist. The government (Godfreyites) was happy to fuel this sense...."

"(Their) scheme played into the belief that wealth was not something to work for, but something to scheme for. It could be generated by playing your cards right, hooking into the right networks, and finding the right "investments."

"(They) concluded that whatever was making this perpetual motion machine operate, it did work."

"something out of nothing is possible."

"tricked by the elites (Godfreyites) who claim that they can conjure up a trillion dollars ($500 million) to stabilize our economy...."

"Certainly the press (Sub-Standard) seems to have bought it."


There really isn't much difference between scamsters like Madoff, Southwick and Godfrey, only the number of zero's and victims.

Critic said...

Oz,

Brilliant.

tarzan boy said...

If Rudi will permit, there is an article

Here

relevent to both his and Oz's comments.

It involves municipal bankruptcy.

Perhaps it's not to soon for the city council to contemplate the outcome of the Godfrey era.

Machman said...

Where Oz's comments are brilliant, and stand as a testiment for what seems highly likely, do not forget what the catalyst for the current national and international economic situation was and remains...

The National Realtor Association was headed by another Utahan, one Al Mansell as its President. He took the same schemes, which have worked in Utah, forward across the Country. And in so doing served as Captain of a National sinking ship of Realty deals and mortgage loans to people who could not afford them, and state and national legislation which enriches Realtors and developers, Fannie Mae/ Freddie Mac, etc. (as continues today in Utah) at the expense of future generations.

And without any apparent moral compass, ethics, integrity or personal character to guide the Utah way of greed mongering, and racketeering at the legislative and local political levels.

Godfrey and his colleagues are mere disciples of the Al Mansell swindle and scams factory. And Utah's Senator Niederhauser is Mansell's (ex President of the Utah Senate, who took a leave of absence to become the Nat'l Realtor Association Pres.) personal choice to replace him in the legislature. Neiderhauser's business? CPA and Realtor/Developer, why of course!

Just another look at the facts as they have played out so far these past years...

Oh and the sub-Standard Ex., plus The Desturbing Few News, and Salt Lake Tribute apparently can not afford to lose the millions in revenue (from Realtor/Developer Ads) to report honestly the realities of our Statewide predicament. They (the URA lobbyists) know it and openly brag about the control they have over their (supposedly our) legislators.

So far, our only leverage against the continuation of onerous and unfair property taxation seems the threat of Acquisition Value property assessments with caps to prevent shifts and surges from one urban area to another. That and the continuation of information dessemination via excellent blog sites like this one, since you will not learn from the "Golly gee whiz and non confrontational" print and TV news media being ruled by the same forces which polarize us unwisely.

Happy New Year!

Critic said...

It's something how there can be so much intellect on display in our society in places (as above) while so many institutions are ruled by the corrupt and the incompetent.

The drones have taken over the beehive. Hopefully in the economic downfall they have created, the drones will die, or at least be cast from power.

ozboy said...

The "brilliance" in my above post is strictly attributed to the author of the original article that I quoted from. He did a great job in defining the greed and other character flaws in the people behind all of these major financial fiasco's. He definitely has punks like the Lil' Lord pegged!

And speaking of "brilliance" I would like to thank "Machman" for his continuing efforts and abilities at identifying the root cause of so much of what's wrong in America these days and how the real estate and developer interests are putting the screws to all of us.

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