They're all Ponzi schemes. I'll say it again. They're all examples of Ponzi schemes.History is full of them.
As the scale of the Madoff fraud becomes ever bigger the question you should be asking is what is the difference between that Ponzi scheme and the housing/mortgage market and unfunded public sector pensions in this country.
Well in reality - THERE IS NONE. They all rely on new entrants and new monies to keep the con going............. (I've mentioned directly about the housing market multilevel Ponzi scheme before). Many observers have reported that the housing market relies on first-time buyers without realising what they were in fact saying! The Government is still trying to encourage it now with further tax breaks!!!!!
That's why I'm afraid that house prices have rocketed and then collapsed. It's the same thing. Yes sure there is an ultimate land price but that I'm afraid can be worthless - ask some of the big building firms who've recently reported huge writedowns.............But house purchasing creates an immediate tax receipt with the bigger the house price the bigger the tax receipt - simple. Certainly house buying needs to carry a government wealth warning.
A number of unfunded public sector pensions also rely on a similar principle - current funding is provided by new workers with the Government effectively the 'hub' - see Wiki reference above.
It's about time the Government owned up and was frank with people since many are victims of the 'Get rich quick Ponzi scheme' that the housing market has become (through various bizarre factors) and which is going to cause a lot of pain for many........and the growing pensions liability that I mentioned a couple of weeks ago. It is not fair on the voter. He/she deserves more.........
Expect a few more scams and frauds to be uncovered as the economy contracts (with the latest one being potentially the Royal Mail pensions........).
Question: If Madoff is going to jail for the rest of his life by scamming around $50billion what does the Government get for scamming hundreds of £billions (in tax)?
On that note have a good festive break........and make sure Santa isn't defrauding you of mince pies!!!!
Next blog 19.01.09 - be there..........
