Bill Bonner pays homage to the most famous con artist of the turn of the century… and uncovers a scam so massive it leaves Bernie in the dust – and this time around, not a single investor will survive.
One minute of silence, please.
Bernie Madoff died in prison last week. He tried to be a good husband and a good father, providing for his family – including his wife, who spent $ 57,000 a month on her company’s credit card.
He was a recognized philanthropist in New York… and a major donor to Democratic Party candidates.
He was convicted of defrauding investors in a pyramid scam. At the time of his trial, he had stolen some $ 36 billion from his clients, and half of that amount was “missing”.
Half of his clients had made money from this plan. The other half had lost some.
After 11 years of various and varied trials, the losers had somehow managed to grab $ 14 billion, reducing the total loss to “only” $ 4 billion.
If these numbers are correct, investors got 78% of their money back.
A random prediction: After the next stock market crash, many investors will wish they had left their money with Madoff.
A very simple scam
There is a scam and there is a scam.
Bernie Madoff’s Carambouille was simple. He was taking money from investors. It provided them with a good return – 10% to 12% per year. Neither too much nor too little… but laughable compared to the current high-level bets.
(After all, since Madoff entered jail, the S&P 500 has climbed more than 400%. Tesla (TSLA) has increased 184 times. Bitcoin has gone up eight cents over $ 60,000. If only Bernie could have held on … and bought some crypto!)
But investors were happy. Madoff was satisfied. His wife was satisfied.
And all this went smoothly as long as the incoming amounts exceeded the outgoing amounts.
Unfortunately, during the 2008 turnaround, the money stopped flowing. The pot-aux-roses has been discovered. Madoff wasn’t “investing” anything at all; he only took the money and redistributed it, taking a small part for himself in the process.
Compared to cryptos, GAFAMs, NFTs, and government monetary policies, Madoff’s scam seems reasonably harmless. Some investors were doing well, others less.
As for Madoff’s “share” (shared with his employees and the luckiest investors), it was probably not greater than the returns of a hedge fund or a basic SPAC.
A major scam
Madoff’s method wasn’t particularly abominable either. In fact, it differed from US financial policy only in details… and size.
The scale of the crime is obviously much higher on the part of the authorities: the sums are counted in the trillions, not in mere billions.
The losses – from the manipulation of interest rates, deficits, money printing, bribes and political subsidies – will be thousands of times greater than those suffered by Madoff investors.
Like Madoff, the authorities say they are “investing”. But there is no real hope of economic return from their wastefulness and gas factories.
Also, unlike Madoff, who kept investors’ money in big banks, the government spends … consumes … and wastes the money entrusted to it. If taxpayers were to ask for their money back today, it wouldn’t be 78% that they would get – it would be nothing at all.
And, just like with Madoff, the scam will continue as long as the money continues to flow.
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