
I've never been accused of being the greatest champion of the altruistic virtues of inate human nature... nor will I ever... and watching American Greed on CNBC certainly hasn't helped push me towards that cause. To put it shortly, its a show about the downfall of men in their quest for more and more money.
One topic that is on the show frequently, and one that has been in the news recently (Bernie Madoff & Robert Stanford) are the infamous Ponzi Schemes. What is a Ponzi Scheme?
A Ponzi Scheme is when a person defrauds potential investors with a fake investment company that doesn't exist. People put in money that should be invested in the market, yet is spent at the whims of the person running the scheme... a personal piggy bank, of sorts. The primary investors are given the illusion of annual returns, only by the influx of new money from new investors. But, Ponzi schemes always fail eventually. Money runs out. If you can't get new investors to satisify the requests of the older investors, thats the beginning of the end...
People always talk about the greed of the people pretending to manage these accounts... and their greed should be noted, however, people rarely talk about the greed of the people putting their money in these pools. All cases are different, but from the majority of the stories I've seen, these investors have never heard of the guy or his "company"... so why put your money there, as opposed to someplace safer?
MONEY. These Ponzi schemers are promising potential investors FAR higher annual returns on their principle than traditional investment. It is not only the greed of the Ponzi Schemer, but it is also the greed of the people giving their money.
"All the regular investment firms are saying somewhere between 5 and 7%, and its not even guaranteed... this guy over here... he says he's doing at least 18, if not 25%, and people seem to be getting their money... I'm gonna go with this guy I've never heard of... because I want to make more money!"
Ponzi schemes would be FAR less prevalent, if not for the greed of the people as a whole. Both scam artist and scam victim are driven by American greed...