The Madoff melt-down is a cautionary tale that no matter how sophisticated human beings appear to be, we have not evolved very far as a species, still responding to primitive desires for magical solutions. Dezenhall makes the comparison to the Wizard of Oz; the Emperor's New Clothes provides us with an older fairy tale version of the desire to believe, despite the clear evidence.

Madoff's Fraud is Nothing Compared to U.S. Treasury's

Back in 1989, Forbes Magazine published an article painting Vancouver, Canada as the "scam capital of the world". As evidence he cited a few debacles which certainly caused investors to lose money, but the amounts are trifling compared to the trillions that have suddenly become part of the daily news lexicon.

In fact, given the hundreds of billions that Wall Street has fleeced investors for in cases of fraud that are astounding not only in dollar size, but in the duration they run for before they collapse under the weight of their bloated treasuries.

Enron, Tyco, and Worldcom are certainly the household corporate words for fraud on Wall Street. Combined, the estimated take from those three scams was a total of $121 billion in total damages.

But hedge funds are collapsing so fast that they number in the dozens every week, and fully one third of the $1.5 trillion asset class is expected to go up in smoke within the next 24 months, dwarfing the carnage of corporate fraud.

Now along comes Bernie Madoff.

Madoff's take of $50 billion demonstrates unequivocally that the entire investment industry is essentially one big confidence game, where appearances mean everything and substance is hard to come by. Listening to the petulant indignation emanating from the victims of that fraud who were "professional" investors elicits little sympathy from a public who watches helplessly as the Fed continues to pump taxpayer-backed dollars into the accounts of the biggest financial institutions. That wouldn't be so bad if we saw some of that cash making its way down into the broad economy, but so far there is absolutely zero evidence of that happening.

Madoff's fraud, improbable as it may seem, brings to mind another massive financial institution that, if the same standards of evaluation were to be applied as to Madoff, would most likely reveal another Ponzi scheme in progress.

A "Ponzi Scheme" is one where early investors are paid non-existent "profits" with the money brought in by new investors. Ponzi schemes always collapse when no more investors can be enticed into the scheme, and payouts stop. This is exactly what happened in the Madoff case, and unless I am very much mistaken, this is what is happening at the United States Treasury right now, with its accomplice, the United States Federal Reserve.

Technically, the Fed prints money when the Treasury issues it a check that it back with the sale of T-Bills. The treasury bills theoretically attract buyers because the revenue generated from taxes as a percentage of GDP are sufficient to justify the number of T-Bills in circulation. If the U.S. Economy was a corporation, T-Bills would be shares in the company, and all of the infrastructure and profit-generating businesses in the United States would be its assets, and the taxes generated across the whole operation would theoretically comprise the corporation's revenue.

In Bernie Madoff's case, the fan was hit with the proverbial excrement when he ran out of new investors, and some old investors wanted to withdraw $7 billion of their money. Bernie ran around Wall Street for a couple of weeks before he realized the jig was up, and he and his two sons concocted a strategy whereby they would turn him in, hopefully thwarting the boys being swept up in the inevitable incarcerations just on the horizon.

Now if Bernie was the United States Treasury, and his sons were the U.S. Federal Reserve, he could have simply called his boys and said, "Look boys...send over $7 billion right away, will ya?" The boys, being family, would have certainly wired the funds over to Bernie, and Bernie could go on his merry way, attracting a growing crowd of innocent (hah!) investors, and paying them off with his sons' printing press. In this case, investors would continue to pile in, and Bernie could keep writing checks to his sons and issuing shares to his victims, because at no point was anybody going to say "Whoa boys! Lets take a look at them books!"

And that's because if Bernie was the U.S. Treasury, and his sons the Fed, everybody who might want to take a peak at the balance sheets already pretty much knows what they'd find there: the ashes of the U.S. economy. Baffed out and beaten, repackaged and resold in a trillion different ways, such that there is no way the entire productivity and asset base of the United States now and for decades to come, could ever justify the trillions upon trillions of dollars worth of shares the massive Ponzi scheme that is the United States has put into circulation.

Nobody wants the illusion to end. Especially not its biggest shareholders - Japan, China and the U.K. For if their own treasuries are based substantially on the fragrant paper originated by the United States government, well then what does that say about the value of the bonds they issue to justify the quantity of their own currency in circulation?

When considered in this light, its no wonder the world's central banks act on a concerted basis to suppress the price of precious metals. For it the metals were allowed to trade freely against these currencies of falsely inflated value, then the market would quite likely demonstrate what it thinks about those currencies by trading them in for gold - a process now underway on the fringe where wise men looking through the fog of deception that is the media, are moving as nonchalantly as possible for the exits of U.S. investment.

I wonder if we'll ever see this sign, now gracing the web page of Bernard L. Madoff Investment Securities LLC, on the front door of the U.S. Treasury:

"The Honorable Louis L. Stanton, Federal Judge in the United States District Court for the Southern District of New York, has appointed Lee S. Richards of the law firm Richards Kibbe & Orbe LLP receiver over the assets and accounts of Bernard L. Madoff Investment Securities LLC ("BMIS") as per the attached order: http://www.madoff.com/letters/Signedorder.pdf"

By the way, the author of the article on Vancouver, Joe Queenan, now focuses on what turned out to be his forte - humor.

Why are almost all the big names on wall street Jewish?

Many are missing the point of this sad story or what many think is the happy ending of a rich fraud getting his in the end. The author is right to point out uncomfortable truths.

The lesson here is about how we almost want to be suckers and afraid to trust even our most basic instincts. All Madoff did was exploit this again and again, proving that his high-dollar victims were in reality his natural prey, and no less self-aware that those of lesser means.

With apologies to Fitzgerald, perhaps the rich aren't that different from you and me ...

If it sounds too neat - that's because it is. No doubt Bernie has a short time left and figures he'll take the fall for all and the family will walk. That would be a neat trick. Hope no one actually believes that a fraud of this huge size could be carried out by one person.
"Tis a far, far, better thing I do than I have ever done.....ect. ect." Or is it like Harry LIme said in 'The Third Man' - come off it kid, there are no heroes in the real world.

The Rich fleecing the Rich. I'm all for it.

I am not a psychologist, politician, nor a corporate analyst, so my comments are purely the speculative thoughts of the uninitiated. Keep that in mind before begginning the usual put downs. This is an educative advantage, not an opportunity to exhibit a wealth of intelligence by showing how ignorant others are. So here goes.

In the case of the rich and successful, I am not sure naivete is the mental state that led to this fiasco. I think it is pride and a false sense of their own abilities. I have noticed that many very successful people reach a point when they seem to believe that they are the intellectual and esthetic superiors to others around them. The greater the successes, the higher the pinnacle upon which they believe that they reside. Some seem to, eventually, come to believe that they have the touch of both Midas and the gods. Nothing they do or think is wrong, and they are in such a positive financial position because that is their birthright. Of course, I must admit that this may also be a form of naivete. Whatever it is, they enter into these deals with no concept that they need to track them since they could never do anything financially risky.

Unfortunately, most of the greatly wealthy people that the rest of us are made aware of are families like the Hiltons and portions of the Kennedy clan, who seem to have brought up their children with the attitude that power and priveledge is their right and that there isn't anything that they can do which should be critisized. I cringe when I realize that the images of these children are what the world sees and are judging us by. I do not despise them for their wealth. I despise them because they seem to think that the rest of us exist only to keep them there, and that we are wrong to complain that their great wealth keeps us much lower than we could be. And now the country itself is at risk because of these activities. And still they cannot conceive that they were wrong.

In an ideal world, the fortunes that have been amassed would be stripped and the violators forced to work for minimum wage in order to survive. However, with institutions like the Swiss banks in existance, even if prison time is mandated, they will still be wealthy when their time is served. I grieve for the good that would have been done with the money stolen from those charities. I have sympathy for those among the wealthy who are really more down to earth in their attitudes and have used that money to do good.

And I sympathsize with the masses who will now have to work their rear ends off, or lose their jobs completely, in order for the others to replace the lost funds. Because these wealthy people will not sit back and just absorb the loss. They will make sure that the rest of us return every penny of it.

When I was young I envied the wealthy. I often thought how much easier my life would be if I posessed just a fraction of what they had. The children in my family could be better educated, live more comfortably, and I would have enough money to help support the charities that I believe in. It seemed wonderful.

Now, after years of news stories of financial flossings and drunken binges, I can only thank God for putting me where he did. Look at what he rescued me from.

When Jesus said that it was easier for a rich man to go through the eye of a needle than to enter the kingdom of heaven, he was not referring to their posession of wealth. He was referring to attitude as a result of that posession. For many months now we have been provided with evidence of that attitude.

It is time the wealthy learned a new word: Enough.

Pride goeth before destruction, and a haughty spirit before a fall.

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