While most writers are condemning Madoff for the scheme he perpetrated, in which some of the wealthiest have lost significant portions of their invested savings, his method is no mystery. Earlier investors were paid off from the money obtained from more recent victims - a scheme built on lying and stealing and perpetuated by the imagination of the victims. Madoff was far more successful than most who start such ripoffs because of his innovation, apparent lack of conscience and the running of the scheme during an economic boom when many people lose their normal sense of incredulity. A very recent article makes the point that "this loss is part of the grave cultural distortion introduced by funny money."
Madoff's 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." The people with whom he dealt had, it turns out, some internal sense that there was something a little bit shady about the whole operation. But they dispensed with this sense when the fat checks arrived, and concluded that whatever was making this perpetual motion machine operate, it did work.
But listen: the government right now is using the same tactic to convince you that it is saving you from the recession. The whole scheme partakes of the same sense of denying reality that characterized Madoff's scheme. And I'm not just talking about Social Security, which is almost an exact replica of the Ponzi version, except that at least Charles Ponzi didn't force people to give him money. I'm speaking of something broader. The entire financial system that is propped up by the Treasury and the Fed is based on the same idea: that something out of nothing is possible.
So they will jail Madoff. Wall Street would flog him if it could. He is disgraced for all of history. But meanwhile, the likes of Bush, Bernanke, Paulson, Obama, and all the rest are still riding high, even though their scheme is far larger and more egregious.
That the government version of the Ponzi/Madoff schemes is still riding high - urged on by large numbers of actual victims - is a sign that those victims are blinding themselves to the fact that they are being outwitted and fleeced by government and its central bank. As long as this willingness of large numbers of victims continues - and the belief that government is the necessary mechanism for having an orderly society, the future will bring only more disaster.
