Forex and Pyramid schemes
Posted in Learn by Lewis Wolfe
Monday, January 26th, 2009 10:17 AM GMT
The one thing about forex – provided you stay well away from proprietary systems and automated tools – you’re on your own…
With just a romance with your chosen broker to make or break.
Consider the situation if you’re dumb enough to think about letting someone else handle your investments. Yes, I’m thinking towards Bernard Madoff – crazy name, crazy guy – and Ponzi schemes. I had an interesting chat with a guy who knows about these things and his opinion was that these funds never started out as a Ponzi scheme, but due to structural weakness that’s exactly what they had to turn into in order to keep afloat.
And the really interesting point was that he reckoned these weaknesses could well have appeared a long time ago – 2000-2001 was his guess.
Everything looks fine as long as fresh money is coming in and the market is going in the right direction. Disaster as soon as these aren’t happening.
For anyone not of a North American background, a Ponzi scheme is just another name for good old pyramid selling – a type of scam where large percentage returns are absolutely 100% guaranteed, allegedly due to some surefire investment (like forex) or market knowledge (forex guru). In fact, there’s no serious investment, certainly not a winning investment, and dividends are financed by new deposits.
Ponzi schemes will inevitably fail – they must. The only minor interest is which way they do…
- The originators – those at the top of the pyramid – simply grab the money and make a run for it – anywhere that doesn’t have extradition treaty.
The regulatory authorities in whichever country or countries are involved get off their butts and close it down – rare…
A pyramid scheme needs a geometric increase in deluded punters per day. What must happen at some point is that this number of new investors falls below sustainable, not enough new cash is coming in to pay those just above in the pyramid – and collapse. The people at the bottom and going towards the middle get badly squeezed.
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[...] Financial 24 | I had an interesting chat with a guy who knows about these things and his opinion was that these funds never started o [...]
Agape World is being investigated because many reports to the FBI, SEC and Suffolk DA in New York state. No firm details from the investigation have been uncovered as yet but it seems to be pretty bad.
Pyramid schemes and boilerroom stock frauds are going on every day as we speak – almost makes the forex scene look clean, doesn’t it…
Biggest scams are the bailouts, and who’s going to do anythin about them, except the people who set them up, the politicians??