"I was fleeced by Madoff"
The financial guru's Ponzi scheme cost me 30 years of retirement savings. How could he do this to me -- and why did I let him?
By Geneen Roth
http://www.salon.com/mwt/feature/2009/01/07/madoff/index.html
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Your friend's message:
This sure shows how vulnerable people are: we do look to government to identify and stop people like Madoff. I wonder if this person would support strict regulation of financial markets- now?
------------------- my reply
Hi - the sad thing is that this woman likely thought that the markets were regulated... in my classes the kids often react to any perceived injustice by saying "that is illegal". There is a sense amongst the unwashed that the powerful are right - that government is too involved in our lives. The corollary of this is that the government will protect them from such terrible crimes (as in stealing all their money). The sense that the market ideology presumed that people would take responsibility to get 'full information' etc to look after their own interests (which Smith's hidden hand etc of self interest requires) was not widely held. What many people like you understood was that the ideology obliged people (or again simply assumed) to do what they were not in a position to do - ie to understand the markets; to get information and so on... how could the ordinary investor hope to understand when the financial culture was one of over paid superstars (read Wizards behind curtains) working in a culture of friendly handshakes and insider trading?
The whole market was a pyramid scheme set up as a multiples of ponzi schemes. I have been telling people for years that the housing market was an international pyramid scheme. I didnt think of expanding my analysis to the banks because despite 14 years of university study and 25 years as a lawyer I didn't feel I understood the mortgage business. You may recall I have asked you to explain derivatives to me a couple of times. I took the stock brokers course (and did quite well) but I still don't understand hedge funds... so it seems obvious to me that folks like this poor woman had no hope of understanding - and this ignorance extended to an understanding of what was and what was not being regulated.
Even now the media here (in NZ) whines on about the "nanny state" - even now the government is in the business of getting out of business. And so I don't expect any move to responsible government anywhere will be easy - there will need to be a shift in the whole tenor of the political discussion for a return to 'governance' for the people and of the people etc as was the case following the 1930's. I simply don't think that the media would let the message to get through - talk about circuses - that is all that we will have on the media (whether the 'circus' is a foreign war or the Olympics).My sadness and some suggest, my unhealthy obsession is that there will be rules - but that these rules will protect the rich. The wealth accumulated by the winners in this world wide ponzi scheme will not be returned to help pay for the costs of the 'bail out". The public will pay for the mess with increased poverty, decreased social services and so on. The response of the government will be like that (in terms of rough analogy) of the victors in 1919 as compared to the response of 1946. As you know, in 1919 the victors wanted peace but more than that they wanted a return of the old regime and decided the best way to get there was to have Germany pay for it.Here, those running the show (ie the government) want to get back to where they were? But where is this? 1970? 1980? or 1999? What is the bench mark for success? 5% growth or 2%? And home ownership of 45% or 85%? The Canadian government is giving $4 billion to the auto industry - what are the guidelines? what is 'success'? Oil at $100 a barrel? Oh the government will pretend that recovery is coming - that things will be as they were. But ... how can they ever be as they were? Sadly I suspect that regulation will simply be rules closing the barn door after the horse has begun to smell (using this analogy more than it should be - I would suggest that the horse needs to be examined, its cause of death determined and then it should be appropriately buried - all with the barn door wide open). The problems are profound - a democratic solution (as opposed to fascism on display) would involve electoral reform. But is won't happen. Why?Because the whole culture is no longer one which sustains the old fashioned notion of good governance. It is a culture in which everyone feels that they are special, that rules are important but getting caught is the problem, and that the best outcome is money money money...Y's experience with the Federal Government taught me a lot about the current attitude to governance in Canada. Of course everyone pretends that the system is 'fair'... but there is no fairness in a system in which files go missing - where hiding and delay is the best legal tactic. Contracts are let and money is made on the basis of who you know not what you can do... All over justice is reduced to a dollar sign - and yet hundreds of millions of dollars in fines are left uncollected. Who pays? Who doesn't? Read Bleak House lately?What is justice when the main and often only economic activity in much of the province is the cultivation of an illegal drug? How does such a large industry get established, keep going in a supposedly law abiding part of the world? Do only the unlucky or unconnected get caught? What happens to the community when the richest citizens pay no taxes because their business is illegal. Here look south - some argue that Mexico is skating closer and closer to collapse... why? because of the attempt to enforce drug laws... or the attempt to determine who profits from this trade?And then where is the justice in a financial rescue when the most wealthy in society somehow manage to keep their homes, yachts and medical insurance when the less wealthy are told to eat their losses.Ok - I am angry. Alas... and I don't know who to blame...
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