Of Bulls, Crocodiles, Jaws &Standard Financial Practice...

drawing by marguerita
One hears anguished commentary about how Bernard Madoff’s gargantuan fraud epitomizes the self-defeating excess of high-tech finance — his fall the embodiment of the fall of modern capitalism. But while $50 billion is a lot of money to defraud, there’s nothing particularly modern about Mr. Madoff’s ethics or technique.
Some say that Mr. Madoff’s fraud is a harbinger of the downfall of the 21st-century’s frenetic variant of capitalism. I would suggest that it underscores how stable the strategies and the institutions of finance truly are.
What changes are the scale and the technology. The ethical shortcomings remain.
There are, of course, important differences between fraud and and standard financial practice.
.Crucially, bubbles are powered by fools of increasing gullibility, who are willing to pay an even greater price to buy an asset from the fool that bought it in the preceding round. Ponzi schemes only require that their investors be foolish.Editorial Observer - Ponzi Schemes - The Haul Gets Bigger, but the Fraud Never Changes - NYTimes.com