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RORY
O'CONNOR is a documentary filmmaker and
journalist. He is also president and
co-founder of the international media firm Globalvision,
Inc, and The Global Center, an
affiliated nonprofit educational foundation.
Rory
O'Connor is a Contributor to MaximsNews
Network
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RORY
O'CONNOR: PONZI DEMOCRACY:
23/12/2008 (MaximsNews Network)
UNITED NATIONS - / MaximsNews
Network / 23 December 2008 --
Ever since Bernie Madoff with all the
money — fifty billion-with-a-b,
apparently – the journals and airwaves
have all been abuzz with references to his
alleged securities fraud as a “Ponzi
scheme.” But few accounts have delved
into the back-story of who “Ponzi”
actually was, what he did – and the
crucial role a watchdog press played in
ultimately uncovering the legendary
swindler whose name has since been
enshrined in the financial Hall of Shame.
I thought it might prove illuminating, as
this dreadful year collapses to a close,
to re-examine the original Ponzi scheme,
as it sheds light not only on our tattered
global economic system, but as well on
what has been dubbed our “Ponzi
era” — and indeed, on our entire,
shattered, pyramid-like, 21st-Century
Ponzi democracy itself.
First,
though, who was Ponzi, what exactly did he
do – and why, nearly a hundred years
later, does he and his eponymous scheme
still resonate?
The
twelve months that carried America from the
summer of 1919 through that of 1920 were
laced with lust for a faster and better life
— a lust stimulated by war and an
influenza pandemic that showed how fleeting
and frivolous life could really be, a lust
at any cost. Soon the ‘20s started to
roar, and Edna St. Vincent Millay greeted
the new decade with a book of poems called
“A Few Figs from Thistles,” best known
for the lines “My candle burns at both
ends;/It will not last the night;/But, ah,
my foes, and, oh, my friends–/It gives a
lovely light.”
She
could easily have written that line about
Charles Ponzi, the man who took that year in
American history to churn millions of
dollars and give his name to a scam that
still plays havoc with investors today. An
Italian immigrant hungry for the best in
American status, Ponzi perhaps accurately
saw corruption as nothing more than his
newly adopted country’s accepted means to
an end. After all, America was the land of
opportunity and the builder of confidence
– and Ponzi turned that confidence into a
confidence game that would ruin thousands of
people and sink six banks.
In
June 1919, Ponzi, a 36-year-old clerk at
J.P. Poole, an import-export brokerage house
in Boston, stumbled by accident upon a
racket that would launch his name into
history. He opened a letter from a customer
in Spain and discovered a postal reply
coupon, enclosed to cover the postage for
Poole’s return envelope. Ponzi found that
although the customer had paid the
equivalent of only one American penny for
the coupon in Madrid, it was redeemable at
any U.S. bank or post office for a nickel.
Why not buy up these coupons around the
world, thought Ponzi, and cash them in here?
The possibility for financial growth was
staggering. He did enough research to
determine that most large countries sold
these coupons and promptly quit his
$16-a-week job.
In
short order, however, his legitimate plan to
achieve riches slammed into a wall of
regulations. There were international rules
that prevented more than $75,000 worth of
postal reply coupons to be used worldwide
annually, but Ponzi merely viewed this
revelation as a momentary setback. Spurred
by a galloping ego, he figured that if he
knew next to nothing about these coupons,
what could the average Bostonian know? He
circulated among his Italian compatriots in
the city’s North End and spun tales of
profits to be made with these little known
coupons. He told them he had learned
moneymaking secrets at Poole’s, secrets
that made Rockefeller rich, secrets everyone
else could use to become rich as well.
Invest with me, promised Ponzi, and in 90
days you will get your money back with 50
percent interest.
Although
his offer seemed as difficult to believe as
it was to refuse, Ponzi opened an office for
a foreign exchange investment firm. His
first two customers were immigrants bringing
him fifty dollars — something approaching
their life’s savings — but most came
with ten dollars or less. Ponzi gave them
receipts and kept his word the only way he
could, finding a second group of investors
whose money he would use to pay off the
first group in 90 days. And so started a
swindle that would stay afloat as long as
there were enough Peters to rob to pay all
the Pauls. As Ponzi built a bigger and
bigger house of cards, the greed and
confidence of his investors aided and
abetted in his scam, because the greedy many
didn’t come back for their money after 90
days — they came back to reinvest it
all…
As
months went by and the lines outside his
office stretched to five blocks long,
Ponzi’s own greed knew no quenching. He
dreamed of running for mayor and owning
banks. Eventually, he took control of the
Hanover Trust Company and his old employer,
J.P. Poole. He began to pay laborers ten
cents for every new dollar they could bring
him. Soon, Ponzi’s investors included
waiters, bartenders, stevedores and elevator
operators. The American Dream began to look
real for the working class people of Boston.
Everyone seemed able to make money with this
scheme – especially Ponzi, who lived
luxuriously in a mansion boasting unheard of
luxuries such as air conditioning and a
heated swimming pool.
By
the spring of 1920, Boston’s Brahmin
bankers began to worry. Depositors were
taking their savings out and giving all the
money to Ponzi. At first, the bankers –
along with representatives of big business
and the press – tried to ignore the little
Italian, treating him as a flash in the pan,
a man with a crazy scheme that couldn’t
last. True, Boston publisher Clarence
Barron, a financial expert who published the
Barron’s financial paper, called the
scheme ridiculous in his own paper, but
reporters at the other papers continued to
fight their way through the crowds outside
Ponzi’s office, completely disregarding
the biggest story in New England, to invest
their own money
Finally,
however, one of one of the editors of the
Boston Post became suspicious and
assigned investigative reporters to check
Ponzi out. Soon panic led to a run on the
company. Ponzi bought time by paying out $2
million in three days, but as the Post
ran a series of articles, the swindle soon
unraveled. By August Ponzi was under arrest,
17,000 people had been cheated of millions,
maybe tens of millions.
“By
the time this is over,” the Washington
Post recently
editorialized, “‘Madoff scheme’
may be the new name for mass financial
fraud.” Unlike Charles Ponzi, the paper
noted, Bernie Madoff “operated in a modern
regulatory environment in which numerous
authorities, state and federal, were
supposed to keep an eye out for such
scams” — something other people, such as
Madoff competitor Harry Markopolos, observed
years ago. Markopolos even told the
Securities and Exchange Commission “Madoff
Securities is the world’s largest Ponzi
scheme.” But as the Post accurately
concluded, “the regulators slept.”
So
too did our recently deregulated media. Is
it possible, I wonder, that there may be a
connection between the deregulation of the
media and the fact that the same media never
warned us of the dangers of financial
deregulation? The dots aren’t so hard to
connect…
If
the current “Ponzi” scandal tells us
anything, it is this:
•
even the most sophisticated investors are
easily fooled;
•
the general public therefore needs robust
government regulation;
•
the public also needs a robust, vigilant
media system to safeguard both the
marketplace of commerce and the marketplace
of ideas and democracy;
•
and without aggressive financial regulation
and a vigilant press, markets, politics, and
our entire society inevitably devolve into
corruption for which we all pay the price.
For
decades, we have been sold a bill of goods
and told incessantly that government isn’t
the solution — it’s the problem; that
markets are efficient and rational and will
self-correct; and that personal wealth, no
matter how obtained, matters above all else.
And
that’s what I call a Ponzi democracy.
WORLD
NEWS
UN
DISASTER TEAM ARRIVES IN FLOOD-STRICKEN
PAPUA NEW GUINEA:
22/12/2008 (MaximsNews Network)
UN:
UNITED NATIONS BRIEFING AND TV - QUESTIONS
AND ANSWERS: MONDAY, 22/12/2008 (MaximsNews
Network)
UN:
UNITED NATIONS BRIEFING AND TV: MONDAY,
22/12/2008 (MaximsNews Network)
•••
100th
HUMANITARIAN WORKER KILLED THIS YEAR IN DR
CONGO; VIOLENCE AGAINST CIVILIANS UNABATED,
BY CAROLINE PATTON: 22/12/2008
•••
FRIDE:
INTERNATIONAL JUSTICE AND THE DIPLOMATIC
STRUGGLE OVER DARFUR - BY ISABELLE
BIRAMBAUX 21/12/2008
(MaximsNews
Network)
•••
FRIDE:
DEFENDING HUMAN RIGHTS AND PROMOTING
DEMOCRACY - BY JOS
BOONSTRA 21/12/2008
(MaximsNews
Network)
•••
FRIDE:
IS THE EUROPEAN UNION SUPPORTING DEMOCRACY
IN ITS NEIGHBORHOOD? - BY JOS
BOONSTRA, JULIA CHOUCAIR VIZOSO, ANA
ECHAGUE, BALAZS JARABIK, KRISTINA KAUSCH,
AND RICHARD YOUNGS 21/12/2008
(MaximsNews
Network)
•••
FRIDE:
ENGENDERING AID; ANALYSIS OF THE ACCRA
OUTCOMES - BY NEREA
CRAVIOTTO 21/12/2008
(MaximsNews
Network)
•••
FRIDE:
CUBA; THE LEGACY OF A REVOLUTION - BY SUSANNE
GRATIUS 21/12/2008
(MaximsNews
Network)
•••
FRIDE:
AFRICAN MISTRUST OF "NORTHERN
JUSTICE" - BY VIDAL MARTIN
21/12/2008
(MaximsNews Network)
•••
U.N.
PANEL ON THE MEDIA AND UNITED NATIONS
NEWS: 21/12/2008
(MaximsNews Network)
•••
UN
SECURITY COUNCIL AUTHORIZES RWANDA
GENOCIDE JUDGES (MaximsNews Network)
FORMER
PRESIDENT CARTER
ON ERADICATING GUINEA WORM DISEASE:
EXCLUSIVE INTERVIEW by MARISHA
WOJCIECHOWSKA-SHIBUYA: 19/12/2008
(MaximsNews Network)
WATER
KEY TO ERADICATING HUNGER AND POVERTY IN
AFRICA, DECLARES PAN-AFRICAN MINISTERIAL
CONFERENCE:
19/12/2008 (MaximsNews Network)
•••
CONVICTED:
RWANDAN GENOCIDE MASTERMIND: 18/12/2008
(MaximsNews Network)
•••
Amb.
RICHARD HOLBROOKE: THE DAY CHINA AND THE
U.S. OPENED FULL DIPLOMATIC RELATIONS:
18/12/2008 (MaximsNews Network)
•••
CARNEGIE
ENDOWMENT FOR INTERNATIONAL PEACE: OBAMA
NEEDS COLD COOPERATION WITH RUSSIA: 18/12/2008
(MaximsNews
Network)
•••
SECRETARY-GENERAL
CALLS PIRACY OFF THE COAST "A SYMPTOM
OF THE STATE OF ANARCHY" IN SOMALIA,
BY CAROLINE PATTON: 17/12/2008
THE
WATER FOOTPRINT NETWORK LAUNCHED TO
ADDRESS CRITICAL GLOBAL WATER ISSUES:
17/12/2008 (MaximsNews Network)
•••
ALMOST
1,000 KILLED BY CHOLERA IN ZIMBABWE;
BELIES ASSERTIONS BY MUGABE THAT THE
EPIDEMIC HAS ENDED, BY CAROLINE PATTON:
16/12/2008 (MaximsNews Network)
•••
UNFPA’S
2008 STATE OF
WORLD POPULATION: Focusing on the Numbers
by
Jane Roberts:
13/12/2008
(MaximsNews Network)
Labels:
Rory
O'Connor, Panzi
Democracy, Bernie
Madoff, U.N.,
MaximsNews,
United
Nations,
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