How would we start a Ponzi scheme?

And some other thoughts on what is shaking the financial world. yes we need it, an earthquake wouln't be that welcome, still I had to think of over details.


So here we go

A Ponzi scheme asks you a principal to enter, on the promises you will leave it long enough. The company pays you very interesting annual or semi-annual, even shorter or longer interests to nurture trust they relate with you. 

PS: I am not looking to start up mine, I am just sharing some thoughts about how we are led to believe. nothing more than a fiction that is taking place too often in the daily life, and not only from the news.

Ressources required: either you have the almighty network required in building all entrepreneurial endeavors, or you have a small network that will expand once first results proven. Network investing in yourself, with you hiding the tricks behind, and word of mouth should build up.

In this latter case, I wondered how we could be greedy enough to enter a company running a Ponzi scheme, well not totally greedy, partly too much human and simple. Obviously we do not know it when first entered.  Key of attraction is about building enough trust. Trust is based on facts. So to start my Ponzi scheme, and be sure here, I will never do it,

In case to attract first investors, I would start by making a loan, and open some branch here and there, and then make them contract new loan, larger, with less debt interest, till I can prove the money creation is proving good, and good returns to show my financial investors. So that now, their inputs are fuelling the growth of the scheme.

Indeed, trust is then created on the core branch, not needing to explain the whole satellite of secondary branch to customers. And then the ROI is attracting, and building a word of mouth, still being selective enough to attract and retain.

Why did I think about that this morning? Because it is reinventing the wheel creatively, for bad and for worst. I do believe the Ponzi scheme shows how banks work. All types of banks, from personal ones, to hedge funds and trickier ones. They are getting money with low interest, from central bank or the central organization, get customers to contract loan to an higher rate, and so on and so on. Like a Ponzi scheme, the required basement for banks is trust by the people and businesses. Without this trust, they are just waste, pure and simple waste. reason why they should be even more worried now.

We’ve seen it in England with Northern Rock, almost witnessed it in France. When trust is pierced, we want money out, and the banks cannot satisfy the demand in withdrawals. Simple as that. I took here an example on the sector of banks, could be real estate. And reason why governments should enter more forcefully into how banks run their business, and make some ground requirements more than the reserve ratio and so on. How can we do it? plenty of solutions but first governments need to get to distance, and recapitalize their debt away from them.

Even there, solvability is a burden, so why am I not for Eurobonds? It is the same path I am using the Ponzi scheme, I can say why I am standing against Eurobonds. It would be use to enhance market liquilidy, volatility is a direct function of liquidity, so speak to me of solvability, and it could be articulated another way. 

Eurobonds would just have made Europe looking more alike the US. Yes it would have delayed the next crisis, still do think the current situation in Europe could work towards each one working to a common goal by being accountable of their own balance.

Yes they didn't prove it so far, but hey does it worth delay such circumstances? We don't speak about many of the US states getting very negative balance, and it gonna blow bad more and more. yes thinking of california greece-like status and some others like New Jersey.

You can think eurobonds would be better for european markets solvency, liquidity and so on. Right, do think still the important is about accountabilities of each country in the decision they take. and it s not changing the scale of where the financial tools applied that will support it. Eurobonds would just be a veil that gonna reveal a  dramatic situation when lifted up. Europe can foster growth through its strenghts, and not only through its weaknesses. 

References:
http://www.lemonde.fr/economie/article/2011/09/06/le-risque-de-faillite-d-une-grande-institution-financiere-europeenne-est-reel_1568203_3234.html#ens_id=1216746&
http://www.lemonde.fr/economie/article/2011/08/29/parisot-denonce-le-role-de-etats-unis-dans-la-crise-de-la-dette-en-europe_1564666_3234.html#ens_id=1268560&
http://www.lemonde.fr/economie/article/2011/08/15/les-eurobonds-ne-seront-pas-au-menu-de-la-rencontre-sarkozy-merkel_1559697_3234.html
http://www.lemonde.fr/europe/article/2011/09/06/la-slovaquie-bloque-le-lancement-du-fonds-europeen-de-stabilite-financiere_1568604_3214.html#xtor=RSS-3208
and so on and so on.

Finishing on the music that fuelled my inspiration while writing this post: