Weekend Reading: 12/13
The fallout from the largest investor fraud in our history is just beginning. Bernard Madoff created an unbelievably massive ponzi scheme, and it’s looking like all that money is lost. Madoff had such a strong following that his investors often forsook even the most basic financial advice of diversification: “Richard Spring, a Boca Raton resident and former securities analyst, says he had about $11 million — or 95% of his net worth — invested with Mr. Madoff. “That’s how much I believed in him,” Mr. Spring said.”
What is a Ponzi scheme? NPR’s Planet Money has an excellent outline.
John Carney at Clusterstock writes about a recession for the long term. His central premise:
much of the alleged prosperity of the past few years was simply illusory. Cheap and loose credit combined with Ownership Society policies pushed up housing prices. Rising house prices allowed people to take on more debt. People took on more debt than they could afford because they perceived that they were more propserous than they were. Businesses expanded beyond profitability because consumer demand built on credit kept expanding. Banks lent out more against inflated housing values.
Peggy Noonan has an interesting op-ed about the new cultural norms that are forming in lavishness and spending. My favorite line:
Some of the new mood may reflect a certain Puritanism—there’s always a little of that in the American character. And some of it is mere PR. But not all of it is strategic. Economic collapse concentrates the mind. Some of it is maybe “agenbite of inwit,” the Middle English phrase meaning remorse of conscience. The new mood seems to involve a new modesty, and something a little more humane.
