E N D P I E C E
Hello Mr Ponzi
Albanians are not the only ones who’ve been taken for a ride, suggests Steve Eckardt.
Need a laugh? Just take a look at Albania: a whole nation of morons. Why, these chumps sunk all their assets into giant “Ponzi” schemes – pyramid scams where investors get promises of whopping returns. Of course, eventual collapse was inevitable. Did this stop Albanians? Don’t you believe it. Half the population jumped in. Why, some people sold everything they owned: houses, horses, cars – hell, probably a child or two – in the scramble to get in on the action. Two billion dollars in all – equivalent to 43 per cent of Albania’s gross domestic product. Now, of course, they’ve lost everything. Has there ever been a bigger bunch of fools?’
Well, that was the thrust of US press coverage of the Ponzi schemes’ collapse in Albania. ‘Get-rich-quick scams... lure[d] the gullible with promises of up to 500 per cent annual returns,’ declared Business Week, whose slogan is: ‘Not just information. Intelligence.’ A ‘something-for-nothing ethos’ had gripped this ‘Balkan basket-case’.
The tonier Christian Science Monitor put it another way: people ‘frantic to taste the good life but with few legitimate avenues to do so’ found the schemes ‘a tolerable risk in light of the scarcity of genuine investment opportunities’. They thought that fat returns ‘was how capitalism works,’ breathed one expert on National Public Radio.
Imagine that. And this.
In the last two years the US stock market has soared 85 per cent, though the economy has grown less that 6 per cent. Today 43 per cent of US adults have money in the stock market – more than double the percentage seven years ago. This despite warnings by the usually tight-lipped US banking-system head, Allen Greenspan, of ‘irrational exuberance’.
The dramatic inflation of the US stock market owes almost everything to the inability of anyone to make money anywhere else: Japan has a millstone of $350 billion of bad loans around its neck; Germany has the highest unemployment rate since the 1930s; US banks pay a laughable two per cent or less on deposits. Cut-throat international competition is hammering profits from actual production – rather than speculation – into the ground.
Seems rather as if people ‘frantic to taste the good life but with few opportunities to do so’ find Wall Street ‘a tolerable risk in light of the scarcity of genuine investment opportunities’.
Comparing Ponzi schemes in Albania with the mighty New York Stock Exchange may seem far-fetched, to say the least. But what would you call people who believe in returns 14 times greater than economic growth? Gullible?
Actually, the bad news goes far deeper than the market’s price/exchange numbers. Truth is, capitalism – whose profit engine feeds on paying workers less than the value of what they produce – is itself a pyramid scheme. Inevitably it is collapsed by too many goods looking for too few consumers – a bitter irony for hundreds of millions who have too little to live on. Three generations on from the end of the Great Depression and World War Two, we have come to believe that eternal economic growth is... well, the way capitalism works.
If the ruination of the people of Albania raised only smirks and headshakes from Western pundits, their eruption into angry protests moved commentators to indignation. When one-time protesters became armed insurrectionists, smirks and indignation turned into narrow-eyed expressions of ‘serious concern’ about what the New York Times called ‘Europe’s angriest country’.
Somehow, mobs of thick-headed workers stripping policemen to their underwear and, armed with tanks and automatic weapons, threatening to roll into the capital, didn’t seem so funny any more. Couldn’t somebody explain to these people how capitalism works?
But no matter. It’s Albania for crissakes. Here in the US the smart money is racking up 40 per cent annual gains on the stock market.
So who are the real morons?
Reach Steve Eckardt, a Chicago-based freelance writer, at [email protected]