Re: Madoff money, Ponzi schemes, and Wall Street collapse----

[panader0]

This whole thing is hard for my mind to grasp because there is no THERE THERE. There is no product left to display. I look on my desk and see a lamp, or on my kitchen counter and see a cheap coffee grinder; these are things that are THERE. They exist in space (I think). The lost monies from Madoff and the Wall Street collapse never had any physical reality, i.e., no product behind them. They existed in cyberspace for a moment and were gone. It's a tough concept for a construction guy like me whose work is concrete, block, etc. and will be around for a hundred years after it was paid for. A waitress serving a beer does something more real than the sudden poof disappearance of invested money. Maybe why I didn't do well in economics in school.

[MannyGoldstein]

1. Next You'll Tell Us That The Emperor Has No Clothes!

Sheesh!

[panader0]

2. Let's say I spend $1000 to pour a concrete floor

At the end of the day, the $1000 is spent but I have a concrete floor. On Wall Street, at the end of the day you may well have nothing. To me this makes no sense. Should our economy be run like a poker game where you can go bust? Or should we have works where, although there may be no free returns, we are left with tangible product?

[AdHocSolver]

7. PanederO would be 100 percent correct: The Emperor has NO clothes on. n/t

[stillcool]

3. The money Madoff fleeced is

real money, and it has/had real value. He lost it like the United States lost the money in Iraq. I think it's called money laundering. Maybe our government is a huge Ponzi scheme?

[Esra Star]

4. Anybody who says they understand economics

is a fool or a liar or both.
Smoke and mirrors liberally splattered with snake oil is more
decipherable than economics.

[AdHocSolver]

6. To understand the stock market see my reply to the OP.

Briefly, there are two "economies". The "real" economy of jobs, and goods, and services. Supermarkets, department stores, construction workers, teachers, farms, factories, and so on are part of the "real" economy.

Then, there is what I call the "fictional" economy. Stock brokers, investment companies, mutual funds, insurance companies, and so on. They deal with essentially "imaginary" entities, pieces of paper with essentially fictitious value, and a jumble of otherwise meaningless numbers stored in ledger files on computer disks. People, cities, states, and even countries need the former, they could survive without the latter.

The problem that people have in understanding the economy is that they confuse the former with the latter. This is due to the fact that the powers that be don't want people to understand the economy. That is why they train and hire "economists" to spout rubbish and confuse the population about reality.

All a person really needs to know to understand what goes on in the economy, both the "real" and the "fictional" ones, is to understand some basic concepts and definitions. They are, in no particular order:

What is a market; What is competitionn; What is meant by supply and demand, and how do their relative values effect the price level within a market; What is a monopoly; What is a cartel, and how does it work; and so on.

[Esra Star]

8. If it is possible to divide "economics" into two categories

#1. Economics I understand (as outlined by you) and
#2. Bullshit economics. Then it would work, but somehow we all get
hurt by the combination. So I still agree with myself.

Funny (quaint) story.
My grandmother (1890-1987} never trusted cheques (checks).
She would wait for her pension cheque every second Thursday.
When the mailman delivered it, she would already be dressed to go
shopping. She would grab her handbag put the cheque in and head off to the "shops".
First call was the bank where she would get the cheque cashed.
She would put all of the money into her handbag and then do some shopping.
maybe she would buy a ball of wool or something.
She would then head back to the bank and deposit the cash back into her account.
This was her way of knowing it was "real".
It's funny now, but I understand what her thinking was.
Cheers

[VonHayek]

11. Money is money

From a GDP standpoint it doesn't really matter where it goes. Spending it is spending it. If I pay someone $20 to tell me a funny joke, the GDP is the same as if I pay someone $20 to bake me a cake as it is if I pay someone $20 dollars and ask them to get me a return on the investment.

[AdHocSolver]

12. Money is a fictional quantity, and GDP is a meaningless number used for propaganda purposes.

Years ago, I talked about economics with a woman of German descent who told me that after WWI ended, inflation in germany became so bad that, as she put it, it took "a barrel full of Marks" to buy a loaf of bread.

The GDP as used to declare the state of the economy is a meaningless number because of the assumptions it makes in computing and using that number. For example, GDP does not take distribution of income into account. Growth in GDP is assumed to benefit everyone the same way, even though historically, that has not been the case.

Your example demonstrates how geared the GDP figures are towards the wealthy. For a person of limited means on a fixed income, that person does not have the discretion of using that $20 to buy food or using that $20 to buy a share of stock. To such a person, the $20 is not fungible as it would be for a wealthy person. That is why GDP is meaningless and how it is used fraudulently.

[VonHayek]

13. Just because you don't like it

Doesn't make it not true.

GDP is simply a measure of economic activity. Not wealth or greed or standard of living or price level.

Only activity. Which is defined as C, I, G, or X.

[AdHocSolver]

14. I never argued its truth. I said it was meaningless, another economics number to confuse the masses.

n/t

[AdHocSolver]

5. The success of any con artist depends on a large number of greedy, gullible, stupid suckers.

The stock market is a giant confidence game -- Ponzi scheme. I read a book years ago (I forget the name and the author_ who tells about the "first" "stock market" back in merry old England in the 17th (I think) century. The important point that the author makes is that it was a fraud.

For a painless way to learn about the stock market and Ponzi schemes, watch the hilarious Mel Brooks movie "The Producers". The two main characters promote a play that is designed to fail. The investors are conned into investing way more money into the play than it would cost to produce. The play is supposed to fail so that the con artists never have to pay any profits on the investments back to the investors, but instead get to keep the money that is oversubscribed.

This is the same way the stock market works. The middle class dupes, the pension funds run by fools and idiots, the stock brokers who make THEIR profit off of commisions all pour money into a stock to drive its price up (big demand, i.e., large number of buyers, limited supply, i.e., limited number of shares to bid on). The price goes up and up until the price reaches the target price that the insiders want to sell at. Then the insiders sell (or more accurately, dump) their shares and realize a big profit. This dumping drops the price to a lower value and the insiders then buy back the shares that they just sold at a high price for a much lower price. The insiders just transferred a bundle of cash from the suckers, er, investors, to themselves.

The suckers think that the stock price will grow as the company increases its business and makes more profit. This is why the insiders at Enron fixed the company's accounting ledgers to make it look profitable to get people to invest in Enron stock and thereby drive its price up. In reality, Enron was actually "losing" money.

The scheme only works when you can keep people with any money to spend to keep on buying the stocks. When the entire stock market is a fraud, eventually all the "buyers" become maxed out, that is, they have no more money to invest. Then all the Ponzi schemes collapse simultaneously and the country winds up in a depression.

Then the con artists go to the government and convince Congress to bail them out "to save jobs". Actually, our tax dollars are merely used to prop up the corporations long enough for the insiders to cash out and reap their profits. The "real" economy, essentially, jobs, is kaput.

Actually, the fact that you understand that the "king has no clothes on" shows that you are more in touch with reality than those people who see "reality" in the fraudulent stock market schemes. I have a degree in economics, and obtained one in spite of the contradictions inherent in the economics curriculum.

[leftstreet]

9. What an excellent example

The Producers!

It's nice when informed posters like yourself can give this confusing muck some 'understandable' perspective.

:thumbsup:

[alcibiades_mystery]

10. T^he commodities, even the supposedly solid commodities you traffic in

Have a double existence, as the "solid" use values that you're emphasizing here, and as "exchange values" (i.e., the money you paid for the lamp). The solidity of physical commodities is itself illusory insofar as they are commodities; they are always (as commodities) split between their use value, and their exchange value. Finance capital is no different, even if the circuits it travels before you can identify a concrete "use" are a little more esoteric. They represent future production, or rather, a belief about future production. Now, you might say that this doesn't exist in space like your lamp, but you'd be wrong twice, first because the bodies that idealize future production lend it hypothetical spatial coordinates , and second because the EXCHANGE value of your lamp DOES NOT exist in space, but is itself an idealization of the totality of productive social relations. Indeed, your very notion of a house that will be around for a hundred years after it was paid for already displays these two values, since you lend a solidity to the future, and since you ignore that the house will always have attached to it an exchange value and can be paid for over and over again, though its exchange value is purely a matter of convention, and has no more solidity than the exchange value of an equity security.