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100 Years Before 'Ponzi', There Was "The Poyais Scheme"
Submitted by Simon Black via Sovereign Man blog,
When Gregor MacGregor returned to London he was a real celebrity.
He had just come back from the New World, where he had a number of successful exploits fighting in the South American struggle for independence and was made the Major-General of the Venezuelan republican army by Simon Bolivar—the leader of Latin America’s independence movement.
From within the dinge of Britain, the New World seemed like the land of both sunshine and wealth.
A number of Latin American countries were gaining independence at the time, and investors were frantically trying to get in early to capitalize on the opportunities overseas. The was the first emerging markets frenzy among investors.
When MacGregor, from his first-hand experiences there, told people of the new country of Poyais—where the climate was mild, the natives were friendly, the water pure, and the land fertile and abundant with high-quality timber—it seemed like there could be no better investment.
So in 1822, when he offered a £200,000 Poyais bond at 6%—twice the rate that British government bonds were going for at the time—who could resist?
It didn’t matter that the government of Poyais had no record of collecting taxes nor did it have any systems in place to raise revenue. The bonds would be easily paid back through export-taxes on the resources being shipped back to Europe.
It didn’t matter that the country had not been developed. There were hundreds of people signing up to build up the settlement there.
It didn’t even matter that the country didn’t actually exist.
The bonds were quickly sold and seven ships of people set out for this land of false promises.
The swindle inevitably came to light a few months later, though initially from a decline in confidence over Latin America as a whole rather than the discovery of Poyais’ non-existence.
And as the value of the fraudulent bonds plummeted, MacGregor simply skipped town to Paris, where he implemented the same scheme yet again.
In total, selling bonds for this fake country he made up he was able to raise £1.3 million, which in terms of the size of the British economy, is comparable to about £3.6 billion today.
Thousands of people lost all of their money believing in his well-orchestrated scheme, and some even lost their lives trying to find this land of opportunity to settle.
Though the country is very real, the US government’s ability to repay its bonds is just as fictional as that of Poyais.
The amount of debt it has accumulated has just surpassed the $18 trillion mark, which no level of taxation or economic growth could ever pay off.
And given that Treasury yields are below even the government’s own official rate of inflation, investing in US debt means not only will you not make money in the future, but you’re also losing money by the day.
This is hands down the worst investment out there, yet so many still pile their money into it.
Just as the Poyais’ scheme was unraveled by skepticism of Latin American bonds overall, the spark that turns the trust of US government finances into dust can come from a decline in confidence anywhere in the system.
You could easily brand the hopeful investors and settlers of Poyais as gullible. And there was a clear information mismatch and a lot of unknowns that fraudulent peddlers like MacGregor could take advantage of.
But loaning money on losing terms to the biggest debtor in history that has practically no mathematical chance of ever repaying it today – when all the facts are out there for everyone to see – is a much bigger insult to reason.
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The more I read ZH the more I feel the financial market has been one big ponzi since Jesus said what he said to the money lenders.
If that's the case why do we bother with the banker's market? Lets just keep it bartered.
And there is a sucker born every minute, and this one is the Fed.
The sucker is anyone who can't figure out who the Fed really works for.
So once again, that would be the Fed.
How about the church? you pay 10% of your total income and all you get is a promise of something you get after you die.
you are miseld by your own fear or greed.
you are miseld by your own fear or greed.
amen.
I believe Pascal determined that 10% of your income during your working life for eternal life was a good investment. If God exists, you gain everything, if God doesn't exist, you lose nothing because you can't take it with you.
"..since Jesus said what he said to the money lenders."
he said: well done, good and faithful servant! you have doubled my money!
http://biblehub.com/matthew/25-23.htm
little-known fact: he said to the *other* guy: dude, you shoulda given my money to the banker
http://biblehub.com/matthew/25-27.htm
amazing parables for young and old!
Mark 12 13 Later they sent some of the Pharisees and Herodians to Jesus to catch him in his words. 14 They came to him and said, “Teacher, we know that you are a man of integrity. You aren’t swayed by others, because you pay no attention to who they are; but you teach the way of God in accordance with the truth. Is it right to pay the imperial tax[b] to Caesar or not? 15 Should we pay or shouldn’t we?”
But Jesus knew their hypocrisy. “Why are you trying to trap me?” he asked. “Bring me a denarius and let me look at it.” 16 They brought the coin, and he asked them, “Whose image is this? And whose inscription?”
“Caesar’s,” they replied.
17 Then Jesus said to them, “Give back to Caesar what is Caesar’s and to God what is God’s.”
And they were amazed at him.
Church donation is voluntary. That's not just a BIG difference, rather it makes the two (Fed/Church) uncomparable in the way you suggest.
Lucifer indeed.
Fuckin' love it. The Jim Cramer of his time.
If gold and silver were the predominant forms of money in Jesus' time... what were the money changers changing? Did he basically overturn the high yield credit tables?
generic gold/silver was NEVER money...it had to be a sovereign coin of gold or silver...so the different nations currency of differing purities of PM and social acceptance were traded/exchanged
The money changers were more like indulgence providers. The purchaser was getting some form of percieved blessing other than a worthless piece of paper. Pretty close to a Ponzi.
No one goes to Sunday School any more? From plim.org Only the half-shekel coin of the temple was allowed as atonement money, which the priests in the temple used. Those Jews coming from foreign lands with foreign currency or those that had Roman coins had to have these coins changed by the moneychangers. This was one of the largest revenues for the temple.
Roman currency was not accepted at the temple, so bankers set up shop where people were forced into trading the Roman coins for sheckels. Jesus became infuriated when he saw the exploitation that was occurring by the merchants, moneychanges, and Jewish leaders who endorsed it. Another reason why they had to kill him.
edit: I should say he was also pretty angry that the "House of God" had become like the CME.
Don't you mean IMF?
How ridiculous that Jews once believed that Roman currency would not be accepted by God. Didn't they know back then that whatever God wants, he keeps?
If you haven't been to their website visit mises.org and read some of the free articles on money and banking. In a functioning free market banks provide a valuable service by pooling savings and deploying them efficiently by market set interest rates.
The problem is the wide spread use of currency or credit as money and the ability of banks to "fudge" their accounting to allow them to lend out multples of their cash reserves. The remainder of their lending must be secured by assets they hold as a corporation marked to market. Those assets are supposed to be separate from deposits and operate under different regulations but they have consistently eroded sound lending principles and regulations to the point if they run into a liquidity crisis they will take your deposits and exchange them with equity shares in the bank.
If you want to fix the problem ban the use of sovereign debt as reserves for banks and eliminate their backstop.
You've stumbled onto the single absolute truth of both banking and money (yes, even gold) -- it only has value because people believe it does. The only real goods are those that can be bartered, it just happens people seem to be OK exchanging the real stuff for things they believe in, paper or shiny.
Here is the painful truth cleverly wrapped as a parody.
And yes, you're way better off in my opinion taking the red pill and separating as much as possible from the ponzi economy.
"... it only has value because people believe it does."
No different than them that will pay $86 million for a painting.
Yes, but as Ignatius alluded to, that same belief extends to "real goods" also. It seems humans have a fairly crude (or is it?) mechanism for determining value. That is, value determination is based primarily on how many other humans demand the same good or have it in possession, instead of rationally determining whether that good will help increase the survivability of the individual making the determination. Maybe that is what nature intended? But why? And logic dictates the latter method is performed at least in part, by some humans, or acquisition would be nearly nonsensical.
We suckered some folks...
As long as you believe that a vast percentage of humans (across all races and cultures) are heavily represented by the following groups, you can be sure to make good money off such people:
The Dumb, the Gullible (they just 'want' to believe), the Uninformed, the Lazy+Greedy (=get rich quick types)
The world seems awash in these kinds of people, so opportunists, predators and parasites will always find prey or hosts.
It is also true, if you look at the levels of economic and social success, that some cultures and groups have done really well, and others really bad -- because their Culture helped or hindered their success in a competitive environment (aka The Real World). And that's not subjective opinion; its objective fact.
Because. my dear falak, this market is like the ugly girl on the troop ship.....its the only game in town.
There is nothing new under the sun..
True.
It turns out the sun is relatively young, only ~4.6 billion years old in a galaxy that's nearly 14 billion years old. It might be more accurate to say there's nothing new in this specific universe of stable atomic nuclei.
Point taken. Thanks
What the hell is a Cazique,
and why do I suspect they are closely related to the Khazars?
The shit you could get away with before the internet....
you still can get away with us treasury notes, you can go to almost every country and sell usa paper dollar
I was reading "you can still get away with usury.." but then my eyes focused again...
And the even bigger shit the US can get away with, WITH the internet!
How can we even be sure that Obama is a real Poyaisian citizen?
Come on dude, the White House released Barry's official birth document, on the internet, which clearly states he was born in Makeupupu Hospital on the Big Island of Poyai. His mothers' name was, strangely enough, "Stanley". The identity of his father is the subject of hot debate, but the smart money is on Lucifer.
The actual Obama birth certificate he posted on the net, was signed by U. K. Lele ha ha ha no kidding.
Shit, I thought it was signed by Linda Green.
I had forgotten about this example. Just in case you think the buyers of the high yielding corporate bonds MUST know something ! Now, you know; not necessarily.
Bonds are just a promise to pay cash plus a little interest at a future date.
The Fed can always exchange freshly printed cash for the all the bonds at any time it chooses.
"No interest rate normalization during my lifetime" ~ B.S. Bernanke
The Fed can't, but the Treasury can.
That will be the Weimar transition, and most people won't have a clue.
Let's hope his lifetime is cut short.
On a long enough timeline....
Reason is contemporary phrenology.
http://www.ssworks.net/wp-content/uploads/2012/02/age_of_reason.jpg
Which is a trap.
U.S.A. meet Poyais!
Unpayable: http://www.usdebtclock.org/
already 18.008t =)
The Federal Reserve could raise tulips or magic beans to pay off its debt.
options:
debt cancellation across the board for everyone and emergency of new socio-economic and political systems
or
usa needs to nationalize tech, energy, healthcare and infra industries or implement a one-time private industry-wide tax on assets in order to pay all short and long-term liabilities.
Wipe all debt
Nationalize Federal Reserve
Issue ownership shares in the Fed to Each State Govt
Give each share (state) voting rights and a member on the board.
Make shares non-transferable, every state has one no matter what.
Erasae all the laws and start over because the justice system has essentially been destroyed anyway.
that's basically the fusion of options 1 and 2.
brilliant!
now why didn't i think of that? ;-)
It all pales in comparison to the "Rothschild Scheme."
Institute a war. "Print" loan-money, and loan to both sides. Take possession of both the "winner," and "loser." Yoke the various peoples to the debt-plow. Use governmnet as plantation managers to drive the people to plow.
An America, not US subject.
Its been working since Napoleon, they have it down pretty good now.
"This is hands down the worst investment out there"
Not a chance. I agree that US Bonds are worth a fraction of their current value, that said JGB's are much much worse. JGB's have a lower interest rate, Japan is further in debt, japan is further in the debt destruction story, Japan has worse demographics, Japan's economy is in decline faster then the US ect ect.
I agree the bonds of most countries are horrible investments and the US are some of the worst, but not THE worst.
I can pay off 18 trillion dollars in about 360 seconds if I was elected president.
Step 1
Paper
Step 2
Pen
Step 3
Executive order XXXXX
By Executive decree, the national debt is hear-by extinguished, the assets of The Federal Reserve Nationalized , and the bankers operating there-in or having had operated there-in and their next of kin and all blood relatives shall be sent to a labor camp where they will remain for the rest of their lives doing public service, elections for key positions in the now "Federal" Federal Reserve bank, will be held in 2 months, and the board of the new Federal Reserve system will be made up of one representative from each state to help shape monetary policy, all currency will be assumed "debt free" from hence forth.
Signed-President
Its a bit crude... but I think it would do the job fairly quick. . . everyone wants prosperity right? thats how you get it... nothing else will work.
Done.
There would be a few sweeping executive orders like an executive order or two to reform the Tax Policy, and enforcement agencies (lower taxes and cap them to say . . . 15%).... etc... some other stuff.... pretty much to the bankers:"you will have to read the executive order to find out whats in it".
I think U.S. citizens should get a patriotic discount on Treasury Bonds and foreigners should pay a premium afteral with a monetary policy like that, you would quickly become the most profitable country to do business in, the safest country to do business in, and the most prosperous country the world would ever see, so foreigners in crappier countries should pay the premium for the safety of the investment.
Citizens should be given at birth a "Birth Stake" in the nation, equal to an ownership bond in the government and banking system, the average citizen should recieve dividends from tax revenue (Taxes will mostly be levied on imports) dividends will be funded by export taxes on natural resources and import taxes on goods (mild taxes 1~2%).
"I think U.S. citizens should get a patriotic discount on Treasury Bonds and foreigners should pay a premium"
You think the US would be in a position to sell more debt after your little executive order. Oh yeah you do know that the baby boomer generation owns most of that debt and is depending on it for retirement. Your executive order just threw tens of millions of people entering a stage of life where they can't support themselves into the poor house. What are you going to do with them pres?
Its fun to be able to play president and think your fixing the country but its a little harder to govern in practice. I am all for sound money and putting bankers in their place but it has to be done rationally.
I have one thing to say, thank god you're not president.
" The safest country to do business in, and the most prosperous country the world would ever see, so foreigners in crappier countries" That is the misunderstanding.
That WAS I believe Kaddaffis Libya.
All kinds of ways to create bubbles...
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
You kind of can feel bad for people getting swindled a few hundred years ago. A guy making up a country half a world away is pretty easy when you can't see it or easily go there.
The fact that even more egregious fraud happens today is unforgivable considering the access to prove the fraud is readily available. The entire system is based in lies and the architects of the system even admit to the lies.
The establishment should be burned, axed, shot, etc for what they are doing. But somehow they convinced people the lies are for their own good and the power elite deserve their I'll gotten gains because their people were persecuted.
Time for another Jesus to kick the moneychangers out of the Fed buildings. Let's not pretend that those buildings aren't their temples.
Can anyone make out the writing on the Poyais dollar bill? Is that One Bard Dollar, One Hard Dollar, One Lard Dollar?
Imagine we could get the univerese to pay us $1000 for every year of its 14 billion year existance, then in another 4 billion years our debt would be paid off, if politicians stopped spending.
I'm moving to Poyais.
I moved to Poyais last month and now I'm starting a business! I just need some venture capital--would you or any other ZHers like to invest?
mm... if you can find them to buy. Right?
Tomorrows Poyais = Mars
As to the subject of the Ponzi Scheme we often forget that what may seem familiar to me and many Americans is not always common knowledge, the story behind the term is very interesting. To those who are unfamiliar with the term Ponzi Scheme or just would like to know more on where it originated and such see the article below that is titled Ponzi Scheme 101.
http://brucewilds.blogspot.com/2013/04/ponzi-scheme-101.html
@Daddio - Roger that!
"... the spark that turns the trust of US government finances into dust can come from a decline in confidence anywhere in the system."
Talking about a decline in confidence : "JPMorgan faces $22B capital hole under new Fed rules" (http://www.cnbc.com/id/102254673)
"JPMorgan has until 2019 to reach the new buffer and it should be able to avoid the embarrassment of raising equity in the market. The bank makes about $20 billion in net income every year and could retain earnings to meet the new requirements."
Still. tell me about a decline in confidence. Wonder what's gonna happen if the situation deteriorates to the point that the 2019 deadline is too remote.