Carlo Ponzi, was born in Parma Italy in 1882, and came to the US in 1903. For the next fourteen years, he wandered from town to town, from job to job, and amounted to nothing. He washed dishes, waited tables, and clerked, but what he did best, was interpret from English to Italian, and reverse. During his time in the US, he had become pretty good at English. Settling in Boston, he took a job typing and answering foreign mail. He was so good at language that he decided to start an export magazine. Writing to a gentleman in Spain about his proposal, his answer from Spain included an international postal reply coupon. He was to take the coupon to the post office and exchange it for American postage stamps, which he would use to send the magazine to Spain.
The coupon had been purchased in Spain for a US penny, but he was able to get six one-cent stamps for the coupon, which may have been the first case of arbitrage. Sensing a gold mine in buying stamps in Spain, and multiplying his money by 600% selling them in the US, Ponzi decided to become rich by buying stamps in Spain, and getting six times as many in the US. He then could sell the stamps and make a lot of money. Not bad, huh? Sounded good anyway. On December 26th, 1919, Ponzi filed an application with the Boston City Clerk, establishing his business as “The Security Exchange Company.” He promised 50% interest in 90 days to his investors, but said he could do it in 45.
Word spread quickly, and within a few months, the lines outside his office were growing exponentially. Everyone wanted in. Thousands of people purchased Ponzi promissory notes ranging from $10 to $50,000, with $300 being the average. Obviously, Ponzi used the new money to pay off the old notes. All anyone knew, was that they had “invested $100, and gotten back $150 a month and a half later. Nothing wrong with that! A pyramid scheme, in other words. A colossal pyramid scheme, which grew not because of anything Ponzi did, but because of the basic human desire for SFN, or “something for nothing.” Ponzi became filthy rich, and the money rolled in by the buckets full. He paid off the old notes with the new income, and became even richer, and more popular. Within a year, Ponzi had purchased a 20-room mansion, and was living like a king.
On July 26, 1920, a Boston reporter wrote a story questioning the scheme and Ponzi’s honesty. Crowds lined up outside Ponzi’s door, demanding their money back. The hundreds who lined up, were but a small fraction of those who had bought in, so Ponzi simply gave them their money back, and assured everyone that all was well. His popularity increased as a result of this incident, and more and more people “invested.” Crowds cheered his every move, and Ponzi must have actually thought he had discovered a new kind of foolproof money and income. The crowds and “investors” thought so anyway. On August 10, 1920 it all came apart, when the auditors, newspapers and banks declared Ponzi to be bankrupt. He then confessed that he had a criminal record in Canada and Atlanta. On August 13th he was arrested and turned loose on a $25,000 bond.
40,000 people lost an estimated $15 million ($150 million today). He was sentenced to 14 years in prison, and disappeared next day because he was out on bail. He later turned up in Florida, where he attempted another pyramid scheme, and landed in jail. He went back to Italy after serving his jail term, and became a translator for Mussolini. Then off to Rio, and in January of 1949, he died in a charity ward in Rio de Janeiro. A rather inauspicious end to a scoundrel, I suspect.
So why do I bring up Ponzi? First of all, because it is an interesting story, and I thought you’d like to hear it. Secondly, because the entire world’s monetary system, bar none, is a gigantic Ponzi Scheme, which is sure to collapse eventually. Governments are like Ponzi. They think they have discovered a new economic theory, which gives them unlimited funds to do with whatever they choose, but in the main to collar more votes from the stupid constituencies, who actually believe that government is giving them something. The stupid public, in all lands on earth, are just as stupid as were the followers of Ponzi. “Give us a grant.” “Help the poor.” “Subsidize farmers.” “Build a subway system.” “Bail out the banks or savings and loans.” “Build airports.” “Buy my food with food stamps.” “Pay my salary while I am unemployed.” “Pay my medical expenses.” “Support me in my old age.” “Go to the moon.” “Fight wars.” “Do stupid things to make the folks at home vote for you.” “Stop drugs.” “Stop crime.” “Run courts and jails.” Buy my fuel oil and electricity, because I am poor.” “Send me money because I am disabled.” “Build a bridge.” “Build hundreds of thousands of miles of highways.” “Make the air safe.” “Pay for public radio and TV.” “Keep the stock market honest.” “Establish an Army, Navy, Marine Corps, Air Force, and Coast Guard.” “Own National Parks.” “Carry the mail at a loss.” On and on it goes, and not just in America. “Pork, pork, pork,” is all it amounts to, and it is a world wide phenomenon.
Sir Alan, and all the other bankers and governments are conducting a gigantic Ponzi scheme. Ponzi’s promissory notes were paid with more “investors,” and governments pay their bills by printing more money. They buy their votes by printing money. They keep the citizens quiet and seemingly happy by printing money. They levy taxes and collect the payments in their fiat money. The banks loan fiat money to borrowers without having it on deposit many times. Governments tax citizens again by reducing the value of the money they print. How? By printing more! The more they print, the less the currencies are worth, which amounts to double taxation.
Ponzi sold his notes to eager crowds, who at first, got lots of profit. It all collapsed eventually. Fiat currencies work well at first, and don’t collapse suddenly, as did Ponzi’s racket. Ponzi’s went down suddenly because of bad publicity by newspapers, accountants and banks. Accountants, newspapers, and banks around the world know of no other form of wealth, so they continually tout the fake money. Ask any financial advisor about gold and silver, and you’ll get a blank stare. All they know is dollars, pesos, pounds, yen, or euros. Why will they all collapse? Because as one famous man once said, (who is no favorite of mine), “You can fool all of the people some of the time, and some of the people all of the time, but you can’t fool all of the people all of the time.” Propping up a worldwide scam, simply cannot last forever. For the first time in known history, there isn’t a single currency anywhere, which is backed by something valuable, such as gold or silver. Not a one. All are being printed with wild abandon, and all will go the way of all fleshÂ…eventually. Signs of fiat currencies’ demise are easily recognized. It’s all quite a simple observation. Prices go up. Prices in all tangible things go up, even though the tangible remains the exact same thing. Milk, butter, steel, coal, clothes, tires, or what have you, all remain exactly the same items. Only their prices will go up continually; in all currencies. This is the thermometer of the currency’s condition. Prices in that currency.
The fact that the dollar has already lost 98% of its former purchasing power, doesn’t phase 99.99% of the sheeple populace. They just keep on “investing” in dollar denominated items, just like Ponzi’s followers bought his notes. Ponzi’s notes depended on more takers. Fiat currency depends on cutting trees and making ink to feed the presses, plus the cooperation of the banks, newspapers, and accountants. It’s so sad! Protect yourself.