Slashdot Mirror
Ponzi Schemes Multiply On YouTube
Hugh Pickens writes "While it's probably not true that P. T. Barnum was the originator of the saying 'there's a sucker born every minute,' the proliferation of nearly 23,000 Ponzi schemes on YouTube, with an astounding 59,192,963 views, proves that the sentiment is still alive and well. The videos usually don't ask for money directly, but send viewers to web sites where they are urged to sign up for the 'gifting program,' usually for fees ranging from $150 to $5,000. One of the videos recently added on YouTube featured Bible quotes, pictures of stacks of money and a testimonial from a man who said he not only got rich from cash gifting, but also found true happiness and lost 35 pounds. 'They make it seem like it's legal and an easy way to make money, but it's nothing more than a pyramid scheme,' says Better Business Bureau spokeswoman Alison Southwick. Some of the videos claim that because it's 'gifting,' it's somehow legal. 'They talk about "cash leveraging," whatever that means, and other vague marketing talk,' says Southwick, but the basic scheme is that participants are told to recruit more people who will put in more money. 'It's just money changing hands,' says Southwick, 'and it always goes to people at the top of the pyramid.' A spokesman for YouTube, which is owned by Google Inc., said the company doesn't comment on individual videos."
Surely these are pyramid schemes rather than Ponzi schemes?
Isn't a Ponzi scheme different, in that you show a "return" on an investment using other investors' money in the hopes that they will keep investing in you, thereby allowing you to make it seem as if there is money being made.
In a pyramid scheme, you recruit X members who recruit X members each etc. At each level, you send some percentage of the money you receive up.
The main difference being that in a Ponzi scheme you are recruiting investors whereas in a pyramid scheme that task falls upon the suckers you convinced to give you money.
Also, according to Wikipedia, Ponzi schemes are easier to maintain for longer because you simply have to convince a large enough portion of your "investors" to reinvest, whereas the pyramid scheme relies on an exponentially increasing base of suckers.
Ponzi schemes also revolve around financial machinations to confuse people, whereas pyramid schemes, from my understanding, relate more on convincing people about buying into a "franchise" or something to that effect.
captcha: viruses
He might be talking about Social Security - which relies on more people paying in than taking out and will crash and burn horribly if the population stops growing fast enough.
No thats tort money, which isn't used anywhere.
Fractional reserve allows them to lend out a fraction of their reserve - hence the name. You can't create money (well, the central bank can, but it's tightly controlled because of the inflationary effect).
For a deposit of $100 they can lend out $80, that gets deposited and lent out as $64, then $51, $40, etc.
There appears to be more money in the system but there actually isn't at all. Only the initial $100 exists - it's just been lent to multiple people.
In the real world it's more complex - banks sell their debt to other banks to increase their reserves, so they can lend out more (because they make interest on lending - it's their main source of income).
Where this system falls down is where someone in that chain suddenly decides they can't pay it back. This is how we got into the mess we're in right now, where enough people failed to pay the debt back all the banks suddenly remembered that none of this money they claimed to have actually existed at all.. it was all tied up in debt.
The $5 comes from work - you know, the means of selling goods and services to generate income.
You're talking about a world where nobody produces anything, so the only income they have is from banks. That's not a realistic model.
Oh and nobody creates money, except in exceptional circumstances (the central bank can, but an ordinary bank can't.. that's self evident, otherwise they'd all have infinite money). Credit to you is a net debit to the bank (and a source of income, due to the interest payments). This is why banks aren't keen to lend right now - their reserves are low as they've taken a hit from all the bad debt.. because they can only lend based on their reserves they're cherry picking the lending to the safest debtors.
Deflation is the term you're looking for. Stagflation just describes periods of economic stagnation coupled with inflation, and inflation is always a motivator to spend money instead of hoarding it.
You are in luck. This gentleman (a former deputy commissioner at the Social Security Administration) did just such an analysis. Hint: it turns out much better than you might have expected. http://www.forbes.com/forbes/2009/0413/022-stock-market-taxes-on-my-mind.html
The more you regulate a company, the worse its products become.