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."

Comments

They learned it by watching the government.

[Rockoon]

Just as the government learned it by watching Ponzi, these youtubers learned it by watching the government.

Re:They learned it by watching the government.

[Nitage]

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.

Re:They learned it by watching the government.

[Rockoon]

It isnt just social security...

The national debt is now over 11 trillion dollars and there hasn't been a real budget surplus since 1969.

The federal government has borrowed money and can not pay the prior lenders back, so they borrow more money in order to do so. This has been going on for so long that only a few people still recognize it as an active ponzi scheme, as is evident by the ignorant people modding my post as a troll.

The interest payments on the debt will crest half a trillion dollars this year, and will be over a trillion/year by the time Obama's 1st term is up. The government will likely borrow more from social security (why not? its doomed anyways) in order to pay off prior lenders as it becomes more and more difficult to find new lenders.

There are other areas where the government is actively ponzi as well, such as medicare (medicare is a bigger problem than social security.)

Check out (U.S. Government Accounting Office) http://www.gao.gov/cghome/d08446cg.pdf to see how grim the pyramid really is.

It wont be possible to take down the pyramids through force (taxation at gunpoint) for much longer. If ponzi could have gone out and robbed some banks, he could have paid off all of his lenders. But imagine the point where even if he robbed every bank in the country he couldn't pay them off. America is pretty much there, right now, at the point of no return.

Re:They learned it by watching the government.

[LaughingCoder]

... a huge lie perpetrated by people who would like to see the huge pot of SSA money be put into the stock market. I wonder how that would have worked out?

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

Re:They learned it by watching the government.

[Rockoon]

You got it backwards.

Master Charge owns the debts of others
United States owes debts to others

See the difference? Its hard for the government to write off bad debt when its the one thats upside down.

..and whats this about a tax deduction? The solution to the problem of not enough tax revenue, you believe, is to reduce tax revenue further? Did you even think about it before you typed it?

..and whats this about right wingers? Did someone convinced you that this was a political idiology problem (with the 'right' being the 'enemy') rather than a fiscal numbers problem?

Re:They learned it by watching the government.

[jabithew]

I don't know when, but at some point in the last few years wanting to have a balanced budget became the sure sign of a right-wing extremist.

The tax deduction only works for Master Charge, because it can take defaulted loans as losses, which then count against its income.

GP makes no sense. The US could simply refuse to pay off its debts, but to claim that this would have no consequence, or even be beneficial, is surreal. All of a sudden US treasuries, up till now the benchmark of safe investment, would be worthless. Investors would switch to safer euro-denominated bonds, probably from Germany. The markets would be awash with worthless dollars everyone wants to convert to euro. The dollar would collapse. China might start cutting its losses, accelerating the process. The euro would become the global reserve currency, assuming that European economies weren't too hammered for it to switch elsewhere.

The status quo, allowing America to effectively raise cash on its own terms, would be destroyed, and the American public would have to learn to deal with difficult terms of debt like the rest of us.

So yeah, good luck with that.

Re:They learned it by watching the government.

[Cathbard]

Australia actually. Over here we have always had a "look after the underdog" mentality and don't think it's right to throw people to the wolves simply because they didn't have the ability to get rich. Personally I am glad that is the case, I find the "make money or die" perspective quite obscene, not everybody has the ability or aptitude to make money and that has no bearing on their worth to society. In fact I know lots of musicians and artists that did their best work while on the dole (unemployment benefits) and enriched us all. I also know several people on welfare that do great charity work. Making money is hardly a method of assigning worth imo and it certainly shouldn't decide whether a person lives or dies. But hey, I'm not an American, as you say, we think differently.

"educate yourself! educate yourself!"

[RyuuzakiTetsuya]

...this is precisely why we really need to reconsider our public schooling system.

If we abolish forced schooling, and insist that people "educate themselves" They'll find one of these scams, get taken for an expensive ride, and then left dumbfounded as to what happened.

Solid critical thinking skills start with a decent education. Decent education starts by making it free, neutral and accessible.

Pedantry

[elvum]

Surely these are pyramid schemes rather than Ponzi schemes?

A fool and his money...

[onion2k]

The notion that you can "gift" (or "buy") your way to being rich without doing any hard work, or having a creative idea, is so completely stupid that anyone who believes it, assuming they're in full control of their mental faculties, deserves what they get.

Ponzi != pyramid

[Anonymous Coward]

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

Re:"educate yourself! educate yourself!"

[QuantumG]

You'd be surprised how quickly a sucker learns after his money is gone forever. Sounds like a cheap education to me.

Why should it be illegal?

[Opportunist]

With more and more videos being pulled because the various MAFIAA organisations can't get enough, crap like that will soon be the only things left on YouTube. Let's be honest, what's left? Music videos were the first thing to go (or "be unavailable in your country" should they not want to cough up the dough to be available for you). User made videos are now targeted, as well as videos to the likeness of "look how I play $instrument to $song".

Soon all there will be left are videos that, bluntly, nobody wants to watch.

But, to avoid being modded offtopic, let's ask another question: Why should it be illegal to play pyramid schemes? Just because people are stupid enough to fall for them? I have no sympathy for people who are lured in by promises that are quite bluntly too good to be true, where thinking about it for only a minute would give you enough reasons to stay away from it. How can they promise you insane interest rates when your bank can only give you 3% or less? How the heck should they have any influence on your weight (aside from you not being able to even buy bread anymore and thus starving)? And if that's illegal, why is religion still legal while promising essentially the same?

Re:Why should it be illegal?

[American Terrorist]

Why should it be illegal to play pyramid schemes? Just because people are stupid enough to fall for them? I have no sympathy for people who are lured in by promises that are quite bluntly too good to be true, where thinking about it for only a minute would give you enough reasons to stay away from it.

Libertarian intellectualism at its finest. Why don't we just scrap all the laws and let people fuck each other over every way imaginable? People do stupid things, laws try to prevent and minimize the harm done by those actions.

Re:Why should it be illegal?

[Anna Merikin]

Here's why:

If it illegal to take someone's money by use of force, so it should *not* be legal to do the same with a pen or a computer.

If the strong of body cannot rob the weak, the strong of mind should be prohibited from doing the same.

Re:waves of infection with stupidity

[QuantumG]

Friend of mine seriously considered "investing" in a Ponzi scheme. Even after I explained to him how it works he was still thinking about it. Why? Cause he considers himself smarter than the guy doing the scheme. The conversation went a little like this:

Bob: Have you heard of these short term money market investments?
Me: Heh, these.. what.. investments?
Bob: short term.. money.. you give them money and a few weeks later they give you 100% return.
Me: Oh really.. what are they investing in?
Bob: Doesn't say.. I mean, that makes sense, if you knew what to invest in you wouldn't need them right?
Me: It's a scam.
Bob: Really? Their web site looks legit.
Me: Web developers are pretty cheap ya know.
Bob: Well I've search around for them and I've not found anyone bad mouthing them.
Me: Maybe they change their name every week.. or maybe they're doing the long con.
Bob: I think they're legit man.. umm.. long con? What do you mean?
Me: How much are they asking for?
Bob: Not that much, only a few hundred.
Me: So if you invest a few hundred and in two weeks time they give you double your money back and then ask you to reinvest that and give a few hundred more, you would right?
Bob: Well, yeah, I guess.. maybe a few times.
Me: So if, say, on the third time they said they really needed to you pump in twice as much as you have already given them or they won't be able to give you back your investment.. you would right?
Bob: Well, I guess, I mean, they'd have a good history by then.
Me: After just 3 cycles?
Bob: Yeah..
Me: You're a sucker.
Bob: No.. I'd take the money before then I think.
Me: So if they ask you for your phone number and call you up, will you talk to them?
Bob: Sure.
Me: And you'd give them your bank info.
Bob: Uhh.. umm.. I guess so.
Me: Yeah, you're a sucker.
Bob: I think I'll give em the first hundred and then take their money on the first cycle.
Me: I think they'll see you coming and make sure you never get that first "investment" back.

(Bob isn't his real name, but if you're reading this M... you know who you are).

Re:It's *money* which is the Ponzi scheme

[Tony Hoyle]

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.

Re:waves of infection with stupidity

[Tony Hoyle]

Or work for the guy that started it. I wrote the software to monitor one and he offered to graft me on somewhere near the top. As I'd done the maths I realized how sleezy it was (it was fairly obvious that those towards the bottom stood to lose every penny, whilst the guy at the top was looking at £50,000 per month) and in declined. Probably I wouldn't these days.. I'm older, wiser and have less of a conscience.

Re:It's *money* which is the Ponzi scheme

[Kjella]

1 year later I'm a bit stuck because I've paid off most of the loan to the FED but that last $5 is a real bitch because it just doesn't exist. So what do I do?

If it's (hyper)inflation you spend it as soon as possible before it loses value until it collapses like the reichmark in 1920s germany or just recently the zimbabwean dollar. If it's stagflation you hoard it as money is increasing in value. What you're missing here is that somewhere, real value is produced. Imagine that there's 100$ total and there's 10 foobars, the only goods to trade so each is worth $10. Now there's a foobar maker, which produces another foobar - there's now 100$ and 11 foobars and the new market price is 9$. Who's earned value? The people sitting on a 10$ bill. Now imagine how well it works if everyone wants to sit on their 10$ bill.

So what's the solution? To print money, they print one more 10$ bill and suddenly there's 110$ total and 11 foobars and the money market works. Of course they can fall to the temptation and print more money than actual growth, say 110$ and 10 foobars, meaning you can sell a foobar for 11$. The government basicly took part of the value out of everyone's 10$ bills. But people have a very simple way of fighting this - don't sit on money, sit on goods as printing money only increases prices. In those situations money is just an intermediary as you swap one good for another, you buy gold or a saner currency.

Of course the government like everyone else like skimming something of the top, but for the most part they work hard to keep the financial system going. Once you stop believing in the currency you also stop believing in deposits and credits because they make you "stuck" in that currency and so the whole economy withers. Like with the human body, you have vital organs but if you have no circulation system then none of those will survive either.

Re:It's *money* which is the Ponzi scheme

[Ihlosi]

If it's stagflation you hoard it as money is increasing in value.

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.