Schemes' N Scams

Ok, so Bernie Madoff got his just deserts and was sentenced to like, a lot of years in prison. Screw him and his ilk.

Here's a list of other famous Ponzi schemes.

Social security is a form of Ponzi scheme too:

"Well, not exactly, but Social Security does have a few similarities to a Ponzi scheme. But first, a little about Social Security. In 1935, President Roosevelt introduced a controversial "social insurance" to prevent the crushing poverty that hit many Americans in their old age during the Great Depression. As part of his New Deal, Social Security provided benefits to retirees and the unemployed, financed by taxes on current worker's wages. The details have changed over the years, but the basics remain the same: just like in a Ponzi scheme, money from new investors (taxpayer) is used as payout to older investors (retirees). From 1937 to 2005, Social Security has taken in more than $10.7 trillion in taxes and other income. In the same time period, it has given out more than $8.9 trillion (Source). The program is actually taking in more in taxes than it gives out in benefits (and invested it in Treasurys - this in itself is a complicated issue because it's akin to the government giving itself an IOU)."

And in moments of great embarrassment masterpieces are written as was the case with President Ulysses S. Grant, himself a victim of a pyramid scheme, who left an important piece of work with his memoirs.

***

Which brings me to a story about my experiences with scams. The question usually asked whenever someone "so smart" can be scammed is, well, how could a person so smart get scammed?

A buddy of mine considers himself a swift and street smart individual. More than a few years back a few of us went down to post-Bernard Goetz but pre-Rudy Giuliani New York City. So the Goetz-Giuliani axiom had yet to have a positive effect on the crime rate in NYC which at the time was still a rough place to visit.

We stayed at the Chelsea Hotel in the room where Madonna photographed one of her useless erotica books. None of us gave a shit. The hotel agent obviously had to use it as a selling point but we were desperate since the hotel we originally booked was disgustingly dirty. Chelsea wasn't that much better but for two nights it was passable. To us suburban realists, cleanliness was far more important than Madonna or anybody else who happened to inhabit the famous halls and rooms of the Chelsea.

Anyway, during those days, the streets of Manhattan had its share of hustlers. One type of operation prevalent on many street corners was the one where a guy set up a game on a pathetic looking table (that closed up quickly to help avoid the cops) with three coconut looking cups. The name of the game was to simply choose the right cup with the tiny "ball." Of course, this wasn't a one man operation.

We split up in two groups of two and agreed to meet up later on. My friend and I walked around with our ears and eyes open while enjoying the marvel that is NYC. Getting back to the game, we observed and determined it often involved at least three people. The person moving the cups around, the person in front of the them pretending to be a client laying down cash (and winning), and a lookout person.

It was clearly a scam.

We took it for granted what seemed painfully obvious to us was so for others of likemind. As agreed, we met up with the boys but one of them was missing. "Where's Fishmonkey?" I asked. "He's playing a game," my friend answered.

Note: Name has been changed to protect the gullible.

Next thing we knew, Fishmonkey (the smart guy I mentioned off the top of this story) came at us in a panic, more like a raving gambling degenerate, demanding 80 bucks.

"What are you fucking burnt?" I said.

"Come on! I have this game figured out! I lost 160 but can get it back!"

"Get the fuck outta here, Fishmonkey!" my buddy said.

Now Fishmonkey is really in a rage.

"Come on, guys! I only have 40 left!"

"Don't worry. I'll spot you," I replied hoping to shut him up and move on with his life.

"Fuck it, I have my ATM card."

"So what are you worried about?"

"I can beat them!"

"They're laughing at you!"

"No they're not!"

"I can see his gold tooth from here."

"Fishmonkey, listen. Take your loss and run. You were hustled. And if you think I'm going to give you MY* money to lose you're not the person I thought you were."

And so the conversation went on a NYC street corner. We eventually convinced my buddy to walk away with his bruised ego and lighter pockets.

I don't remember what he did for cash (it's not like he was poor or anything. He made good cash as a pro tennis instructor) for the rest of the trip.

"I can't believe I got hosed that way" my friend later said in a moment of quiet reflection on the drive home.

I just thought I should share that story.

*This would be a form of bail out. It would reward irresponsible stupidity.