Of ponzi schemes and Goldqwest

[Disclaimer: Apologies. This article is probably is not the kind of thing that one is bound to enjoy on a lazy sunday afternoon. But i havent the energy to complete it on working days.]

Heres something ive been planning to nail down for a long time now.

What outfits like Goldquest, now Bernard Madoff have been doing actually has a name - They are classic 'Ponzi schemes' - a fraudulent scheme that pays investors out of money that is put in by subsequent investors - because theres no profit that is made - because there is no legitimate business that the outfit is involved in.

They collapse when new inflow stops - Madoff's show collapsed with the liquidity crunch following the economic crisis - and Goldquest - from a combination of political issues (Neta mumbling: mmm. Edhu ennada idhu. Namma etthanai nalla thozhila irukom. Picks up phone ..Elai... ennada this goldukostu ? ...), liquidity issues and the fact, as i see it, that it had grown much too big.

Too many people made far too much money too soon to go unnoticed - far too many lavish parties, Audi A3s, BMWs and hand-me-down, 20k instalment a month Mercs - and you could overhear people pitching for new signees in places as common as Bessie beach cafes & heck, even dosai hotels in Madurai.

I always thought they did so much business in South India because the start of their operation coincided with times when every bloke with an engineering degree - who was or was not illiterate in everyother sense - had 2, often 3 job offers from IT outfits - and some of Goldquest's early birds were so green & with 20grand a month - and 10grand still in the pocket even after sooper amount of oorsuthifying - goldquest - to some - was something they work on 3-4 years, make a billion or two - and retire.

I have to say though, a few of my really close friends actually nearly made it to their retirement - BMWs, Audi A3s, A5s, Beachfront penthouses to flaunting dozens of open airtickets to places like coimbatore, bombay, pune and bangalore.

As one of the original cynics - I dare not say more, for fear of offending them or pissing them off. They are all still friends, and i still respect most of them - for their passion, energy and for how they've taken it after the scam ground to a halt - leaving most of their balance sheets in the red. (Simply read as: More money OWED than whats in the bank).

The mechanics of how they actually came to owe money in the first place when some of them were making money in 10s of lacs a month (True, i have seen cheques) and could afford Audis (I have seen these too) - is something ive closed studied also - and it needs a slightly more verbose, but highly interesting explanation detailing the demerits of credit card debt, buying stuff on instalments, postponing tax dues , reckless money lending to friends and most importantly - the cons of upping your lifestyle (read: monthly expenses) - dues, phone bills, credit card bills, travel bills and booze bills - on the back of shaky, uncertain monthly inflow (- a bit like - a million kutti private ponzi schemes inside the big, mega ponzi scheme) I'l save it for later - for more money minded audience, i guess.

[ partly also down to not having been brought up by true blood, hard headed, seen-it-all cynics ;- (I cant help bringing the old man into this discussion - lol)]

Anyway, here are a few more articles to get you in on more fundae:
Here, here, here

Here are the lessons we all ought to learn from the whole thing :

a) Basic money matters cant be wrong
b) Earn your living by doing something that you understand and make sure that you know to do it pretty damn well
c) Buy a cycle when you an afford a moped, buy an alto when you can buy a toyota, buy a helicopter when you can afford this
c) There isnt a free lunch in the world (Not even a free glass of water, for that matter)
d) When you see something that seems/sounds like too much of a good thing - do what my old man will do without batting an eyelid - turn cynical, gatherup your belongings and SCRAM.