Isn’t all of it a ponzi scheme?

You know, all in all, I do love a free market economy, when balanced by a culture with a strong work ethic and sufficient regulation to squelch temptation.

With Madoff and Stanford in the news so much these days, I’ve been thinking:

Isn’t all of it a ponzi scheme?

A simplistic explanation of ponzi is diverting money to the next person, while never really paying anyone. So how is that different from our credit-heavy society?

How many of us carry weighty balances on our multiple credit cards? And were we recently surprised when – even though we thought we’d been responsible customers – our credit card company could still choose to raise our APR or lower our credit limit? How many of us save money in order to afford a purchase – whether in full or in payment?

I am reminded of one of my sisters – she and her husband purchased their older suburban home when their firstborn was young. Now that both of their children are in secondary school, the whole family is in that same house. Sure, they could’ve moved to a bigger, newer home; but they chose to stay, putting their money and energies into other initiatives like vacations and college. It is said that many domestic arguments arise from money issues. I wonder, too, how many arguments and tensions were circumvented by my sister and her husband’s financial choices.

Surely this is a global issue, and much of the developed world is indeed facing consequences of a credit-heavy society. And I take a moment to ponder how much of our national debt is held by foreign nations.

Now, let me clarify: I am not advocating a cash-only society. Credit is a part of our world. Whereas our credit-heavy lifestyle has gotten us into this economic crisis, we also appear to have a bit more breathing room because of it. Solutions – ironically, sadly – all seem to revolve around getting the credit flowing again. There is growing talk of a slow money movement, as a way to invest sustainably and more manageably. Had you heard about the dairy farmer asking his customers for $1,000 loans? Brilliant.

While Madoff may stand alone at his trial, we know there had to have been others involved in his ponzi scheme of $65 billion. In fact, in some ways, we and our governments should be standing alongside him.

So what’s the take-away message?

Sure, many of us are scared by these economic times. I hope we will choose to contract our spending and plan ahead a bit more with more visibility to our funds, both now and in the future when times are brighter.

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