> Why do smart people, even those in e-gold, succumb to fraudulent
activities
> that are impossible to sustain? If I post a absurd comment like, "I can
> guarantee you 300% return on your money in 3 months!" No one will
question
> the value of the information. But if someone said, "I am putting together
> an offshore mutual fund where expected returns will be 8% to 25% annually,
> with a serious withdrawal penalty." I would get blank stares.
The ponzi schemes that are all over the internet are a type of game to many
people; and devastating to those who believe that their returns are
guaranteed, which leads them to invest a lot of money in these operations.
The most successful ponzi schemes DO pay for a while, (actually, they pay
right up until the end), and this leads their early members to start sending
in their friends, relatives, and neighbors, and to start advertising the
scheme. The longer the ponzi scheme can stay in business, the more people it
can involve and the more money they can make. Of course, they all go broke,
the schemers run, and the net result is a LOSS to many, many more people
than those who made a profit. However, everybody can look at those who made
a profit and rationalize this type of activity to themselves by believing
that not all ponzi schemes have to go broke and since the returns are so
high, all they have to do is become successful ONCE and this will pay for
their losses. The math doesn't work this way -- the possibility of loss is
significantly higher than the possibility of making a profit -- but this
does not seem to dissuade those involved from trying again.
The bottom line is that the people who are interested in a 300% return are
interested in the operation for a different reason than those interested in
a 20% mutual fund.
Craig
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