Abd ul-Rahman Lomax wrote: > At 12:06 PM 12/18/2009, Mauro Lacy wrote: > > >> You maintain this business as long as you can, and when things are >> starting to get murky(really murky) and "profits" are falling, you >> suddenly fire all your employeess, close offices, and disappear in your >> private jet, to have a well deserved recess in your private island. >> >> Come to think of it, a perpetual motion machine is the ideal project for >> these kind of business. And now that the world is turning "green", time is >> ripe. >> > > That's right. See, those who collected those salaries, high enough to > give them plenty of cash to console them for the eventual loss of > their high-paying job as the chief executive, didn't make a profit > from investment in the company. They may have invested, themselves, > they have a loss on paper, but a net profit, a hefty one, from the > salaries. If they sold stock at a profit, knowing it was really > worthless, they'd be in trouble as insiders, but if they avoid that, > what's to prosecute? > > If they are careful to avoid fraud that isn't merely hype or puffery, > i.e., it isn't outright lying to extract cash or property, there is > little risk of prosecution. The danger, though, is if some of those > investors don't take it lying down. The scenario described involves > some big investors who take large losses. Sometimes if they get > pissed, they get even and don't care about the law. >
Yes, that can happen, but it is a relatively remote possibility. As Stephen Lawrence said "Startups fail all the time." It is accepted and normal for a company that have raised some investment capital to fail. During the dot com bubble, by example, it was known and accepted that only around 1 or 2 percent of the companies will succeed. In the end, it's related to the fact that during these bubbles there's so much money chasing so few goods. Money is easy to print, but not so easy to redeem. Money is the colonizing tool par excellence, too. Way better than weapons or force. Banks and investment firms are always looking for opportunities to invest its capital, which they abundantly have, with the remote hope that the business will flourish and they'll get more money out than they have put in. The only thing the executives of those firms need is a credible business opportunity. It doesn't need to work in the end. It just has to be credible, so they can cover they asses. And if it doesn't work, that's the normal outcome most of the time anyway. And most of the time also, it's not their money. It is the money of the investors in an investment firm, or money from a line of risky investments from a bank, etc. Come to think of it, it is a really stupid state of affairs. But it's justified because during the process, appropiation of real assets take place. That is, whenever one of those companies or business succeed, the initial investors are now the owners! The original possessors of money have exchanged during the process, in the end, a lot of printed paper for real value. They have buyed value, so to speak.
