4 ms·

I don't follow your logic. Isn't a larger scheme always more likely to be noticed than a smaller one?

by eli 11y ago

Mikeb85 11y ago
A larger scheme makes enough money to pay off those who might attempt to prosecute it. It's also generally more sophisticated, and has the means to hide misconduct. Look at those who are successfully prosecuted - mostly traders, small firms, 'rogue' employees. In one of the larger cases, SAC Capital, only a small number of SAC employees were convicted, despite it being 'common knowledge' that they engaged in insider trading, to the point that it was a central tenet to the firm's strategy, and traders brazenly collected insider information. And yet somehow, Steven A. Cohen has managed to escape punishment, as have the large majority of its traders.
rl3 11y ago
Truly powerful actors are often able to use government policy as a means of achieving their schemes, either via influence or simply running the relevant portions of the government themselves. Why bother taking pains to hide anything when what you're doing is technically legal? The best part is, said policy can later be propped up to appear as if it was actually in everyone's best interest.
- eli 11y ago
  Not really looking for a semantics argument, but isn't a legal scheme run by the government out in the open the same thing as "policy"?
  - deleted 11y ago
    [deleted]
branchless 11y ago
Such as sub-prime mortgages?
a3voices 11y ago
Well the largest scheme is probably how banks create money out of nothingness through lending, but it's legal. "By creating money in this way, banks have increased the amount of money in the economy by an average of 11.5% a year over the last 40 years. "
- 6stringmerc 11y ago
  Ahh the rehypothecation system. Talk about playing with fire.
- ecdavis 11y ago
  I don't think fractional reserve banking really counts as a scheme or a conspiracy. It's not secret at all, completely legal and has been widely studied by economists. I think "banks create money out of nothingness" is also a mischaracterization. It's more like currency minted by the private sector. That being said, I think there is something about it that fundamentally offends human sensibilities.
  - logfromblammo 11y ago
    The only thing not quintessentially conspiratorial about it is that everybody knows about it and believes that it is actually happening. It is not like currency minted by the private sector. That would be more akin to futures contracts settled by physical delivery or prepaid service contracts. The private sector has to back up its currency with actual goods or services. If you issue hemp futures, you had damned well better be a hemp farmer and insure your crop, and if you issue hemp scrip, you'd better have some actual reserves of hemp in your warehouse. All that is backed by something, even if it is little more than a believable promise. The promise that backs fractional reserve is that you can have your cake and eat it, too. If you make a deposit, you can withdraw 100% of it at any time, even though they will immediately lend 90% of it to someone else. That someone else will then bid against you for the same goods and services, using exactly the same money you are bidding with. Lets say you deposit $100. You want a doodad from Jack Handy. Joe Blow also wants that doodad, and he has $0. But the bank manager is his brother-in-law, so he can qualify for a loan of any size. Ordinarily, you could get the doodad for $50. But Mr. Blow starts a bidding war with you, using your own money, and the final price is $60. If you win, you write a check for $60, and Jack Handy deposits $60. The bank has the same amount in reserves, and can issue the same amount in loans. If Joe wins, the bank lends him $60 of your money, writes a check for $60, and Jack Handy deposits it. The bank still has the same money in reserves, but has promised to pay the same $60 to both you and Jack. Thanks to the trick, you effectively lost $37.50 (100x60/160) for the doodad you didn't get, Jack effectively lost $12.50 ($50-37.50)--surprise! $60 of lender-inflated bank credit is worth less than the $50 in cash--and Joe is now paying the bank rent on the doodad. | before deposit || after deposit || after Joe buys | | Cash | Credit | Debt || Cash | Credit | Debt || Cash | Credit | Debt | ----+------+--------+------||------+--------+------||------+--------+------| You | $100 | $0 | $0 || $0 | $100 | $0 || $0 | $100 | $0 | Jack| $0 | $0 | $0 || $0 | $0 | $0 || $0 | $60 | $0 | Joe | $0 | $0 | $0 || $0 | $0 | $0 || $0 | $0 | $60 | Bank| $0 | $0 | $0 || $100 | $90 | $100 || $100 | $30 | $160 | The are not creating money out of nothing. They are creating credit out of their own debts, and screwing everyone else over hard in the process. They are literally the only winner in the above scenario.

I don't follow your logic. Isn't a larger scheme always more likely to be noticed than a smaller one?

by eli 11y ago

I don't follow your logic. Isn't a larger scheme always more likely to be noticed than a smaller one?

A larger scheme makes enough money to pay off those who might attempt to prosecute it. It's also generally more sophisticated, and has the means to hide misconduct. Look at those who are successfully prosecuted - mostly traders, small firms, 'rogue' employees. In one of the larger cases, SAC Capital, only a small number of SAC employees were convicted, despite it being 'common knowledge' that they engaged in insider trading, to the point that it was a central tenet to the firm's strategy, and traders brazenly collected insider information. And yet somehow, Steven A. Cohen has managed to escape punishment, as have the large majority of its traders.

rl3 11y ago

Truly powerful actors are often able to use government policy as a means of achieving their schemes, either via influence or simply running the relevant portions of the government themselves. Why bother taking pains to hide anything when what you're doing is technically legal? The best part is, said policy can later be propped up to appear as if it was actually in everyone's best interest.

eli 11y ago
Not really looking for a semantics argument, but isn't a legal scheme run by the government out in the open the same thing as "policy"?
- deleted 11y ago
  [deleted]

branchless 11y ago

Such as sub-prime mortgages?

a3voices 11y ago

Well the largest scheme is probably how banks create money out of nothingness through lending, but it's legal. "By creating money in this way, banks have increased the amount of money in the economy by an average of 11.5% a year over the last 40 years. "

6stringmerc 11y ago
Ahh the rehypothecation system. Talk about playing with fire.
ecdavis 11y ago
I don't think fractional reserve banking really counts as a scheme or a conspiracy. It's not secret at all, completely legal and has been widely studied by economists. I think "banks create money out of nothingness" is also a mischaracterization. It's more like currency minted by the private sector. That being said, I think there is something about it that fundamentally offends human sensibilities.
- logfromblammo 11y ago
  The only thing not quintessentially conspiratorial about it is that everybody knows about it and believes that it is actually happening. It is not like currency minted by the private sector. That would be more akin to futures contracts settled by physical delivery or prepaid service contracts. The private sector has to back up its currency with actual goods or services. If you issue hemp futures, you had damned well better be a hemp farmer and insure your crop, and if you issue hemp scrip, you'd better have some actual reserves of hemp in your warehouse. All that is backed by something, even if it is little more than a believable promise. The promise that backs fractional reserve is that you can have your cake and eat it, too. If you make a deposit, you can withdraw 100% of it at any time, even though they will immediately lend 90% of it to someone else. That someone else will then bid against you for the same goods and services, using exactly the same money you are bidding with. Lets say you deposit $100. You want a doodad from Jack Handy. Joe Blow also wants that doodad, and he has $0. But the bank manager is his brother-in-law, so he can qualify for a loan of any size. Ordinarily, you could get the doodad for $50. But Mr. Blow starts a bidding war with you, using your own money, and the final price is $60. If you win, you write a check for $60, and Jack Handy deposits $60. The bank has the same amount in reserves, and can issue the same amount in loans. If Joe wins, the bank lends him $60 of your money, writes a check for $60, and Jack Handy deposits it. The bank still has the same money in reserves, but has promised to pay the same $60 to both you and Jack. Thanks to the trick, you effectively lost $37.50 (100x60/160) for the doodad you didn't get, Jack effectively lost $12.50 ($50-37.50)--surprise! $60 of lender-inflated bank credit is worth less than the $50 in cash--and Joe is now paying the bank rent on the doodad. | before deposit || after deposit || after Joe buys | | Cash | Credit | Debt || Cash | Credit | Debt || Cash | Credit | Debt | ----+------+--------+------||------+--------+------||------+--------+------| You | $100 | $0 | $0 || $0 | $100 | $0 || $0 | $100 | $0 | Jack| $0 | $0 | $0 || $0 | $0 | $0 || $0 | $60 | $0 | Joe | $0 | $0 | $0 || $0 | $0 | $0 || $0 | $0 | $60 | Bank| $0 | $0 | $0 || $100 | $90 | $100 || $100 | $30 | $160 | The are not creating money out of nothing. They are creating credit out of their own debts, and screwing everyone else over hard in the process. They are literally the only winner in the above scenario.