Ponzis : The Science and Mystique of a Class of Financial Frauds
Ponzis are among the most ubiquitous and least understood phenomena of economic life. They acquired a certain salience with the global financial crisis of 2008 and the crash of Bernie Madoff s celebrated Ponzi scheme. This paper explains the struct...
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| Language: | English en_US |
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World Bank Group, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/07/19795533/ponzis-science-mystique-class-financial-frauds http://hdl.handle.net/10986/19358 |
| Summary: | Ponzis are among the most ubiquitous and
least understood phenomena of economic life. They acquired a
certain salience with the global financial crisis of 2008
and the crash of Bernie Madoff s celebrated Ponzi scheme.
This paper explains the structure of Ponzi schemes and goes
on to argue that what makes this such a troubling phenomenon
is its ability to be camouflaged amidst legitimate
practices. It is shown, for instance, that the common
practice of giving stock options to employees could be a
potential Ponzi that allows corporations to flourish for a
while by borrowing from its own future. The paper goes on to
discuss the need for intelligent regulation to incise
harmful Ponzis (not all Ponzis are harmful) while taking
care not to damage other legitimate activities that surround them. |
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