Your Questions About Is The Stock Market A Big Ponzi Scheme

George asks…

Why Do Republicans Say I Do Not Understand What a Ponzi Scheme Is When Comparing It To Capitalism?

By Dr. Michael I. Niman is a professor of journalism and media studies:
Charles Ponzi, the con artist busted in 1920, and Bernard Madoff, one of America’s most successful hedge fund managers and a reputable pillar of the Wall Street financial community. Madoff, whose name is actually pronounced “made off,” took the scheme that Ponzi made famous to new heights, conning some of the world’s biggest banks and richest personalities, making off with an incomprehensible sum of money over three times the size of the auto industry bailout.
A Ponzi con goes like this: Some reputable crook sells an investment instrument that promises attractive returns. As new folks invest, the crook pays off previous investors, who actually see the promised returns on their investment. This continues on as new cohorts of investors buy technically worthless stocks or shares, the purchase of which fund payoffs to earlier investors. The actual stock or investment has no concrete value. It is not backed by a tangible item such as gold, real estate, or even a used car or a big lollipop. Nada. Nothing. It’s only value lies in the fact that people, for whatever reason, believe it has value. This belief creates a supply of fresh capital to keep the operation running while its crook-in-chief siphons his cut off the top. The early investors make out okay, as long as they cash out. The later investors, those mindlessly and greedily following the herd, are fucked.
I’m confused because I’ve also just described the global economy. The dollars in your pocket are what economists call “fiat currency.” While US currency was once redeemable for, and hence backed up by, a fixed amount of gold or silver, that system finally collapsed under the Nixon administration, which was essentially bankrupted by the costs of the Vietnam War. The US could no longer afford to back up its money with gold or silver since it had taken to printing money on an as-needed basis, essentially taxing the population by playing the margins on an inflating currency that it could print at will.
At the time, we had become so used to trading these paper slips for real goods that we forgot how this habit started. Words like “silver certificate” and any other indication of redemption value disappeared from our currency. We left “In God We Trust” on the bills, not because the masters of our economy necessarily trusted God but because it was good marketing for what essentially was a Ponzi investment. What, you got a problem with God?
Money has value not because it has any intrinsic worth. It has value because people value it. That’s it. People around the world continue to invest their worth in our conceptual currency, maybe because shaky as it is, it’s still better regarded than their own. In any event, as long as they keep investing in greenbacks, prior owners can keep trading them in, as with Ponzi’s and Madoff’s schemes.
Then there’s the stock market—global capitalism’s nest. Stocks have value? Well…
Okay, there are the fundamentals. Tangible things like factories and inventory. They have real value. And when you buy stock, you’re buying part of that value. But for the most part, those aren’t the hot stocks. Old economy accruements such as manufacturing plants are now seen as albatrosses. They require maintenance. Their operating expenses are susceptible to uncontrollable variables such as energy and labor costs. New economy corporations are rewarding for shedding the unwieldy weight of employees and buildings.
Wall Street’s stars are stars because they’re stars. That’s it. People invest in stocks because their values are going up, and the bet is that they will continue to go up. The rich are usually the first to get on and then off this train. The middle class, seeing how rich the rich got investing in air, then put their life savings into the roulette wheel, often in time for “bubble bursts” and “market adjustments.”
Like with any other Ponzi scheme, it’s a confidence game. It falls apart when the confidence ends. Right now we’re seeing a crisis of confidence.
Now let’s look at housing. When the tech bubble burst—meaning, when the romance of technology stocks wore off and people tried to assess their real value—the smart money pulled out early and took refuge in real estate. This gave us the era of McMansions, obese little castles wedging themselves onto the suburban landscape.
By 2000, real estate was well poised to be the new Ponzi. People burned by the revaluing of technology paper were looking for something real to invest in. Real estate is certainly real. And it’s a finite commodity—sort of like gold or silver. But the problem is that real and valuable as it really was, it wasn’t anywhere near as valuable as a frenzied market made it out to be—and up it shot. The collateral damage here came in the form of homelessness and personal bankruptcies as more and more poor and working folks got priced out of the housing market entirely
Republicans don’t understand what a Ponzi scheme is, no matter how much they tell someone else they don’t understand (and don’t offer any explanation of what it is just Ad hominem attacks).

Justin answers:

I’ve found that the cons here exhibit very concrete thinking bro.. So unless you spell it out, they aren’t going to connect the dots if you use metaphor or symbolism bro.. That’s why it’s so awesome to just continue to go on doing it anyway.

David asks…

does the government debt even matter?

it seems they have no problem going into deeper debt… does it even affect us? how does it affect anything?

Justin answers:

If our government goes to the fed and has them print up some new money to spend and it’s not underwritten by debt, then it causes hyper-inflation. The fed has to find a buyer for that debt or it can’t create it without destroying the credit market itself. The principle buyer of US debt are the oil producing nations we buy oil from. Part of the deal is they are obligated to use a substantial portion of their profits to buy up US debt.

There is a problem. The price of oil crashed recently. It crashed because congressional democrats passed a law and created an agency to investigate if investors were driving up the price of oil by engaging in the perfectly legal behavior of investing in oil futures. Since they basically threatened to throw anyone they felt was doing this in prison, almost all investors abandoned the market all at once. This caused the price of oil to crash. Without oil profits, nations like saudi arabia can’t buy US debt. That caused the credit market to freeze. US businesses could no longer borrow the money they needed to pay bills. They went out of business before being able to make a profit (bills tend to be spread out while profits come in fits and jumps) That caused the stock market to crash. Since stock price is the main collateral used by businesses to obtain loans, this became a vicious cycle.

The whole thing is a hell of a mess that requires, at the very least, that our government stop spending money IMMEDIATELY and allow the credit market to recover.

Is that what they are doing? No. What do you think the effect of printing up the biggest amount of cash ever in our country’s history and blowing it on a ton of useless bullshit is going to do to the value of the dollar if it can’t be underwritten by loans? It will make the US dollar worthless. And if it IS underwritten by loans, it will destroy the credit market.

So yeah….the debt does matter. It’s thrown our economy into a death spiral and there are only a few ways out of this mess.

For example, Obama can nationalize the banking system and force it to underwrite an unlimited number of loans and not sell them. This will cause a dramatic lack of confidence in the US dollar as now, nothing at all will underwrite it. It will also piss off most of the US’s trading partners who buy US debt. Because that debt will essentially become a worthless asset.

Obama could curtail spending. Actually, this is likely to happen. The states are up in arms over the whole thing. A constitutional convention is only two state legislatures away from being called (something that has not happened in a very long time). It’s basically a no-confidence vote by the states that strips the congress of its authority. If that happens, the very first thing they will do is end all federal spending. This is a very real possibility and is serious business.

The last (and probably best) thing Obama could do is disband the commission on oil and allow investors to bring the price of oil back up to a $150 a barrel. That would solve the problem, at least temporarily, in a matter of months.

But, as Ron Paul has made mention of, more than once, the US dollar (actually all major world currencies) are nothing more than a giant ponzi scheme that will eventually crash and burn. In the long term, there is only one real solution….disband the fed, root US money in hard assets like gold, and cancel all outstanding US debt. Basically tell our creditors we won’t pay and if you don’t like it, tough.

John asks…

Will the government of the United States collapse within the next 10 years?

At the moment, we have a government that is intent on escalating its failed policies of the past. We have a Treasury Secretary who is utterly incompetent and causes the stock market to drop every time he opens his mouth. We have a lunatic Fed chairman who is intent on causing a Weimar Republic style spiral of hyperinflation. We have an overseas Empire that has bases in over 130 countries. We have a debt that is so large that there is absolutely no chance that it will ever be paid. We have an aging population that is set to overwhelm the entitlement system within the next few years, finally causing the ponzi schemes of Social Security and Medicare to collapse. The Congress has recently passed a law, the GIVE Act, which forces the young into a forced labor indoctrination program of a variety that only exists in totalitarian countries.

Can anybody else see what I see in the eyes of our ruling class – that they know that the collapse is coming and that they are just trying to get as much loot as they can before the end arrives? Is the end of the biggest government in history near? Are you looking forward to it, as I am?
By the way, the CIA trained Osama bin Laden and the Mujaheddin back in the 80s to do to the Soviet Union exactly what they are now doing to our government.

Justin answers:

You’re wrong about everything except the last part about bin Laden.

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The Convenience of Online Loans

We all need a quick infusion of cash from time to time, which is why popular online loans are some of the most helpful and convenient options we can explore at a time of need. Between the hectic schedule at work and the errands that we all need to run afterwards, who has the time to go out and actually apply for a loan at a local bank? With online loans, these are no longer concerns that you need to worry about, and yet you should still be able to apply for a loan when you most need it.

Online loans are essentially loans that will consider your application without having to come into the office for a face-to-face discussion. Often, these loans post all their loan requirements on a website that you can check. You can then call their number or send them an email to express your interest for applying a loan. With your documents attached, they will then begin assessing your suitability for the loan and if approved, they will deposit the money straight to your bank account.

Now, of course, convenience is not the only consideration that you have to think about with loans. As you may already know, you are essentially trading up convenience for a few other considerations that you need to be familiar with.

  • First, because most online loans do not require a collateral asset, the interest rate may be just a little higher than what conventional loans offer. You need to consider if this is something you want to absorb or if you are better off heading to a bank or lender for a more traditional face-to-face discussion resulting in a lower interest rate.
  • Second, you need to properly scrutinize the identity of the lender just so you are sure of who you are dealing with. Any responsible borrower knows that you can’t be too careful with anything involving money, even if you are the one to receive the money in the transaction. With a bank, you know exactly who you are dealing with; not so with online loans so you need to do your research before applying for a loan.

Online loans are great options for quick cash because it is convenient but it does come with its fair share of concerns that you need to pay attention to. Make sure you do your homework before submitting your documents to a lender so you know the risks and trade-offs that come with the convenience of online loans.

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Steven Anderson: Don't let fears hold you back from investing in equities

Steven Anderson: Don't let fears hold you back from investing in equities

For the past few years, many investors have fled the stock market. Their flight might have been ill-advised, and you could benefit from their experience. Just how significant has the equities exodus been? Consider this: U.S. equity mutual funds
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Your Questions About Stocks And Bonds Are Collectively Known As

George asks…

Need help with crossword for homework. Please Help!!?

2.The democratic platforms in 1936 and 1940 promised to _______ expenses and balance the budget. (6 letters)

5.In the election of 1936 the Republicans nominated this man to oppose FDR. (6 letters)

7.To stop this on the stock market, Congress passed the Security Act, which forbade the sale of stocks and bonds unless they were registered with the government. (11 letters)

9. The new dealers believed they could reduce this by increasing agricultural prices. (12 letters)

13. the purpose of the CCC was to provide jobs and an _____ for young men from ages eighteen to twenty-five. (6 letters)

8. the PWA made loans available to many cities to replace these with low-income housing.(5 letters)

16. This act, known as the Magna Carta of Labor, guaranteed workers the right to join unions and to bargain collectively with emplayers for better wages and benefits.(6 letters)

17. the FDIC increased confidence in the banks because it guaranteed the ____ of bank depositors. (7 letters)

18. One purpose of the REA was to bring the convenience to rural areas of the United States. (11 letters)

19. In 1936 this third party sought to return prosperity to the United States by printing large amounts of paper money. It nominated William Lemke as its candidate. 5 letters


financi4 answers:

2. Reduce
5. Landon
9. Unemployment
13. Income
8. Slums
16. The “Wagner” Act.
17. Deposit ?
18. Electricity ?
19. Union

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Your Questions About Investing In Stocks

Chris asks…

Investing stocks in Facebook and Apple?

Would it be a good idea to invest money in Facebook and Apple? How much money does it cost for one stock? Would I make money back?

Justin answers:

If you need to ask this question you should not be investing quite yet. Learn what you are doing first. And don’t learn by asking people on Yahoo Answers because they are all idiots except me (that’s a joke, I’m far from perfect myself). Anyway, let’s start learning and look at these two stocks because they are very different.

You should always look at what is called the “fundamentals” of a company before you invest. But before we do that, let’s look at a quote. You find those on various web sites, I like Google Finance.


At the top of the page you will see a field you can type the company name into. Start typing A-P-P-L-E slowly and watch for the symbol to come up. The symbol is AAPL. All stocks have a symbol. You will see that Apple sells right now for about $675 per share. So the minimum you can invest is $675.

Now do the same for facebook. The symbol is FB. You will see the price is $19.34 (it was when I wrote this anyway). Does a lower price mean facebook is cheaper or better? NO!!!!! Look at the bottom of the leftmost column where it says “P/E”. That stands for Price/earnings and it is a good general gauge of the “value” of the stock. Note that facebook’s P/E is 107. Now look at Apples, it is about 16. When it comes to stocks, the lower P/E is GENERALLY a “better value.” There are lots of factors to consider, P/E by itself is not a perfect guide. But in this case it tells you that Apple is fairly priced (considering the fast growth and profitability of the company) while facebook is an overpriced stock that you should stay away from.

Here is a homework assignment for you to start your learning process. Look up these stocks and decide if they are good or bad. Symbols are KO, MCD, AMZN, F, SBUX, and DNKN. Have fun!

Michael asks…

How do you start investing in stocks?

Obviously; I’ve never invested in stocks before I wanted to know where I should even start and how the stock market works. Any assistance will be appreciated.

Justin answers:

The short answer is: don’t start buying individual stocks. You’re competing against pros with advanced degrees in finance. Buy mutual funds or ETFs based on broad market indexes (QQQ is a good start).

If you insist on gambling with your money (not investing), then read these three books before you pretend that you are investing:
One Up On Wall Street – Peter Lynch
A Random Walk Down Wall Street – Burton Malkiel
The Intelligent Investor – Benjamin Graham (a bit more challenging, but a true classic)

James asks…

College class to learn about investing in stocks be called?

I want to learn, and my Economics teacher in high school taught us about them, and I really want to get into it, but it’s a bit complicated.. how could I learn? would a college even offer that? would it be business?

Justin answers:

What about getting a Series 7 study guide? This is the guide stockbrokers study to get their license.

Charles asks…

Is investing in stocks best during an economic depression?

During a depression, stock prices are very low so I could buy a bunch of stocks for very little money and then hold on to it until the market improves and then sell it. But, during a depression, businesses fail. Would it be a good idea to invest in stocks during a depression? Why or why not?

Justin answers:

Not all businesses fail, so long as you do your due diligence and diversify across a handful of solid companies that have the resources to weather the storm then dollar cost averaging through an economic depression is your best option for a gain.

However the concept of investing in a business is that the business operation itself brings value to the company hence intrinsically the stock should appreciate so long as the business model is valid and the management competent hence you should not look to selling unless there are better opportunities. Keeping the investment invested compounds the equity and if it’s a growth stock, defers the capital gains taxes. Just because it has gone up is no reason to sell unless there are better opportunities or you’ve come to the end of the accumulation part of your life.

Joseph asks…

How to does investing in stocks work?

how do you buy and sell stocks? how much do they cost (approximate). is it easy? is it time consuming? are shares and stocks the same thing? how do you make a profit?

Justin answers:

You need a broker to buy stocks. You could use Ameritrade, Scottrade, etc. When you buy a stock you are purchasing a share or % of the company.
Companies have an IPO or initial public offering. This is used to raise money for the company. So for instance in 2004, google IPO’d at $85 a share. That money google uses to further the business. After that they do not receive any money based on the price of the stock. There are millions of shares for a company. So then you use your broker to buy shares. So if you had $850 to invest when Google IPO’d you could have bought 10 shares. So when you have shares you own a percentage of the company. If you happen to acquire more than 50% of the shares of a company then you own the company. So for instance, if Microsoft wanted to purchase Google, they could have bought up a big percentage of the shares. The more shares you have the more you can vote for different things. Example, you could vote yourself to be a board of directors. Every Monday thru Friday the stock market is open from 9:30 – 4. People buy and sell shares for whatever price the market will bear. Going back to google, they are something like $650 a share now. How you make money is if you buy a stock for a price, then sell it for a higher price. As far as time consuming, if you really want to know how your stocks are doing you have to spend alot of time. People spend tons of time, research, etc to try to figure out how stocks will do.

Daniel asks…

What are the basics for investing in stocks? What’s good to put money into?

I’m intrested in trying to invest my money. I would like serious help not someone joking around. I have absolutely no experience in stocks but it’s something I would like to learn and try. I don’t really know how the market works or where I should put my money or anything. Would someone be kind enough to explain it to me and give me some pointers? What are good stocks to invest in? What seems to work for you? Tell me how the whole process works! 😀 Thank you!

Justin answers:

Investing in “individual” stocks takes a lot of knowledge and practice; so I would not suggest doing this until you understand completely how the stock markets work.

Instead visit and learn about mutual funds, index funds, and exchange-traded-funds (ETFs). Trading funds is less risky than trying to trade “individual” stocks.

If I was starting over again, I would find (4) ETFs that have had consistent returns with strong chart uptrends, and simply invest my money evenly over the (4) funds.

Listed below are some good websites for a beginner.

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5 Things you must never do when in debt

Picture yourself in this position; the company you worked at for the past 10 years has suddenly found itself in trouble. Before you know it, you’re facing a redundancy package and you’re looking for a new job. All the while you’ve been unable to afford even the basic essentials. The question that always comes to mind is ‘What do I do?’ Well, in this article, we’re not only going to tell you what you should do but also what you should never do. Here are 5 things that you should never do when you’re in debt:

1. DON’T pay bills with credit cards –
If you’re already struggling to pay your bills, then using credit cards or loans to pay them will only make things worse. Remember that any balance you put on a credit card will accrue interest and cost you more, meaning that you will likely end up increasing your debt!

2. DON’T ignore your bills –
Don’t just ignore the demand letters. If you do, you will likely end up getting late payment fees/charges and a higher rate of interest being charged on your account. If you talk to your lender and inform them you are in financial hardship, they may be willing to agree to a payment plan. At the very least they will know you are in difficulty and can suggest ways to deal with it.

3. DON’T take out a payday loan –
Payday loans are notorious for being part of the cycle of debt. All of them have very high interest rates and charges that kick in as soon as you miss a payment. They might seem like a quick and easy way to pay your bills during a hard month, but if you’re in financial difficulty then you will very likely be unable to afford a payday loan!

4. DON’T rob Peter to pay Paul –
When you have serious debt and overdue payments, it often seems like a good idea to move money around from one source to pay another. This is rarely a good idea and is often a never ending cycle; if there simply isn’t enough coming in, you can’t manage to pay everyone.

5. DON’T bury your head in the sand –
Most people in debt say they wish they had done something sooner but the majority of them don’t. The problem is that if you aren’t dealing with your debt, it won’t get any smaller; it will only ever increase.

So what should you do when you get into debt? It’s very simple; get expert advice. Debt advice from Your Debt Expert is free and confidential, and easy to get, but the most important thing to do when you find yourself in the situation is speak to someone about it. An expert will give you the right information about how to go about dealing with your debts and is legally obliged to give you the correct advice.

For more Debt news and advice follow Peter Dean on Twitter – @your_debtexpert

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