What is a Ponzi scheme?

The so-called Ponzi scheme, the so-called Ponzi scheme refers to deceiving people to invest in fictitious enterprises, and then paying the money of later investors as quick money to the original investors to induce more people to fall for it. Ponzi scheme is the oldest and most common investment fraud and a variant of pyramid scheme.

The origin of Ponzi scheme

19 17, Charles Ponzi noticed the economic chaos caused by World War I and felt that there was an opportunity. He began to plot and moved to Boston, where he set up a so-called "securities trading company" and announced to the outside world that the company would buy international coupons from France and Germany and sell part of its profits to the US Postal Service in the form of dollars to earn the "price difference" between the dollar and the French and German currencies whose currencies depreciated seriously after the war. In fact, this plan doesn't make money at all, but some people try to invest in order to get a 50% return in a month and a half. To the delight of the original investors, they got the dividend as scheduled. Cunning Ponzi paid new investors money as quick profits for the original investors to lure more people into the trap. Because of the amazing profits, this "news" spread widely. Ponzi successfully attracted tens of thousands of investors in a few months, with a cumulative investment of more than 654.38 US dollars+0.5 million yuan. Later, Boston media reports caused new investors to question and wait and see the company, so that the company had no new source of funds to pay the interest of early investors, so he closed the store and fled with about 40 thousand investors' life savings. Later people called it "Ponzi scheme".

The essence of Ponzi scheme

The essence of Ponzi scheme is to pay the investment of the latter round of investors as investment income to the previous round of investors, and so on, so that more and more people and funds are involved. After all, investors and funds are limited. When investors and funds are unsustainable, Ponzi scheme will inevitably collapse suddenly. In fact, Ponzi scheme does not originate from Ponzi, nor can it stop at Ponzi, but exists widely in human economic activities. Ponzi scheme is just a typical example.

Characteristics of Ponzi scheme

Ponzi scheme can last for a long time: infinitely approaching the limit, constantly adjusting the theme of the scheme, and robbing Peter to pay Paul. Ponzi schemes have different forms, but the essence is the same. Judging the characteristics of Ponzi scheme:

One is to advocate infinite unidirectional growth (especially the growth of geometric series);

Second, growth is based on "good expectations", which is far from reality;

Third, the premise of maintaining the sustained growth trend is that the public generally holds some kind of "belief", and this "belief" has no credible material basis;

Fourth, when a "belief" becomes fragile, we should adjust the theme of "belief" and not break the situation by establishing a new "belief".

Ponzi scheme in financial system

The Ponzi scheme characteristics of the real financial system can be understood from the following aspects:

First, the financial system has no material foundation and is in danger of collapse at any time.

The way for commercial banks to make profits is to obtain deposits from depositors at a lower interest rate and then lend the money to enterprises that need funds at a higher interest rate. As we all know, banks generally have a large number of credit loans (the amount of bank loans is much more than their deposits, the lower the deposit reserve ratio stipulated by the central bank, the greater the multiple of loans, and the higher the deposit reserve ratio, the smaller the multiple of loans, usually around 10 times). The risk of banks is a run. When many depositors request to withdraw their deposits due to changes in the political and economic environment (even because they listen to a rumor), and the loans cannot be recovered in time, the crisis is inevitable. Therefore, as long as a certain proportion of bank runs occur, banks will inevitably go bankrupt, and all related economic activities will not be spared. The whole financial system is built on such a skyscraper without a solid foundation, and it is at risk of collapse at any time. Ironically, all banks take "credit" as their creed, but in fact any bank has obvious Ponzi scheme characteristics!

Second, financial derivatives will always be a pyramid scheme Ponzi scheme.

Credit economy is the inevitable product of financial system. In modern economy, the scale of credit economy is expanding rapidly and the credit structure is becoming more and more complicated. On the basis of credit currency, new financial products are constantly derived, which is getting farther and farther away from the real economy and even irrelevant. At this point, the virtual economy has become an indispensable part of any modern credit economy. The negative effect of economic bubble is obvious, which often creates the illusion of prosperity, so it is easy to be sought after and has a self-strengthening mechanism; Moreover, because the development of virtual economy can be completely divorced from the real economy in form, the virtual economy has a tendency to go beyond the scope of the real economy. When the economic bubble develops viciously, the result will be a bubble economy.

The so-called bubble economy,

First, the proportion of virtual components in the economy exceeds the affordability of the real economy, and the economic structure is seriously distorted;

Second, after the formation of the bubble economy, the expected logic of some markets, especially financial markets, will undergo fundamental changes. Even though the price is already high, most market participants still expect the price to rise further because the demand is extremely strong;

Third, the irrationality of public behavior leads to a sharp increase in the uncertainty of the relevant market and the failure of market rules. Generally speaking, there is no difference between financial derivatives and MLM products, and there is no substantive content, just the object of MLM piecework. The prevalence of "pyramid selling" in the financial market stems from people's desire for rapid growth of wealth and is easily confused by false prosperity. In the end, because the funds are unsustainable, an instant collapse is inevitable.

Third, financial products such as stocks and futures cannot escape the Ponzi scheme.

In today's financial system, stocks, futures, subprime securities and speculative real estate, land, oil and so on. They have all become financial derivatives, and they have all become "pyramid schemes" with changing goals. There is no substantial difference between various financial investment instruments, but only pyramid schemes with different names. In the development of stocks, futures, real estate and oil, etc. It is easy to see the rapid expansion and sudden rupture of the following ways: attractive returns-promoting numerous demands and price increases-high returns promote a new round of participants' participation-promoting potential participants' sustained and ultra-high profit expectations-further pushing up prices-participants make judgments that prices will only rise but not fall, so that the relationship between supply and demand makes prices constantly divided until funds are unsustainable. Facing the risk that the financial system will inevitably collapse, innovative financial derivatives will continue to speculate with another investment tool when it is about to collapse, and can be maintained for a long time. This makes the Ponzi scheme in the financial system more hidden and will not be easily discovered. However, when the funds are unsustainable, the people no longer trust and refuse to follow suit, it is inevitable to break the game.

situation

Case 1: Take the stock market as an example.

Speculative stock market bull market was created by Ponzi scheme. Through a round of investment, the stock price is continuously raised, and the latter round of capital investment is relied on to provide income for the front-wheel investors. The game continued until there was no new undertaker, and it collapsed. The ups and downs of Nasdaq stock market are a typical example. The stock index reached a low of 2028 points in July at 1998, jumped to a high of 5022 points in April 2000, and fell above 1300 points in June 2002. This process is the Ponzi scheme under the so-called "IT concept". A single stock, if the company's assets are invested in 2 yuan, why can it be issued in 2.5 yuan? Because people expect this company to have a future. Why did it rise to 3 yuan after its release? Because when people saw its performance increase, they raised their expectations. However, by constantly raising expectations and raising the stock price to 10 yuan and 20 yuan, it is completely out of touch with reality. It is impossible for a company to pay dividends to "shareholders" with such high profits from its own operations. The only feasible way is to take the money of the investors behind. As for those who join later, it depends on the money of those who join later ... This payment system is a typical Ponzi scheme, and the result is doomed to collapse. In China stock market, the bookmakers formed a "Ponzi Group": people who entered the stock market did not care about the future performance of the stock itself, but expected to "eat the old money" to get rich, so those who had already entered hoped for more new entrants. Many investors have the same mentality as pyramid sellers, knowing that all kinds of "concepts" are scams, but they hope that more people will enter after buying them and then collapse after making profits.

Case 2: Take the real estate market as an example.

Ponzi scheme of real estate price is easy to appear in the process of real estate industry growth. Due to the market speculation on land prices, there will be false rises, and land prices will skyrocket several times or even dozens of times. For example, the soaring real estate price in Japan is a typical example. The land price index of six major cities in Japan increased five times during 1980 and 10, and the total market value of land price reached 4,000 trillion yen, equivalent to four times of the total land price in the United States, and the unit price of land was 100 times of that in the United States. 199 1 year later, the land price plummeted and the bubble burst, and the economy has not recovered yet. Ponzi scheme In the process of supply and demand of real estate, the housing market is prone to such a cycle: the concept of following the trend to buy a house-driving the increase of housing demand and price-driving the profit expectation of real estate developers-further pushing up housing prices-consumers think that the house is an investment that will not depreciate, so the relationship between supply and demand makes the price rise continuously, until one day the funds for buying a house are unsustainable, the house price will fall accordingly. The decline in real estate prices will inevitably lead to a series of sharp price reductions in asset values until bank loans cannot be recovered, which will lead to a crisis in the financial system.

Case 3: China example of Ponzi scheme-Delong case.

Remarks: It was an era when entrusted financial management was extremely popular. Delong is just the most influential one.

Data: illegally absorbing public deposits of 45 billion.

From 200/KLOC-0 to 2004, Delong used six financial institutions to illegally absorb and deposit 46 billion yuan. According to reports, the illegal deposits of 46 billion yuan in six financial institutions counted by judicial organs actually accounted for only half of their total deposits from 200 1 to 2004.

Methods: Principal-guaranteed entrusted financial management.

Delong's organization has been engaged in the business of "principal-guaranteed entrusted wealth management". The court ruled that this "principal-guaranteed entrusted wealth management" business is an act of "illegally absorbing public deposits" in disguise. The judgment found that "Youlian and other financial institutions ... absorbed 32,658 public deposits or signed contracts with 693 units and 1073 individuals, absorbing 43,743.7 billion yuan in disguise, of which the outstanding balance was1670.52 billion yuan. The court ruled that "principal-guaranteed entrusted wealth management", that is, obtaining clients' funds by committing to principal-guaranteed and paying fixed income, does not conform to the asset management characteristics of the securities market, and is consistent with the basic nature of absorbing deposits to repay principal and interest, and should be absorbing public deposits in disguise.

The end: Delong collapsed and Tang Wanxin was sentenced.

Because the stock price is completely divorced from the support of the intrinsic value of the enterprise, the game can be maintained, and the financing amount of entrusted wealth management business must be guaranteed to continue to expand. Similar to the nature of pyramid selling, the product of pyramid selling itself is just a carrier, and its value is irrelevant. The core is the construction of the whole pyramid scheme structure and the pyramid effect of the capital chain. Since 200 1, the regulatory environment of China stock market has undergone fundamental changes, and the continuous reports and revelations of the media have finally caused a run-off storm of Delong institutions, which alerted banks and attracted the attention of CBRC.