BCG ENDING THE ERA OF PONZI FINANCE PDF

The greater the weight of speculative and Ponzi finance, the smaller the overall margins of safety in the economy and the greater the fragility of the financial structure. In , an Italian immigrant to the U. He announced an arbitrage business that would buy postal reply coupons in Italy and exchange them for stamps in the U. He attracted investors by promising extraordinarily high returns—50 percent within 45 days. But instead of investing the money to buy the coupons and exchange them for stamps, he simply used the money of later investors to pay high returns to earlier investors, extracting huge profits along the way. Such frauds have been known as Ponzi schemes ever since.

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The greater the weight of speculative and Ponzi finance, the smaller the overall margins of safety in the economy and the greater the fragility of the financial structure.

In , an Italian immigrant to the U. He announced an arbitrage business that would buy postal reply coupons in Italy and exchange them for stamps in the U.

He attracted investors by promising extraordinarily high returns—50 percent within 45 days. But instead of investing the money to buy the coupons and exchange them for stamps, he simply used the money of later investors to pay high returns to earlier investors, extracting huge profits along the way.

Such frauds have been known as Ponzi schemes ever since. The biggest, however, is still ongoing: the Ponzi scheme of the developed economies.

It may seem harsh or exaggerated to liken the current troubles of the developed economies to a Ponzi scheme. I do so deliberately to emphasize the scope and seriousness of the problem. Nearly five years after the financial crisis, the leaders of the developed world are far too complacent. Fortunately, there is still time to act. But leaders from all social sectors—government, business, organized labor, environmental and other stakeholder groups—need to act decisively and quickly in order to secure future economic prosperity, social cohesion, and political stability.

It is in the nature of Ponzi schemes to collapse suddenly, without warning. No one knows what event may send the developed world and the global economy as a whole back into crisis. All stakeholders will have to make sacrifices. Creditors will have to accept losses. The wealthy will have to pay more taxes. Wage earners will have to work longer and save more for their retirement. Public spending on social welfare will have to be cut, even as spending in new areas of social investment will have to be increased.

Government will have to get smaller and more efficient. Who pays and who benefits will be subjects of intense political controversy. How critical tradeoffs are managed will vary from country to country. But rather than address these issues, this publication simply aims to highlight the painful dilemmas that the developed world faces, to define the necessary steps toward a genuine solution, and to create a sense of urgency for rapid action.

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How should leaders prepare their companies to thrive in a rapidly evolving landscape? What will it take to win the '20s? Choose your location to get a site experience tailored for you. Ending the Era of Ponzi Finance. Notes: 1. About Boston Consulting Group Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities.

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BCG report: Ending the Era of Ponzi Finance

And it is exacerbated by huge unfunded liabilities that will be impossible to pay off owing to long-term changes in developed-world demographics. Creditors will have to accept losses. The wealthy will have to pay more taxes. Wage earners will have to work longer and save more for their retirement. Public spending on social welfare will have to be cut, even as spending in new areas of social investment will have to be increased.

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BCG – Ending the Era of Ponzi Finance Economist American Debt

Post a Comment. Random Thoughts from an Organized Mind. Moments of clarity in a sea of noise. The Boston Consulting Group is one of the most respected in the world. For them to call our global financial system a Ponzi scheme is an eye-opener.

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bcg.perspectives – Ending the Era of Ponzi Finance

Not sure how this happens, but the entire developed world is in debt. Europe, the US, and Japan have borrowed so much money that they are headed towards ruin. The Boston Consulting Group even went so far as to call it the biggest Ponzi finance scheme in history. That is some pretty bold talk from a buttoned-downed group of consultants. The 23 page report is well-argued and makes 3 points: 1 the global debt picture is pretty bad.

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Ending the Era of Ponzi Finance

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