2008-12-22 Madoff as Metaphor

2008-12-22 Lew Rockwell Ludwig von Mises Institute \Bernie Madoff\US economy\2008 Wall Street bailout\2008 financial meltdown http://mises.org/story/3272 Madoff as Metaphor Madoff as Metaphor  There is a saying in the world of Austrian economics about the business cycle. The puzzle is not to explain business failures. Those are part of the normal course of life, and the sign of a healthy economy. The puzzle is to explain the "cluster of errors" that appears at the beginning of a recession. How could so many have been so wrong about so much at the same time? The business cycle is a system-wide failure, not merely the mistaken judgment of a few.

So it is with Madoff's scheme. The mystery isn't how one person was able to fool a few. The scheme in which yesterday's "investors" are paid off with the money of today's victims is known in all places and probably all timesâ€”and it always goes belly up to the originator's complete disgrace. It is a classic example of how moral laws are self-enforcing in the world of economics.
 * Commentary: /Woozle
 * Related:
 * 2008-12-19 The Ponzi Scheme As Way of Life by Sharon Astyk makes the same overall point about endless bubbles without trying to slip in any covert agenda points -- and also ties it in to the long-term irresponsibility over global warming.

&ldquo;The puzzle is to explain the "cluster of errors" that appears at the beginning of a recession. How could so many have been so wrong about so much at the same time? The business cycle is a system-wide failure, not merely the mistaken judgment of a few.&rdquo;   