Counterfeiting, Predatory Lending, and Ponzi Schemes
You read about Alstry discuss predatory lending often...what I am finding out is most don't even know what it is or why it is important to understand as an investor.
We all know what counterfeiting is....simply printing up fake money and passing it off as real. It is illegal because it allows someong to "steal" the production of another without really having to produce anything of value themselves.
Counterfeiting, Ponzi Schemes and Predatory Lending are viewed in a similar light.
Ponzi Schemes we know is when a person takes the money of another and doesn't really produce much of anything of value to generate returns on investment..but simply generates returns from the money of future participants. Ponzi Schemes work as long as the perp is able to keep taking more and more money into the scheme to keep the existing participants complacement with continuing payouts. Ponzi Schemes keep working until the perp runs out of sources of funding...and then the entire operation eventually collapses.
Predatory lending is when one makes a loan knowing or should knowing that the loan can't be paid back. Such lending is illegal and improper because it creates money and gives it to people when we know they can never produce sufficiently to pay it back. In a way, it is a form of counterfeiting. If you do enough it it, you can have massive collapses once the predatory lending stops, like a Ponzi Scheme. Most recently we saw what happens when we had massive predatory lending to housing....and then compounded the problem with derivatives.
Now we have simply glossed over the last collapse with Predatory lending to government, or WE THE PEOPLE. This when in high gear on 9.09. When banks lent to home owners, legally the borrowers and the lender were on the hook for the obligations. But when government is borrowing the money, WE are ALL on the hook, jointly and severally.
Now we are borrowing well over $1 Trillion dollars per year....plus WE THE PEOPLE are guaranteeing over $20 Trillion dollars of financial assets(according to the Barofsky report) that is primarily owned by the Rich and Retired. WE THE PEOPLE are all on the hook for this behavior....yet relatively very few are benefitting from it.
And with banks cutting off credit to Main Street....more and more are suffering while those holding financial assets feel little pain as they are bailed out. This can only go on for so long before the citizens NOT BEING bailed out reject the system...which we are beginning to see with the Occupy movement.
I am amazed that the Gardner Bros try to sell you "investment" advice in such an environment...because anyone who really understands investing realizes that the current system is really nothing more than a Ponzi Scheme of functionally counterfeit money in the form of Financial Assets supported by Predatory Lending.
Why do you think it is a www.udderworld.com and why Alstry doesn't analyze private investments...because mathematically none can exist when everything is driven by WE THE PEOPLE.
It would be just like calling housing in 2005, or Madoff, or Enron investments.