Or as Marx put it M-C-M, which spells Bubble, as in South Sea Bubble.
Capitalism now is one large Ponzi scheme fraud is to capitalism as apple pie is to America. Remember Junk Bonds..... Contrary to the predictions of the politicians and their consultants, though, junk bonds soon revived and became a staple of American finance.
And the lastest fraud being perpetrated is the unregulated Hedge fund and Private equity market financing.
"The upper class is now serviced by a vast and growing industry, loosely called Private Equity.
The job of the private-equity investor is -- again, speaking loosely -- to exploit the idiocy of the ordinary investor, and the corporate executives and mutual-fund managers who purport to serve him."
~ Michael Lewis, Bloomberg News, 12 December 2006
"Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one another." - Warren Buffet
Here we learn that hedge funds account for 32 percent of credit-default swap sellers and 28 percent of buyers, up from 15 percent and 16 percent in 2004, according to a British Bankers' Association report last month. They are second to banks in each category. Pension funds and mutual funds make up 7 percent of the sellers and 4 percent of the buyers.
Readers know that I have developed a theory that suggests hedge funds (Riskloves) and possibly foreign central banks (FCBs) have been the key facilitators of, and will ultimately be the bag holders for, the securities and credit bubble. The key to understanding this relationship as it pertains to Riskloves is to recognize that most of their incentives are front loaded and geared towards extreme risk taking. When a Ponzi unit security is created or securitized that’s the moment that fees are generated for the financial sphere (Pig Men). The Pig Men also collect more soft dollars “doing business” with the Riskloves. The Riskloves (and increasingly the FCBs) then take the securities. Then once the security is created, it enters into the never never land of Ponzi toxic waste, where it is blessed by another cozy player, the credit agencies. Once blessed, then these securities can be pawned off on pension and public funds, in what can only be described as a circle jerk.
A Minsky-like Restatement of Keynes Market Irrationality Warning
"The market is a complex, adaptive social system, is therefore not prone toward equilibrium, but instead subject to phase shifts, cycles, and transfomation. Groups of people who play in the market are prone to cycles of irrational exuberance and irrational pessimsim."