29-Jan-2009 NEW Calculator: Madoff Ponzi Scheme Calculator
Ponzi Schemes are a type of pyramid selling scheme, and have come to the headlines recently in light of the Madoff scandal.
How do they work ?
Wellll... Firstly, they promise a large rate of interest... more than a market return. For a while, and especially if money is coming in, they perform fine. If the market return becomes significantly lower than the promised return, they lose capital at an accelerating rate, but that still isn't a huge problem in the short term.
The problem begins when people start to get nervous and take their money out. This causes the fund to go under very quickly as the promised return is paid out of the capital.
You could argue that a lot of our banks these days are operating big Ponzi schemes !... be wary of the highest interest. Here's a screen shot of my Ponzi Scheme calculator:
... you can download it below. If you're investing in one of these Ponzi Schemes, they can work well for you if you get your money out !
Training Video on Mahoff Ponzi Scheme: