Lee Camp speaks with Tan Liu about his revealing book The Ponzi Factor, where Liu exposes all the big fraud of the stock market. Liu explains why the stock market, especially today, in the era of financial capitalism, is the purest definition of a Ponzi scheme:
The issue, of course, is profits from stocks and what makes a stock price move, is not the earnings and growth. It is actually money from another investor. Now, is there a connection at all with respect to earnings and growth and this price movement? Yes, it's called a speculative connection. It is not a legal one. It is not a logical one. It is not a definitive, or, a mathematical one.
The SEC defines three basic features of a Ponzi scheme:
One, it is an investment scenario.
Two, the investment profits come from other investors.
Three, the investors think the profits come from somewhere else.
What we can clearly observe every single day, every single moment the stocks are trading, is an event where the stock seller - an investor - sells it to another investor, taking some capital gains profit - if you'd lucky.
So, we have an investment scenario, we have profits that come from other investors, and those investors who are selling it, they think the money comes from somewhere else, like the growth of the underlying company. So, we have an event that we can witness every single day and we have a definition of a Ponzi scheme. The event matches a definition. Therefore it is a Ponzi scheme.
So, here is how the big companies are playing safe because they don't risk anything since the stock price is actually detached from their real assets and profits, but you are risking your money in a purely Ponzi scheme.
And here is how some jackals are getting away with it with a lot of real money in their pockets, while the rest micro-investors (the vast majority) are losing their money, especially after the burst of the bubble and the eruption of another big crisis.
Yes, this is not just financial capitalism. This is casino capitalism, which is worse than the ordinary casino because the game is 100% rigged.