Understand the essentials of Ponzi schemes (also known as Ponzi pyramids or Ponzi systems) in just 50 minutes with this practical and concise book. Ponzi schemes are fraudulent investment operations involving an investment company and an investor, and were initially facilitated by currency devaluation and inflation. These scams, which attract investors by promising huge windfalls, are often characterized by speculation, a context of low interest rates, poorly informed investors and a lack of risk management.
This book will provide you with a handy introduction to the principles behind Ponzi schemes, as used by Charles Ponzi and the disgraced financier Bernie Madoff. You will learn about the numerous flaws of pyramid schemes, such as the need for trust and the risk of the fraud being detected, and about similarly disastrous financial schemes, in particular subprime lending.
About Ponzi schemes
Ponzi schemes typically attract investors, who are often ordinary members of the public, by promising huge returns. This entices many new investors to join the scheme, and the money they invest is used to pay back earlier investors, while the organizers of the scheme reap vast profits. Problems arise when there is no longer enough money coming in to pay back investors, which ultimately causes the system to collapse as people frantically try to withdraw their money.
In this book, you will discover exactly how Ponzi schemes attract investors and seem to deliver on their promises to begin with. A clear explanation of the risks of the system, a discussion of a practical case study, and an introduction to similar fraudulent operations will give you the tools you need to avoid scams and invest wisely.
This straightforward and accessible 40-page book is structured as follows:
- Introduction to Ponzi schemes
- Flaws in the monetary system: a playground for Charles Ponzi
- Functioning of the operation
- Components of the models
- What are the advantages of this type of system?
- Practical application for investors
- Advice and tops tips for investing safely
- Case study
- Limitations and extensions of Ponzi schemes
- Limitations, weaknesses and criticisms
- Related models and extensions
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