Bernie Madoff Was Only a Petty Crook Compared with Uncle Sam
By Robert Higgs on Jul 14, 2009 in American History, Bailouts, Budget and Tax Policy, Economics, Money and Banking, Property Rights, The State, Welfare, corruption
Bernard Madoff was in the news again today. I quote here from a CNBC report, adding my own commentary to put the report into perspective.
Disgraced financier Bernard Madoff has arrived at federal prison in Butner, North Carolina, CNBC has learned, though it is still not clear if that will be his permanent home.
President Barack Obama and the sitting members of Congress have not been charged, much less convicted and sentenced, for crimes that make Bernie Madoff’s look like child’s play. Note well: I am referring here not to the assorted murders, assaults, and batteries for which these men and women are manifestly guilty—I say guilty because they not only admit these crimes, but proudly take public credit for them—but to certain of their strictly financial crimes.
Madoff, 71, was sentenced last month to 150 years in prison after pleading guilty in March to charges that his investment advisory business was a multibillion-dollar scheme that wiped out thousands of investors and ruined charities.
Madoff caused people to lose billions of dollars. The U.S. government has caused people to lose trillions of dollars, and it’s not finished yet. The public’s losses mount during every minute of every day. By its effects in discouraging work, saving, and investment, and thereby reducing capital accumulation, the U.S. Social Security system has caused the nation’s gross domestic product to fall significantly below the levels it would otherwise have reached. According to Professor Edgar K. Browning, a leading researcher in this field, “the available evidence suggests that Social Security has reduced [current] GDP by 5 to 10 percent.” Ten percent of GDP is now approximately $1.4 trillion—or about 28 times the maximum amount Madoff is believed to have cost his clients. Moreover, Madoff’s harm is a one-shot loss, whereas the U.S. government’s Social Security harm is an ongoing loss that grows annually. In the future, the annual loss will be even greater than the currently estimated $1.4 trillion or so.
Authorities said Madoff had carried out the fraud for at least two decades before confessing to his sons in December that his investment business was a fraud and that he had lost as much as $50 billion.
The leaders of the U.S. government have carried out their Social Security fraud—essentially a Ponzi scheme, in substance exactly the same as Madoff’s scheme—since 1935, and they have yet to confess to their crimes, unless their family members have been told and have kept the confession to themselves.
Madoff, in contrast to the government, carried out his fraud in a civilized way: he merely misrepresented what he was doing, purporting to invest his clients’ money and to obtain a high rate of return on these investments. People dealt with him voluntarily. Those who suspected something was fishy did not do business with him, and some people went so far as to give substantial information to the SEC to show that Madoff’s business had to be fraudulent (which information the SEC ignored for years on end, of course).
The U.S. government, however, does not bother to claim any prowess in investing the money it forces people to surrender to its scheme. It admits that the “client’s” return is now close to zero (varying a bit according to the client’s age and other factors). Nor does it carry out its admitted Ponzi scheme in a civilized way. Not only is participation in the scheme involuntary, but the government threatens violence against anyone who fails to participate as it commands him. Thus, the government operates its Ponzi scheme in a markedly more thuggish manner than Bernie would ever have dreamed of. He might have been a crook, but he was not a thug.
Everyone (including Bernie himself) agrees that Bernie Madoff was a crook. What is the correct term for the U.S. government, or does the word government tell us everything we need to know about the honesty, humanity, and justice of its actions?
I still do not understand why some people believe that there is a Social Security “trust fund” out there somewhere, nor do I understand people who think that SS is some type of government “benefit”.
Mr. Higgs, I saw an interview with you a couple of months ago where a caller (I think it was a C-SPAN book review) insisted SS was something that the government “gives you” and you should not mess with it. Do people not understand that government is at best a zero-sum game, and currently (almost always) a negative-sum game? Enough rhetoric. Nice entry sir.
Chad | Jul 15, 2009 | Reply
Anyone who thinks that the Obama Administration is to blame for the current financial crisis has failed miserably by omitting to look at recent history beyond the perfunctory view provided by the mainstream media. This MONUMENTAL SCAM has it’s roots 30+ years ago, and those who planned it, are also those who now, as then, control the media, the “authorities”, the Senate, and the Congress, and the MONEY. The erosion of fundamental economic principle by a culture of speculation-for-gain, and to allow this unmanageable “monster” to invade and takeover every the most basic of commodity valuation has given rise to uncontrollable inflation. When the prices of commodities are “set” by speculation, anyone with money to “bet” can control the swing of pricing by providing a false indicator of demand. The PRICE OF OIL is a good example of this mechanism—the market is not set by actual production cost, but by a commodities exchange where the price per barrel is dictated by anyone with enough MONEY to buy futures at a high price. Would it surprise you to learn that THE OWNERS OF THE OIL control the commodities market? Wake up!! The same situation is applicable to LAND, HOUSING, FOOD, ACCESS TO MEDICAL TREATMENT, PHARMACEUTICALS, WATER, AIR, and WAR. Anything that can derive profit is manipulated and has been manipulated well before the current President was spawned. The media is searching for a “Fall Guy” culprit. The Media knows who is responsible, after all, the easiest way to rob a Bank is to own it (and the Media).
rsb | Jul 18, 2009 | Reply
Don’t you mean 95+ years ago?
Of course, we could say the fake Panic of 1907 was the prelude …
Novista | Jul 18, 2009 | Reply
When Robert Higgs points his finger at Uncle Sam, he is not singling out any particular administration. At least as far back as the U.S. capitulation to British Empire during the First World War, all administrations together constitute the term “Uncle Sam”, who is guilty of the financial and war crimes described.
An example of this administrative continuity is the administration of Bill Clinton. Prior to Obama and Bush Junior before him, Clinton bombed British-created Iraq, monthly for all 130 months of his two terms in office along with the British.
The power elite, who own the mass media, present the two major candidates they want to a complacent public, while ignoring those (such as Ron Paul, Cynthia McKinney, etc.) that they don’t want us to know about. John Q. Public, in turn, votes for those candidates that mass media has taken the trouble to present to them. In this way, the voluntary matrix provided by mass media plays a significant role in maintaining the system. The voting system is a sham where money is the prime factor in success at the polls, which is a game that is reserved for global corporatists since they are the only players with pockets that deep.
Elitist-controlled government hegemony of nominally private property through their offspring—the corporation (an artificial person with human rights granted it by its parent) has long been a favorite tool of elites. The result is Italian-styled corporatism, as Thomas J. DiLorenzo explained in 1994. Both major parties are two sides of the same corporatist coin.
Bob Williams | Jul 19, 2009 | Reply
The one thing that is incorrect in this article is the assumption that the government has not confessed its crime. To the contrary, they have been boasting about it since its (Social Security’s) inception. The main difference between Social Security and Madoff’s scam is that Madoff didn’t think to build an army to defend himself before putting it into place, and so 1) he couldn’t force people into the scam like the government does, and he couldn’t protect himself against his main competitor (the federal government), when that competitor decided to “remove” him from the game.
joe4liberty | Jul 30, 2009 | Reply
Is anyone surprised that a libertarian anarchist doesn’t think that old people should have a pension? His kind simply don’t care about the suffering of others.
JTK | Oct 1, 2009 | Reply