Saturday, February 12, 2011

Madoff Was No Ponzi

From the Scandal! exhibit at the Museum of American Finance comes this international reply coupon.

Back in the day, Europeans writing to addresses in the U.S. could enclose these prepaid-reply-postage coupons. Because of inflation after World War I, the cost of purchasing the coupons in Italy was less than their value in U.S. postage. That arbitrage opportunity caught the eye of Charles Ponzi.

Admittedly, Ponzi's scheme ended badly. But Bernie Madoff's secret method for manufacturing steady, above-average returns from stocks and derivatives lacked even a veneer of plausibility. Do we insult the memory of Ponzi by linking his name to Madoff's?

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