Madoff (aside from stealing an exact operating model from US Social Security), was a by-product of the horrible system in place: Regulation.

As an Austrian Economist at heart people give me very very funny looks when I say that the majority of bank regulations actually perpetuate investor and depositor laziness (not to mention account insurance!), and that they do far far more harm than good in the long run. Unfortunately this point is hard to get across, since economics is a 2 + step thinking process and one of the many gifts of government is the 1 + 1 = 2 approach. Unintended consequences? Both the government’s mistress and its nagging mother-in-law.

But back to Madoff. The SEC was notified MANY times about this problem and did nothing. There are a lot of people involved in this corrupt “regulatory” system that need to spend the rest of their lives in prison. In fact I think we should seriously think about putting the regulatory system as a whole on trial and giving it 150 years next to Bernie. They can swap cigarettes for extra dessert all the way to the next millennium for all I care!

But this “protection” we have skews the public mind so deeply it makes my head hurt. The reason these ponzi schemes (of which I am very certain there are many more to come to light in the coming years) are TRULY made possible is because these regulations breed complacency. The government breeds the belief that they “have your back” and will take care of you. Of course people overlook the utter arrogance of this claim in that a few hundred or even thousand of people are expected to protect the welfare of millions. Logically this is impossible.

And so, just as FDIC insurance encourages depositors to be lazy and NOT do their due diligence on their banks, the SEC causes investors to be lazy and not use those critical thinking skills that are not taught in government schools to say to yourself “hey, something’s kind of off here. Bernie’s long everything and yet he is the only guy who’s mad money this way while the market is going down. What gives?”

Imagine a world where regulation did not exist and people actually paid attention to what their banks did. Banks would actually have to compete on how CONSERVATIVE they were and how strong their REAL balance sheets were (none of this off balance-sheet crap would exist, which is also a product of government laws).

For easy proof look to the English banks in the 1800s, who were supposed to be the paradigm of the banking industry worldwide (because of the strong government intervention in the industry and the excellent regulation). Versus the Scottish who England intended to make second rate by basically leaving them to their own ends (i.e. no regulations, reserve requirements at all from government).

Well, along comes the huge banking collapse in England. The industry was rocked to its core, people lost millions, and dozens of banks closed. The Scottish banks? Not a dent!

I think for all of you who have this passive-agressive tendency to bash Madoff online and to your friends should step back and see that he is only a piston in a large machine that should be running full power and smoothly. The government has pulled the drain plug and has been pouring the sand that is itself into the oil-fill. Eventually this whole machine will break via mass insolvency and hyperinflation/default. But unfortunately I think too many people are buying into this administration’s “regulatory reform” bunk and I can only pray they will see the true effects of these massive government expansions for what they really are and cut the head from this giant bloated serpent before it consumes everything in sight.

Sorry for the length of this comment lol. I just hate statism with my every cell. It’s like watching yourself be inevitably robbed in super-slow motion. And being tied up at the same time.