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30 Dec 08

Eugene Robinson - Bernie Madoff's Lesson About a Free Lunch - washingtonpost.com

www.washingtonpost.com/...AR2008122901900.html - Preview

madoff 2008

In a sense, we're all Bernie Madoff. We've been running our economy in accordance with his accounting principles for a generation -- and now we face a most unpleasant reckoning.

19 Dec 08

The Madoff Economy - Living in the bubble

The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

After all, that’s why so many people trusted Mr. Madoff.

www.nytimes.com/...19krugman.html - Preview

madoff trust

Consider the hypothetical example of a money manager who leverages up his clients’ money with lots of debt, then invests the bulked-up total in high-yielding but risky assets, such as dubious mortgage-backed securities. For a while — say, as long as a housing bubble continues to inflate — he (it’s almost always a he) will make big profits and receive big bonuses. Then, when the bubble bursts and his investments turn into toxic waste, his investors will lose big — but he’ll keep those bonuses.
The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.
After all, that’s why so many people trusted Mr. Madoff.