Back in July, we asked whether the UK housing market was like an '8-ball' pyramid scheme. The headline "Ireland was just one big Pyramid Scheme" second most viewed over at the torygraph finance pages tells me it's time to revisit this theme.
Now believe or not, lots of people are always trying to start pyramid schemes of one sort or another. Very few ever gain momentum, but every so often one does and can rapidly infect, and then rip apart, entire communities. Back in July we remembered the 'Women Empowering Women' scheme that drove the Isle of Wight to the brink of insanity in 2001, and spread so far it was raised by an MP for Aberdeen in the commons.
When these schemes collapse, the participants higher up the pyramid usually start frantically lending money to new participants believing it will secure them a bigger payout. Of course it seldom does, and the 'friends' they tricked into joining on ticky seldom cough up, if they ever even speak to them again. Which brings us nicely to the article:
"We don't know where the money went," added the trader, half in jest, but half in earnest. "We've been debating it all morning. Cars, flat-screen TVs, Bulgarian properties? Everyone round here used to have a Mercedes. The whole country was a pyramid scheme."
But don't worry folks, if we lend them £7bn, we'll get our hundred and odd billion back in no time. Because that's how pyramid schemes work, isn't it George?
Big Green Bills
1 hour ago
3 comments:
SL, sad thing is, when a HOist bubble bursts, it's the people at the bottom being forced to give the people at the top money so that the people at the top can lend it back to the people at the bottom (with interest) for them to join the scheme.
From the linked-to article: Ireland's much-vaunted corporation tax rate stayed at 12.5pc., so someone saw some sense there - a tiny ray of sunshine amidst the gathering clouds.
I very much doubt if many of the cars & flat screens have been carted out of Ireland, let alone repossessed & even doubt if that many Irish had Bulgarian houses. What really happens is that people psyche themselves up to the thought they might have one in a few years if everything works & boasting to the neighbours. Now they are psyching themselves down & girning to the neighbours in the same way.
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