Master Madoff

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It's a rare
opportunity that one has in a lifetime to personally experience
the teachings of a master. Some people lived through the Gandhi
era. Others lived through the Dalai Llama era. Luke lived through
the Yoda era.

We my friends
have been fortunate enough to live in a wondrous time. A time of
invention, innovation and technological advancements that has inspired
an evolution of the human species never before seen. And we have
been chosen to live in the time of one of the greatest masters of
them all. A teacher among teachers. A Jedi knight of the first order.

The master
educator Bernie Madoff. Oh yes my eager little beavers, Bernie Madoff
is a teacher. His lesson: Moral Hazard.

Here's Master
Madoff's message in a nutshell: Moral hazard is the prospect
that a party insulated from risk (consumers) may behave differently
from the way it would behave if it were fully exposed to the risk.
Moral hazard arises because an individual does not bear the full
consequences of its actions, and therefore has a tendency to act
less carefully than it otherwise would.

People who
understand moral hazard, such as Ron Paul, Peter Schiff and other
conscientious, educated people, have been preaching this message
for years. Unfortunately, it would seem that Dr. Paul and Mr. Schiff
just simply never finished their Jedi training as master Madoff
did. He brought us the lesson of lessons in a way that everyone
can understand and will never forget.

One student,
Alexandra Penney from Palm Beach, Florida, appeared on CNN today
to talk about what she's learned. She is spreading master Madoff's
teachings daily on her blog: since the SEC had audited Madoff on
many occasion's and found no reason to suspect any sort of criminal
activity – in fact they gave him their seal of approval — she
thought her investments were safe. There was obviously no reason
for her to do her own due diligence before investing, so she didn't.
In fact she put ALL her money in master Madoff's care. No one said
education was cheap, but that lesson is something no one can ever
take away from Alex. And in these troubling economic times, that's
a lot more than some have.

Alex
was attracted to master Madoff's dojo by the up to 46% return on
her money and given the frontal lobotomy that Alex underwent at
birth she truly thought such a sustained return was possible in
the market. Once again, my frontal lobe keeps me from living life
to the "foolest." Not the first time and I am sure it
won't be the last.

One disgruntled
former student, Boston money manager Harry Markopolos, appeared
on 20/20 four years ago commenting on the simple investigation he
had undertaken regarding master Madoff's activities and the facts
unequivocally indicated fraud: Madoff didn't make buys or sells,
he was making consistently above average returns for his clients,
etc.. . He implied that the SEC should have caught those simple,
basic aspects of trading in securities. He even had the audacity
to suggest that they didn't because either the SEC was an over-bloated,
inefficient bureaucracy and/or so incompetent they couldn't do the
simplest things and therefore a waste of taxpayer's money and/or
— and this is just mean-spirited and obviously a product of Mr.
Markopolos' resentment — the SEC was bought off by a billionaire.
Oh right. Please, like that can happen. What would Mr. Markopolos
suggest? We get the SEC out of the securities markets so there's
no moral hazard and people will take responsibility for doing the
necessary due diligence themselves before investing? Hah! Then what
would the master's like master Madoff do? Freak.

March
14, 2009

Don Cooper
[send him mail] is an economist
living and working in Atlanta, Georgia.

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