Why It's Called a Ponzi Scheme

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Ever wonder where the term Ponzi scheme comes from? Today associated with figures like Bernie Madhoff, it originated with one Charles Ponzi and his plan to make millions with postage stamps. Back in 1920, there was a deal where you could effectively pay for postage in one country, and redeem the value in the country you received it, where the price of postage might be different. Do this between the United States and Italy, where inflation had wracked the country, and according to Ponzi you could make a profit of 400%. Well he told his friends about his great plan, and he doubled their money in 90 days. So he started a company in January 1920, and by July he was taking in a million dollars a day. But here’s the catch: That whole postage scheme? The value was redeemed in stamps, not cash. Logistically the overhead purchasing such large quantities and shipping them from Europe to America would cost more than he could make in profit, so he didn’t - as long as more people kept investing, he kept paying out. Until the Boston Post reported that to cover his investments he would’ve needed 160 million postal reply coupons… and there were only 27,000 in circulation. Charles Ponzi lived 6 months as a millionaire, and the rest of his life in poverty.

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Imagine going like "This guy Mr. Ponzi seems like a trustworthy guy, I should invest in his scheme!"

cheydinal

Ponzi wasn't a bad guy, he literally donated the skin off his back to help a burns victim.

tisFrancesfault

If i recall correctly he himself said he learned it from someone else so we'll never know who actually came up with the ponzi scheme.

itaybron

Remember its only illegal if a person does it

deathdome

These days we call it: Literally the entire financial strategy of most cities and towns in North America WHOOPS

JD-qqfz

He represented himself in court. Was aquitted from some charges from the first jury but ended up being found guilty by a second set of jury

davemelo

Serves him right for swindling all those people's money.

brokenbridge

I studied there before lockdown - I knew of it because of Suarez and Van Dijk before moving there. I loved the club Paradigm, which I named a track after and also how
Big a student city it was. RUG was a nice university also.

dylanwynneosullivan

So thats where the term comes from

Thanks for making this video

rickyfast

I was once a bit of a ponzi then I met a clever woman who caught me in her envelope and stamped me down. Now, instead of a fancy suite and straw boater, I wear postal shorts and deliver through a DL slot. Hey, it’s better than a life in the Penn. And the pay’s regular.

stevefranklin