Bernie Madoff and the Fed: American Pyramid Builders

Like an Egyptian pharaoh of old, disgraced American financier Bernie Madoff, who died last week in prison at the age of 82, had built a mighty pyramid.

But while Egyptian pyramids still stand, even though the pharaohs who are buried in them died many thousands years ago, Bernie Madoff’s pyramid collapsed relatively quickly.

Money pyramid builder

Egyptian pyramids were built by slaves who quarried and transported the pyramids’ massive stones under the whip of the overseer.

Madoff built his pyramid in a different fashion.People actually clamored to give him their money and, strangely enough, felt honored when he agreed to accept it.

When Bernie’s pyramid finally collapsed

Of course, he used their money to pay dividends to existing shareholders and thus his pyramid kept getting higher and higher.

When Bernie’s pyramid finally collapsed in 2008, thousands of people, including many celebrities and many institutions, including charities, found themselves defrauded. At $65 billion, it turned out to be the largest financial fraud in history.

The other, much bigger pyramid builder

The U.S. Federal Reserve has been building a pyramid that is similar to Madoff’s — but on a massive, global scale.

The Fed has kept dollar interest rates at zero most of the time after the 2008 financial crisis. This happened, even though the United States has experienced the longest economic recovery in U.S. history which also went along with record low unemployment rates.

The Fed as the stock market’s hand maiden

Not at all surprisingly, massive financial bubbles developed, but whenever the Fed-made money pyramid was in danger of a collapse, it stepped in essentially to print yet more money.

The Fed’s balance sheet ballooned to some eight trillion dollars. The extra liquidity boosted everything in sight: corporate profits, real estate, contemporary art and other collectibles, to say nothing of stock and bonds.

The Fed’s global conveyor belt

Being the issuer of the world’s reserve currency, the Fed also exported its pyramid all around the global financial system.

The result? Paper money has been debased. Everyone is suddenly a millionaire. The old compliment — you look like a million dollars — now sounds almost like an insult.

Under the Fed’s pyramid, money has become so plentiful and cheap that bond yields in many countries have become negative. In other words, governments in Germany, Switzerland and elsewhere charge lenders for the privilege of borrowing from them.

Bitcoin: The next pyramid?

The rise of the Bitcoin, which is supposed to be an alternative to the dollar and eventually replace it, is the direct result of the made-by-Fed pyramid.

Bitcoin is a trillion-dollar pyramid within a massive multi-trillion-dollar pyramid. Ironically, when it is measured in bitcoins, and not dollars, the booming Wall Street is actually in a deep bear market.

The pyramids that last

Pyramids were funeral monuments which the pharaohs began building while they were still alive but aware of their mortality.

Many designed their tombs in advance, one of the most famous being Pope Julius II who commissioned a grandiose one to Michelangelo.

America may still rally — but not before the financial pyramid comes spectacularly down — much more spectacularly and damagingly than Madoff’s.

Many things created by U.S. easy money of the past decade and a half will endure – the technological progress, the Internet, the achievements of the biotech industry and other sciences. The same way the automobile, the airplane, the radio and other electric appliances endured after the 1920s financial bubble burst.

However, many speculators, investors and retirees will go down along with the financial pyramid — much like Madoff’s investors and the thousands nameless workers who built the Egyptian pyramids.