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Sunday, 8 January 2017

BETWEEN PONZI SCHEME AND FRACTIONAL RESERVE LENDING POLICY: A CASE FOR MMM AND OTHER MUTUAL AID (PEER-TO-PEER DONATION) SCHEMES.



I would start by saying I am an ardent student in the subject of money and currency (Yes, they aren't the same). From the creeping into America's lexicon of "war is profitable" and the severing of dollar from gold by President Nixon (that set a new standard of fiat currencies for the rest of the world), I read about and crave money devotionally. Since I love the subject of  money and currency, I had to do my study into the two subjects above. This became necessary as the words "ponzi scheme" first landed on the Nigerian mainstream terrain, an event that coincided with the arrival of MMM 2011.
We hear a lot of publicity about the danger of MMM, about how it is a "ponzi scheme", they keep saying; and how it is doomed to crash. Funnily, I hear these narratives from people who are hurt first hand by the mere existence of this economic bandage from Russia, and also from people whom this scheme is designed to liberate from and assuage their poor standard of living. So I concluded that the rich and powerful are as rich and powerful because the others are lazy and ignorant. That I'm very sure of.
I digressed.
My simple litmus test to ascertain if any antic against MMM is really a decision based on knowledge and research, or simply a "masses reasoning" that exists for the rich and powerful to exploit: I try to engage people in a debate comparing fractional reserve lending legally practiced by financial institutions and the ponzi scheme of Sergei Mavrodi and other Robin Hoods. 99% of the time, they test very blue: they've never even heard of Fractional Reserve Lending, and they first heard the words "ponzi scheme" from Linda Ikeji Blog or Premium Times.
So what exactly is a ponzi scheme? And does MMM really fit as one? I am asking you!
My attempt: I'll spare you the dictionary definition. You can find that with a quick Google search. An analogy that attempts to describe it (one the authorities and other critics have used to describe MMM), because it is the least "jargonless", is simply ROBBING PETER TO PAY PAUL. But that definition falls flat in the face of mutual consent between Peter and Paul. No one is being robbed. Today Paul takes from the pool Peter also contributed into, tomorrow Peter does. Sounds more like very sophisticated "Osusu". Very sophisticated. Since I'm not an expert, pardon my non comprehensive elaboration. But I think its conciseness fits the context.
So how about Fractional Reserve Lending. It's simply a policy that allows a commercial bank to just keep a fraction of the deposit it claims to hold, and is able to use the other in other ventures that are not fully risk-proof; like give out a loan to individuals or government, invest in capital projects or whatever. In other words, Customer A takes N100k to "Second Bank of Nigeria". He gets some sort of digital receipt in the form of a balance back to his home. The law of Fractional Reserve Lending allows the bank to keep just a percentage of that N100k (usually 10%) and engage the other in trade. So Second Bank of Nigeria can then go ahead to give out N90k as loan to Customer B. So customer A has digital receipts, Customer B has N90k in hand. That is 190k in existence without any interest, without any genius from any banker, without any sweat from any marketer. Just the law.
Let's pull both concepts towards a meeting vanishing point. The concept of Ponzi Schemes and Fractional Reserve Lending allows artificial currency to be created into a system. 30% extra Mavros; N100k final balance in an account. Both of these can be converted to cash. You either GH or you communicate with your bank to pay you.
So, the obvious question arises: how are those extra derivatives we created from the ponzi scheme and fractional reserve lending accommodated? The simple answer is that everyone won't go to the bank the same day. Today it's Peter, tomorrow it's Paul. If Paul and Peter go the same day, MMM or Second Bank of Nigeria crashes. That simple.
So if they are so similar, why is one embraced and the other is considered legally and morally criminal?
Let's go back to the illustration. Customer B deposits his 90k in Second Bank for a while or simply takes it to "Gitib Bank". Gitib Bank replicates the process and are able to keep just N9k and loan out N81k to another customer, C. Already N271k has been generated from just 100k physically circulating. The rest are just numbers in computers. Only one person has N100k, two other people owe the banks N171k. Imagine!
Maybe they all loan at a generous interest rate of 5% pa (which never happens). Do the math on the derivatives these banks can create from mere "keeping" of people's currency. Even without any interest on the ricocheted use of people's deposits, those guys will smile to the bank. Oh! They are already at the bank. My bad.
Secondarily, money supply increases, inflation sets in, the keke guy has to work harder to afford the life he lived earlier with less resources and stress. All while some Agbaje or Adenuga guy smiles at his billions made "legally."
Then came Sergei Mavrodi with his concept of creating this pool of increased currency supply, but designed not to benefit him, but to benefit the masses. Not the big owners. Not the government who feed on taxes and can't do anything to hurt compliers. Then came MMM.
If you didn't know this already and was busy criticising, I hope this will help you understand why the huge PR efforts to discredit MMM and dissuade your involvement in it. And I hope you now know that those guys had what they were fighting for, and you didn't. You were just an egotistic opinionist who didn't even know where the gun barrel was pointing. I hope too you realise how foolish you've been all the while.
In conclusion, MMM is actually your friend that you threw out. The real ponzi scheme is the bank. They won't even give you loan to plant a plot, they don't go any extra length to add value to you. It's all business for them. The government is their accomplice and we all know they are worse. Like Sergei asked, "if you know what is right for people, why is the life so bad in the country?"
If a Senator that does not care about your dilapidated learning infrastructure, where you have to go out from and compete in the same market space with folks from Norway and China, if they don't care about your near zero healthcare, why do you suddenly think that they will care about where your business risks lie? How could you be so foolish? The other day I landed in a chat room with folks that are deeply into cryptocurrency and are in far away Europe, and I began to really feel the impact of NOT having power 20 hours out of 24 in the 27 years I've been alive; of taking GST classes in a hall crammed to varendah, under a lecturer who does not even know me; of having to buy internet bundles at exploitative prices and still having to move from kitchen to varendah in search of signal to connect Google. I felt like an illiterate with no hope.
Yet those guys who are benefiting from this ruin want to advise me how to keep my hard-earned money. God punish you guys! I stand with MMM through the trying time. I just PHed 50k. I'll gladly pay that into the system and not expect return if that's the cost of finding its balance again.
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