The IMF has just released a new working paper, with more detail than you likely ever wanted to know about how Ponzi schemes work – particularly in and around the Caribbean.
Ponzi schemes are everywhere and, at least in some environments, new versions arrive frequently. But why are they so hard to prevent and shut down once they appear? The paper contains some strong hints, albeit couched in very diplomatic language.
The comment competition is: what, if anything, does the failure of governments to shut down blatant Ponzi schemes imply about the prospects for a potential “macro-prudential” system/market-stability regulator implementing cycle-proof rules in the United States? Is there a better way to prevent the kind of behavior that led to our current financial crisis?