Madoff Fraud Ripple Effect on Recession

The Madoff ponzi scheme which is unfolding in NYC looks like it could have a ripple effect very similar to the damage inflicted by Lehman Brothers collapse this past summer. Although not as large as Lehman, the fact that it was a Ponzi scheme means the percentage losses will be even greater.

As if the economy was not snowballing downward enough, this fraud will be a nasty accelerant. This is a huge fraud....aparently a couple of times larger than Enron (which was not a total fraud as here).

Regular readers of this blog know that rising fraud is to be expected with the downturn. But, this fraud predates the downturn. So my takeaway is that if people will cheat their close friends in good times, just imagine what they will do when under severe distress.

I am writing this from the Boca (FL) area where I happen to be as this story breaks. The Boca/West Plam area, along with the NYC area look to be the epic center of the fraud. In NYC, the impact will be spread because of the size of the wealth community. I expect the impact in South Florida to be much more severe.

The South Florida economy was already reeling worse than the norm...this is yet another kick in the teeth for business owners and residents in this area.

But, the ripple effects of this fraud will be much, much more far reaching. I regret to say that this is yet another factor that validates my previous views that this downturn will be more severe than most have expected and longer loasting.

So is this the beginning of the end of the world...hardly!

I continue to see business owners and individuals that are positioning themselves to not only survive, but to thrive and even prosper in these tough times. Have you made the choice to prosper in these tough times?