PONZI SCHEMES IN MUNICH IN THE 1870S

December 5, 2010 at 2:04 am | Posted in Economics, Financial, Germany, Research | Leave a comment

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Adele Spitzeder and the Financial Scandals of the Munich 1870s

Adele Spitzeder

(born 9. November 1832 in Berlin, died 27. October 1895 in Munich)

In the Hans-Juergen Syberberg film, “Ludwig,” mention is made of the Spitzeder financial scandal of 1870, in Munich.

(see Disc 1, “Ludwig” DVD)

See below:

In Munich, around 1870 Adele Spitzeder promised poor farmers amazingly high returns. Initially, she indeed paid out, financed by tons of money flooding in. Finally, she ended up in prison, having caused the big Munich banking scandal in 1872.

She wrote her memoirs in prison, explaining the soundness of her strategy.

Charles Ponzi was just one of many others who repeated her strategy. He did it in Boston around 1920. Again, the guy ended in prison, but at least he really became famous: Today, a reference to Ponzi schemes can be found in nearly any textbook. The No Ponzi game condition is taught in all advanced macro PhD courses. Nevertheless, nowadays it somehow seems as if investment bankers playing similar schemes (willing to finance fat private equity deals without any covenant), rather than ending up in prison end up getting additional money from the Fed.

See:

LIQUIDITY CRISIS

Background Information

Research Papers

Liquidity Crisis (PDF 152 KB)

Gerhard Illing, University of Munich, September 21st 2007

http://www.en.sfm.vwl.uni-muenchen.de/liquidity_crisis/index.html

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