Are Ponzi Schemes Possible In Collectibles?

The whole idea of a Ponzi fraud is to pay off old investors with the proceeds of funds from new investors.

Taking that as a basic definition, Social Security is a Ponzi scheme run by the government. Yet, few of the public or the media understand or acknowledge the fact.

With ordinary financial investments, there eventually is some sort of accounting that may expose Ponzi schemes. When everyone wants their money back pretty much at once, and there isn’t any to give them. Or if there never was any backing for their so-called investments, frauds are eventually uncovered.

Most investors have no idea how easy it is to become a victim of a Ponzi scheme in collectibles. I speak now specifically of some of the modern art that has been peddled over the past fifty or so years. Particularly work of those who were more celebrities than they were artists.

Their talent was purely and solely in the mind of their publicists and agents. The subject matter is said to be so esoteric that many so-called “experts” have made careers out of these artistic “talents.”

You could even have a house painter cover a sheet of canvas with white or red paint and create millions of dollars worth of art that such questionable experts will fawn over.

If push comes to shove, the values of such art can be practically nil. Everyone relies on the good old Bigger Fool Theory. That someone dumber than them will come along and bail them out by buying their fiasco.