Madoff’s masterly $65bn sucker game

Web of exquisite lies

Bernie Madoff, writes Dalrymple, was the type of swindler

who is hyper-respectable and sober in appearance. How gladly I should have entrusted my savings to him if he had asked me! Such a calm, intelligent face, full of strong but discreet character!

His Ponzi scheme

was so brilliant that even now it excites my admiration, though I know that it was wicked.

Madoff offered

not huge and spectacular gains, but steady, invariant, yet more than adequate ones that could plausibly have been the fruit of unusually wise investment in turbulent times.

The gains were offered

only to the people whom Madoff accepted as clients, who then came to think of themselves as specially privileged to be taken into his embrace, which turned out be more spider’s web than sheltering fold.

💷 Theodore Dalrymple 💶 personal finance tips ‘n hints 💰

Should we wish to be of the 1%?

Wealth as such is not a very elevated aim in life.

What about you, Doctor?

I have never made it my principal aim or goal.

To have a sufficiency, though, is both necessary and gratifying, is it not?

A degree of prosperity is at least some evidence of worldly success — an imprimatur as it were, to which I have never been quite as indifferent as perhaps I ought to have been.

Do you feel wealthy?

Not enough to feel that a new car would not be an unwise extravagance if it were unnecessary.

What do you look for when buying a car?

My main desideratum is that it should start first time in the depths of winter. For many years I owned cars that could not be relied upon to do so.

What is your wish?

Modest comfort.

How much do you feel you need to accumulate to secure this?

As returns on paper wealth are exiguous, and having memories of inflation of 15% a year, I have very little idea.

Have you, in the course of your adult life, been able to put money aside?

As a typical member of the old-fashioned provident middle classes, I have saved for years not to become rich on paper, but to avoid poverty in old age.

How did you get into the 1%?

My wife and I lived well below our income for more than 20 years and invested the rest under the guidance of an adviser.

What criteria did you apply in selecting this adviser?

I had no real evidence of his superior financial wisdom, other than that I liked him.

Does such wisdom exist?

I am not convinced that it does.

How would you rate your own judgment in financial matters?

Let me admit that if I had had the misfortune to meet Mr Madoff before his scheme was exposed, I should have trusted him implicitly. He had such a trustworthy face.

What is your pattern of consumption and mode of life?

It does not differ conspicuously from those of many of my peers, except in so far as I have no television and buy many more books than most.

What do you fear?

To be poor — and to end up in the hands of the State, whose charity is simultaneously patronising and heartless, rule-ridden and capricious.

 

Dalrymple’s twin laws of political economy

The existential problem of indebtedness

To restate the Dalrympian laws of public and private finance, they are:

Memories are short and lessons are never learned.

and

Sufficient unto the day is the credit thereof.

Dalrymple writes that

a profound change in culture and character has taken place in my lifetime. People not very much older than myself prided themselves that, poor as they were, at least they were not in debt; not to be indebted was for them a matter of pride and self-respect. What they could not buy outright, they were content to do without. Whether or not this was a good thing for the economy as a whole I cannot say; but I think it was good for the character. It encouraged self-control and also a probity that is now uncommon.

Governments

are under political pressure to indebt themselves

while ordinary people

are under some other type of pressure or compulsion that is internal to them and resistible but not resisted. They judge themselves and others by their modes and quantities of consumption, which give meaning to life in the absence of any other meaning. Spending, whether or not they can afford it, is affirmation that their life has a purpose.

Indebtedness

is an existential problem. Spendthrifts hope, if they give any thought to the matter at all, that the economics will take care of themselves. Sufficient unto the day is the credit thereof. At least until the next credit crunch.

Dalrymple’s money personality

Giovanni Bellini, Four Allegories: Prudence, c. 1490. Gallerie dell’Accademia, Venice

High finance, writes Dalrymple,

has never really been my forte or my interest. My attitude to finance is primitive: I spend less than I earn.

When, during the boom, Dalrymple’s bank asked if he wanted a loan,

I naïvely told it that I did not need a loan. The bank’s reaction reminded me of that of a newspaper for which I used sometimes to write when I refused to do an article for it on the basis of information that was self-evidently false. What, they asked, had that got to do with it? And for the bank (at the time), what had not taking a loan got to do with not needing one?

Teddy Dalrymple’s financial affairs

Although he subscribes to investment — speculation — newsletters, which of course contradict themselves regularly, Teddy’s financial affairs have never really captured his imagination.

He does, however, invest in ‘antiquarian books on arcane subjects’.