MMM-2011 Pyramid Scheme

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There is a new internet pyramid scheme called MMM-2011. The website is e-mmm.com and it is appears to be completely in Russian with no English option. I know Russian so I could read it. Here it is in a nutshell.

People deposit money expecting a return of 20% to 60% percent per year. It is working while new members join, since there is a large inflow of money into the system. It is the same thing as a bank, only it is structured as a pyramid, where each person begins to be a new bank branch. The system can grow until it will take all of the people in the world.

In 9 month since its inception it has 5 million people and large sums of money. The money is distributed, and not stored in a central account. It can not be shut down. The previous attempt was in 1994, where in half a year MMM had 15 million people. It was shut down by the government because all the money was in a central location.

The creator claims that we already live in a pyramid, the pyramid of ever increasing credit. We pay old debts by taking a larger credit at a lower percentage. His goal is to destroy the financial market as it is today, by launching his pyramid against the current one.

According to the modern definition of money – anonymous tokens – a pyramid seems to make clear a paradox inherent in its definition. Such pyramid will destroy both corruption as well as means to have a proper capitalist society, since it is destroying money.

I have translated some of the arguments found on e-mmm.com site from Russian to English, on my blog:

http://rarden.blogsp…apocalypse.html

Will MMM take over the world? If yes, what will happen afterwards. How could we define money to stop pyramids from being created again?

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update: English version of the MMM site is: http://i-mmm.com/en

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It’s amazing that people fall for blatantly obvious ponzi schemes! It’s an example of man the animal with a short term focus winning over man the principled reasoner.

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Can you elaborate please ? What is wrong with it ?

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an you elaborate please ? What is wrong with it ?

It is a Ponzi scheme.

Hopefully, that article has enough. My own synopsis is this: Ponzi schemes can only work as long as there are more suckers to be found to channel their wealth to the previous person in the chain, but it cannot work in principle. The bottom line is that a scheme that does not involve wealth creation, but only involves wealth transfer cannot make all participants wealthier. Since it obviously makes the early participants wealthier, the math says that later participants will end up poorer. Ponzi schemes have never worked in practice because they cannot work in principle.