TruthSavvy.

Is any observer of Wall Street surprised that a former chairman of the Nasdaq Exchange has been charged by prosecutors for running a Ponzi scheme in which by his own estimate some $50 billion has been lost for investors? Is anyone shocked that this operation allegedly went on for years right under the collective noses of SEC officials? Is anyone the least bit astonished by the claim of Madoff’s lawyer, Dan Horowitz, that they will “fight to get through this unfortunate set of events.” Or that Madoff as currently charged faces a mere 5 years in prison and a puny $5 million fine, according to prosecutors. (See “Bernard Madoff arrested and charged with fraud”, Dec. 11, Moneycentral.com.) Of course there’s little surprise! While the details are yet to emerge and be established in court, the charges are not shocking in light of the circumstances of today’s capital markets.

As explained in the Moneycentral article, a Ponzi scheme is simply a pyramid-type swindle in which very high returns are promised to early investors, who are paid off with money put up by later investors.” How is this different than the stock market of the last thirty years? The market could probably pay 4-7% on a sustainable basis if executive compensation were under control and Wall Street didn’t exploit markets so aggressively. The only thing that made possible the prospect of 10-12% year over year returns for the general public (and 20-30% annually for elites) was the accelerating expansion of the universe of new participants combined with monetary inflation, easy money leverage for speculators, and the wage exploitation of workers. Take away the new participants and any one of the other ingredients and this promise of market returns for retirement savers becomes as big of a lie as any Ponzi scheme.

Is it any wonder that a Nasdaq chairman who became accustomed to the architecture of his exchange might resort to the same basic architecture in trying to enrich himself? Would this be so unusual for Wall Street today — a place where greed knows no limits?

Why didn’t Hank Paulson go to the U.S. Congress and get down on one knee to beg for legislation to break the 1977 congressional growth mandate to the FED? Why didn’t Paulson condition any bailout funding on an end to unsustainable stock market architecture? The answer is that America’s elites are married to the Ponzi architecture of capitalism. Our ruling financial class got their wealth through a structurally unfair system. They loath the idea of the gap being closed between wage earners and themselves.

As a consequence of rampant hypocrisy among governmental and financial elites, the Madoffs of the world will be prosecuted, as well they should, while the nation’s overarching Ponzi style of capitalism remains intact — taxpayers being burdened to maintain both it and the elites who suck its milk. What will it take to get long-suffering Americans to yank down worthless elites from their thoroughly disgraced posts?

Marjorie Kelly made points of a related nature in her well-conceived 2001 book, “The Divine Right of Capital: Dethroning the Corporate Aristocracy.” If people would have paid attention to the Kelly book, William Grieder’s books on globalism, Jeff Gate’s work on “Democracy at Risk,” and Yuri Slezkine’s recent assessment of mercurial ways, we could have a better world with fewer bubbles and less disruption of the common good.

The goal is not socialism: It is fair, sustainable and constructive market capitalism operated by moral means and for honorable ends. With good rules and a level playing field, just capitalism can lift the vast majority of boats. But what we endure now is a shameful substitution that puts 200 years of American labor and ingenuity at risk.