Law’s easy money creation schemes under Louis XV initially seemed to save France from the damage caused by the king’s predecessor Louis XIV, who had ruined the country. But, as usual with easy money schemes, they ended in disaster. One of the few disappointments of this overwise commendable book was the author’s failure to draw what I would believe is an obvious parallel between Law and the once-lionized central banker of our times, Alan Greenspan.
France under Louis XIV, the infamous Sun King, and his successor Louis XV, had a predilection for spending, wars, spending, central planning and more spending.
The author, in focusing on the Laws, Lays, Ebberses and their effect, warns there is a secondary problem of their chicanery. At the same time the Madoffs flourish, many seem to accept a culture of debt. Both scams and excessive debt are hurting us, the author says.
He warns that unabated debt “will unwind even the most robust economy. Excessive debt has traditionally caused more recessions, depressions and even wars throughout history.”
The author also argues that Bernie Madoff won’t be the last to perform highway robbery. Madoff’s scheme was ignored by regulators. Indeed, he was actually praised for years before people came to their senses, realizing he’d pinched the silverware.
Possibly the most difficult and courageous part of the book is when the author seems ready to eat his own: He cites a 2012 study conducted by the CFP Board of Standards—the “Senior Financial Exploitation Study.” In examining the work of advisors, it found some CFPs who badly advised or might have bilked clients. In other words, CFP Madoffs.
Some 74 percent of investors may have purchased unsuitable products from these advisors; 58 percent of the advisors may have omitted important facts; 48 percent may have misrepresented an investment; and, most alarmingly says the author, 19 percent committed fraud with intent or lying. It’s the last number “that concerns me the most,” the author writes.
It should.
Advisors aren’t supposed to do that. They are supposed to be independent and above sales quotas. They are supposed to consider the big picture for clients.
But can we all just be more careful, less emotional and more dispassionate? Can we heed the message of the author and avoid the Madoffs who are waiting for us in various investment and political forums?