How Long Could a Ponzi Scheme Survive?

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Recently a friend posed this question: If the market hadn’t gone sour, would Bernard Madoff ever have gotten caught?

I wonder.

Instead of investing his client’s money, Madoff put it in his bank account. He said he knew the day of reckoning would eventually come. But would it have come if he were able to continually pay out the promised returns? Or did it only collapse because so many people demanded principal withdrawals at once? Did it only collapse because investors lost their optimism? And if Wall Street runs on hope, how is that different?

What do you think?

Image Credit: liber, Flickr

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