The News
Sunday 26 of May 2024

Consar and the Ponzi Scheme

Consar,Photo: Notimex/Carlos Pereda
Consar,Photo: Notimex/Carlos Pereda
There are the economic facts — verifiable historical, statistical and mathematical that beg the question: how can a person, an institution or a company offer interest rates that exceed, sometimes by far, 3 or 4 percent.

Historically the rate of profit on an investment in production capital has been 20 percent annually. So a capital of one million monetary units has corresponded to, over the past 200 years, a profit of 200,000 units.

That 20 percent is certainly a good profit. Above all if compared to the 3.5 percent paid by a bank or 4 percent yield of some investment funds.

But that 20 percent will not go entirely into the hands of the producer. This has to cover the cost of land rent (or building or warehouse). And that 20 percent should also be deducted from historical borrowing costs, i.e. payment of interest on money borrowed to start the business.

So that 20 percent of historical profit should be divided between manufacturer, landlord and lender. Except, of course, that the manufacturer itself supplies the necessary initial million currency units, which obviously is not common.

It is clear, therefore, that the gain of the manufacturer or producer can only be between 6 and 7 percent, one third of that historical 20 percent.

That is why banks, investment funds or retirement savings can only pay real interest rates of 3 or 4 percent, as it happens in reality. The difference between that 3 or 4 percent and the 7 percent that is the producer’s profit is the profit of the bank or investment fund.

These are the economic facts. Verifiable historical, statistical and mathematical. It should then be asked, how can a person, an institution or a company offer interest rates that exceed, sometimes by far, the maximum possible is that 3 or 4 percent.

When the latter happens, it is reasonable suspicion of fraud, a simulation, a deception to lure those unwary with their money to the company offering “real good yields,” just to be stripped of their heritage. There are a thousand and one variations of the very famous Ponzi scheme: to offer high yields for resources, and then no returns.

These percentages (20, 7, 4 or 3) we are talking about are the norm, the historical constant in a legal economy. But it is obvious that the criminal economy (production and trade in drugs, human trafficking, vehicle theft or kidnapping, for example) is able to pay very high yields to investors in such “business.”

But in the legal economy the actual performance over time can not exceed the 3 or 4 percent, we call standard. See as an example of this form of deception the “returns” offered by banks regulated by the National Retirement Savings Commission (Consar). They range from a high of 8 percent to a minimum of 5 percent, with a simple average of less than 7 percent.

For that, Consar has often reported losses (it euphemistically says disabilities). To go adjusting yields for in the best case and the passage of time, the saver receives 3 or 4 percent standard and nothing else. It’s one way certainly less perverse than the classic Ponzi pyramid.