No smarter than Albanians

The Ottawa Citizen’s Dan Gardner takes on what amount to Ponzi schemes in markets:

A bunch of suckers
[…]
Thomas Friedman owes Albanians an apology…
“It was logical that Albania’s first post-communist, free-market government was brought down by Ponzi schemes,” wrote New York Times columnist Thomas Friedman, who has an unmatched record of seeing clearly what will happen shortly after it does.
Albanians were bumpkins. They didn’t understand capitalism. And Albania’s newly democratic government — government by the bumpkins for the bumpkins — didn’t help them.
[…]
Back when P.J. O’Rourke was chuckling at Albanian rubes, we were pouring our savings into Nortel, Enron, and any stock with “dot com” in its name. The fact that Pets.com didn’t actually sell stuff and make money didn’t bother us. That stock was hot!
We bought with the expectation that someone would later buy from us for much more than we paid. That person, in turn, expected that someone else would buy for even more. And so on. By 2000, the Dow had tripled in five years.
Does this remind you of anything?
“In a Ponzi scheme,”…
The stock market crash came in March of 2000. But by then, another sucker’s game was underway.
Real estate values were going up and up. You have to get in now! In a few years, you can make a fortune when you sell to a buyer who is sure that in a few years he will make a fortune selling to … some other sucker.
It’s obviously madness. But it wasn’t obvious then, was it? If it had been, you wouldn’t have bought AOL and you wouldn’t have a mortgage worth more than your house.
…I am not going to conclude that capitalism is a giant Ponzi scheme and the workers of the world have nothing to lose but their chains. Albanians know something about that bunkum, too.
The problem is speculation…

Mark C.
Damian adds: Gardner’s interview with Rob Breakenridge, in which they discuss the federal budget, is well worth a listen.

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