Bitcoin, Ponzi, and stamp collections
It is some ten years since the RTE programme was broadcast, fifteen years since the story was revived.
The edition of Scannal is still available on the RTE player. The programme narrates the tale of the development of a Ponzi scheme, a scam whereby early entrants receive large dividends from the investments of later entrants. The scheme works just so long as the base of the pyramid can be made wider and wider, that there are more and more people drawn into parting with their money.
The story had been revived in a newspaper five years earlier and is still on the Sunday Independent website. Rory Egan wrote in the Sunday Independent of 19th November 2006:
Once upon a time, back in 1954, a man named Paul Singer decided to make his fortune in Ireland after his business collapsed in the UK. He approached a reputable family auction house run by the Shanahan family and persuaded them to join him in a new venture: buying and selling stamp collections.
On the face of it, Singer’s plan was sound. His idea was to buy up a number of eclectic stamp collections, sort the various stamps into countries or ‘First Day of Issue’ albums and sell these specialist collections at a profit. He appealed to the ‘Money in Grandma’s Attic’ in all of us by telling the Irish public that there was an insatiable appetite for the old Irish Free State stamps. But the smoke and mirrors really began when he encouraged the general public to invest as little as £10 in one of his syndicates, which he practically guaranteed would make huge returns.
One must remember that in those days the only way to make a fortune was to inherit or win the Sweepstakes. All of a sudden syndicates were buying stamp collections and selling them months later for profits of 20 or 30 per cent. It was possible to double your money inside a few years. People invested their life savings and for a while it seemed to be too good to be true. And it was. The truth was that most stamps sold at Shanahan’s were bought by other syndicates run by Singer.
On May 9, 1959, a mysterious robbery occurred in Shanahan’s, with over £300,000 worth of stamps stolen. All of a sudden, all the syndicates tried to cash out. Singer was arrested on fraud charges, but he was eventually freed on a technicality and promptly left the country.
Thousands of investors lost money, but the country learnt a lesson and we would never again allow ourselves invest in something that was so hyped up and inflated to unrealistic values. No, we’re much smarter now – we put our money in property.
Towards the end of the programme, economist David McWilliams speaks of the Singer scam as a triumph of hope over experience.
A triumph of hope over experience? What is Bitcoin? It has no intrinsic worth, it has no government to regulate it, no bonds against which it is issued, instead it is a piece of speculation. Its value will rise as long as there are people who can be persuaded to part with their money, as long as the base of the pyramid can be made wider and wider.
Unlike Paul Singer, who was arrested on fraud charges, no-one will be arrested, for no crime has been committed. People are willingly parting with money to buy something that does not exist.
Hope triumphs over experience.
That Bitcoin thing bewilders me.
And it seems ‘mining’ the stuff eats through electrical power in data centres.
On the Stamp Collection. I get a basic collection back in the day with stamps produced all over the world. But mostly from ex-colonial possessions of the British, lately independent at the time I got them. With the pack one got a booklet detailing the ‘rare’ ones you should keep an eye out for. But really it was a sort of scheme designed to shake pocket money from lonely boys.
RTE’s Primetime reported on Bitcoin suggesting it was like a bet at the horse racing or the dog track.