Two names have been wed in the news this month: Charles Ponzi, the con artist busted in 1920, and Bernard Madoff, one of America’s most successful hedge fund managers and a reputable pillar of the Wall Street financial community. Madoff, whose name is actually pronounced “made off,” took the scheme that Ponzi made famous to new heights, conning some of the world’s biggest banks and richest personalities, making off with an incomprehensible sum of money over three times the size of the auto industry bailout.

But I’m confused. A Ponzi con goes like this: Some reputable crook sells an investment instrument that promises attractive returns. As new folks invest, the crook pays off previous investors, who actually see the promised returns on their investment. This continues on as new cohorts of investors buy technically worthless stocks or shares, the purchase of which fund payoffs to earlier investors. The actual stock or investment has no concrete value. It is not backed by a tangible item such as gold, real estate, or even a used car or a big lollipop. Nada. Nothing. It’s only value lies in the fact that people, for whatever reason, believe it has value. This belief creates a supply of fresh capital to keep the operation running while its crook-in-chief siphons his cut off the top. The early investors make out okay, as long as they cash out. The later investors, those mindlessly and greedily following the herd, are fucked.

I’m confused because I’ve also just described the global economy. The dollars in your pocket are what economists call “fiat currency.” While US currency was once redeemable for, and hence backed up by, a fixed amount of gold or silver, that system finally collapsed under the Nixon administration, which was essentially bankrupted by the costs of the Vietnam War. The US could no longer afford to back up its money with gold or silver since it had taken to printing money on an as-needed basis, essentially taxing the population by playing the margins on an inflating currency that it could print at will.

At the time, we had become so used to trading these paper slips for real goods that we forgot how this habit started. Words like “silver certificate” and any other indication of redemption value disappeared from our currency. We left “In God We Trust” on the bills, not because the masters of our economy necessarily trusted God but because it was good marketing for what essentially was a Ponzi investment. What, you got a problem with God?

Money has value not because it has any intrinsic worth. It has value because people value it. That’s it. People around the world continue to invest their worth in our conceptual currency, maybe because shaky as it is, it’s still better regarded than their own. In any event, as long as they keep investing in greenbacks, prior owners can keep trading them in, as with Ponzi’s and Madoff’s schemes.

Then there’s the stock market—global capitalism’s nest. Stocks have value? Well…

Okay, there are the fundamentals. Tangible things like factories and inventory. They have real value. And when you buy stock, you’re buying part of that value. But for the most part, those aren’t the hot stocks. Old economy accruements such as manufacturing plants are now seen as albatrosses. They require maintenance. Their operating expenses are susceptible to uncontrollable variables such as energy and labor costs. New economy corporations are rewarding for shedding the unwieldy weight of employees and buildings.

Wall Street’s stars are stars because they’re stars. That’s it. People invest in stocks because their values are going up, and the bet is that they will continue to go up. The rich are usually the first to get on and then off this train. The middle class, seeing how rich the rich got investing in air, then put their life savings into the roulette wheel, often in time for “bubble bursts” and “market adjustments.”

Like with any other Ponzi scheme, it’s a confidence game. It falls apart when the confidence ends. Right now we’re seeing a crisis of confidence.

Now let’s look at housing. When the tech bubble burst—meaning, when the romance of technology stocks wore off and people tried to assess their real value—the smart money pulled out early and took refuge in real estate. This gave us the era of McMansions, obese little castles wedging themselves onto the suburban landscape.

By 2000, real estate was well poised to be the new Ponzi. People burned by the revaluing of technology paper were looking for something real to invest in. Real estate is certainly real. And it’s a finite commodity—sort of like gold or silver. But the problem is that real and valuable as it really was, it wasn’t anywhere near as valuable as a frenzied market made it out to be—and up it shot. The collateral damage here came in the form of homelessness and personal bankruptcies as more and more poor and working folks got priced out of the housing market entirely.

For everyone else, euphoria about not being homeless blinded them as they signed off on bulging mortgages for real estate saddled by intangible conceptual values. These were still good investments because, costly as these homes seemed, they could always be sold to someone else for more. Ponzi!

In the end everyone bought into the global Ponzi scheme. This week we’re shocked to find out that HSBC Bank invested a billion bucks with con artist Madoff. Imagine this staid old opium bank making such an irresponsible buy. But let’s look, for example, at “fiscally conservative” M&T Bank. I’m using them as an example because last week they sent a letter to investors boasting that smart guy Warren Buffett is one of their major stockholders—so not to worry. M&T didn’t (at least so far as we know) hand over a billion dollars to a charismatic swindler. But their business plan moved money from the regions where it’s invested, into overheated housing markets in Florida and New York City where they’ll loan a half a million dollars for the purchase of a one-room apartment—securing their loan only with the belief that there will continue to be people who believe that a one-room apartment is worth a half million dollars.

So let’s get back to Madoff’s Ponzi scheme, and let’s look at his victims. Exactly what was it they were investing in again? No one knew. No one cared. They just wanted a piece of the action.

Madoff never claimed to run a Ponzi scheme. But he did admit to being a hedge fund manager. And people were cool with that because whatever a hedge fund is, it makes money. They didn’t care how it made its money. They just cared that it made money. That’s the real crime of the stock market. No one cares where the money comes from or how it’s made, or what the environmental and human costs are. They just want a piece of it so they could put the down payment on a new McMansion or Ferrari. Now they got burned. End of story.

Dr. Michael I. Niman is a professor of journalism and media studies at Buffalo State College. His previous Artvoice columns are available at artvoice.com, archived at mediastudy.com, and available globally through syndication.