‘Where has all the money gone?’

No doubt that’s what the laundry list of high-profile investors, charities and financial institutions taken to the cleaners by Bernard Madoff Investment Securities LLC must be asking themselves amidst revelations that the organization was nothing more than the largest Ponzi scheme in American history. It was “one big lie,” as the hedge fund’s namesake called it himself.

The financier’s fraud might ultimately cost investors as much as $50 billion and did little to boost confidence in the financial industry, already reeling from the subprime mortgage and credit crises of the past year.

In the grand scheme of things, however, Madoff’s actions are not dissimilar from Wall Street’s greater misdeeds.

Madoff’s outright theft of investor funds, while certainly criminal, pales in comparison to what other so-called “Masters of the Universe” have been doing recently. 
The financial industry clamored for deregulation, and ex-Presidents Clinton and Bush were more than happy to oblige.

They say you reap what you sow.

Freed of burdensome regulation such as the Glass-Steagall Act and – apparently – of government oversight in general, Wall Street ran wild. Hence the emergence of an opaque market in derivative securities to the order of $500 trillion, propped up in large part by high-risk mortgages and a glaringly obvious housing bubble. Only the criminally incompetent, or perhaps just criminal, could have denied that the day of reckoning was near.

New York University economics professor Nouriel Roubini, nicknamed Dr. Doom for his pessimistic and often prophetic predictions regarding financial markets, suggests that U.S. financial losses might reach an astounding $3.6 trillion before all is said and done.

To keep the financial industry solvent and the economy afloat might require trillions of dollars in bailouts and stimulus over the coming years – straight from the pockets of American taxpayers.

Nonetheless, Wall Street executives were more than happy to award themselves record bonuses while destroying the nation’s wealth. “Money for nothing,” as Dire Straits once said.

Yet there is more blame to be shared, and Americans largely have only themselves to thank for the dire straits in which they now find themselves.

National savings have declined steadily in the last several decades, reaching an all-time low in 2007, at a fraction of 1 percent of GDP.

Factor in $14 trillion in outstanding household debt, and savings are clearly in the red. Instead of saving money for a rainy day – or the economic “perfect storm” that now batters our economy – Americans swiped their credit cards with impunity and took out second mortgages to fuel rampant consumer spending.

The forecast looks even more foreboding: The government’s debt currently totals $10.6 trillion. Pile on some $40 trillion in upcoming Social Security, Medicaid and Medicare entitlements as baby boomers retire, and the folly of our ways becomes ever more apparent.

Left hung out to dry and footing much of the bill for our nation’s indiscretions in the form of higher taxes and diminished social safety nets, future generations will undoubtedly find themselves asking: “Where has all the money gone?”