As Ponzi Schemes Go Ghana’s Menzgold Was Pretty Small

This is actually something of a surprise, that the recently collapsed Ponzi scheme in Ghana, Menzgold, was so small. For there are really only two things which cause a Ponzi to fall over – either very few people believe in it or everyone does. Clearly, if few people believe then few invest and it never really gets up off the ground. But the significant feature of such schemes is that if everyone believes in them that’s when they fall over.

To have one with this sort of middling performance is thus the slight oddity – Menzgold apparently had fewer than 10,000 investors:

The Editor of the New Crusading Guide, Kweku Baako Jnr, is disputing claims that embattled gold dealership firm, Menzgold Ghana Limited, has more than a million customers whose funds are locked up in the controversial minerals trading company. Kweku Baako said his checks showed that Menzgold had a combined 4,924 customers at the branches, with the exception of the Kanashie branch. During Asempa FM’s Ekosii Sen on Tuesday, he sent in a text message saying, the huge figures are obviously exaggerations. “For the records: The number of Menzgold customers/investors is not above 10,000! My checks show that minus the figure of the Kanashie branch(which I am yet to verify) , the overall customers/investors strength number not more than 5,000.Menzgold runs 7 branches including the Head Office; Kasoa,East Legon, Tema, Dzorwulu(Head Office), Kumasi, Tarkwa and Kanashie. The figures 1.8m, 60,000,etc are obvious exaggerations!”

There’s an obvious importance to this.

The end game for a successful Ponzi is always the same. Given that old investors are paid their “profits” from the investments made by new, the scheme fails when there are no more new investors. It might not be when the entire population is exhausted but it will be when the population of the gullible is. This is also the great danger, the longer one runs the more of the population is ensnared and the greater the chaos when it all goes kablooie.

But 10,000 investors tops? That means that the political blame game isn’t all that important. The two main political parties are already tearing strips off each other as to who was responsible. It happened on your watch, but what about the others that happened on your, didn’t one of your people accept a donation, isn’t that a picture of one of yours with the promoter…..and on.

There’s also the worry that the collapse of a really big scheme will have macroeconomic effects. There really is that thing called the wealth effect, when people suddenly have less than they thought they’ll stop spending and that can bring on a recession.

But 10,000 investors tops? In a country of near 30 million? No, that’s unimportant. Sure, it’s important to those who’ll not get their money back but to everyone else in general it’s not even a blip. Menzgold can be left to quietly go bust and we can allow the criminal justice system to have its say. No attempts to repair or revive are needed. Not that any attempts to repair or revive would work but there’s no need for them.

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