Friday, 25 July 2008

Pyramid Schemes

All Pyramid schemes are a scam, that's all they are and with that all you get from them is bitterness and misery.

Pyramid schemes were started in the 1960s and became popular and drew big news in the media, mainly due to the scam association linked with them. After all the bad publicity it died a little death in the 1980s but now with the birth of the Internet pyramid schemes have seen a new light and many just like moths at night, can't but help being drawn to it.

In order for you not to fall into the trap I will be explaining what Pyramid schemes are how they work and how a great amount of money can't be made.

What is a Pyramid Scheme

To start an investors deposits a lump sum of cash, then they enrolling other investors to do the same and the idea is that they get a massive return for their investment.

The principle is very simple but in reality pyramid schemes just don't get a return for their investment and in many cases lose all of their original investment. There is only one person making any money from this type of scheme, that's the person at the top of the pyramid; the creator of the scam.

The scammer is in a position to reap the benefits from everyone fool enough to be tiered under them, sending money, cheques etc. then they just disappear without trace, with the loot.

Other Names For Pyramid Schemes

Pyramid scheme scams have been disguised by con men and con women by calling them many other names. Here are a few you may recognise:

Donation Club - Women Empowering Women - Liberty Scheme - People in Profit - Circles of Success - Calculator Scheme - Gifting Circles - (and here's a good one) Debt Reduction Schemes. There may well be more but you will know for sure once you know the scheme and read in between the lines of the contract.

Money Pyramid Scheme

A variation on a pyramid theme but still essentially a classical pyramid scheme and a scam.

There is a time set where the investor has to sign up a declared number of investors, just two more would give them a profit but the investment sum to be invested is several thousand pounds.

One of the secrets to failure with this is the time scale, often as low as one week or a month. If they achieve their target within this time they are promised high returns with such a high investment value.

The appeal is that carrot of such a high return of profit in such a short amount of time. Friends and family are often pressurised into joining up as an investor to prevent the loss of their original investment.

Pyramid Schemes - The Problems

There are two things that makes pyramid scheme so popular and the main reason people get involved with them, financial desperation and greed. These are two separate reasons and both are reason enough to take the 'risk' albeit advertised as no risks involved.

The first is the desperation to earn money, usually people who of a poor disposition and desperately need the money for their families. They are easily entices with the promotion that is laid out of big fast returns, even to the point of loaning the money for the initial investment. It is so unfortunate that these people became even worse off than they were before the business.

It has social implications tied up with it as many are so desperate to get their sign ups or second tiers that they would resort to harassing people to join up. The result is not only the lost their investment, but also the loss of many friends and relatives. In return they have made enemies from the bad business they had spread. Some even losing their retirement savings, losing their homes or going bankrupt from debts accrued.

The greed factor is the second reason, many knowing it is a scam but go ahead thinking that the profit they make will far outweigh the guilt of conning others into the game of pyramids. It may be that the failure of the business by those who were led by greed only have themselves to blame but how many other do they drag down with them?

The pyramid would collapse when the tiers of investors just don't materialise and this is where the scam factor hits home. It is not an ever ending roundabout of profit for all. In addition to this there would be small print in a contract that if the investor did not achieve a set number of lower level investors by a set time frame then they would lose all of their initial investment.

The top level pyramid investors or the creators gets their money while the pyramid collapses below them, but they have already banked and gone before the complete collapse.

Are All Pyramid Schemes A Scam?

Yes! That's the only answer you will get from looking at all these pyramid schemes. If anyone claims that a pyramid scheme is not a scam, they are either foolish or setting up a pyramid scheme themselves!

A bit about Matrix Schemes

People join this the 'hope' of getting a product when they rise to the top of the pyramid by getting a designated number of sign ups under them. It is the same as a conventional pyramid scheme but the rewards are products i.e. new brands of televisions, laptops and other high priced luxury goods. Don't get sucked in.

And Finally

If you want to make money, just avoid all pyramid schemes like the plague and try something else.

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