The distance is short, the cheese is big

The incident involving a group of football players being defrauded by a Denizbank branch manager is becoming increasingly complex. Let us try to look at the subject from very different windows, from history to theoretical infrastructure, from excessive greed for profit to income distribution, and from cryptocurrency markets to football rules...

Let us briefly recall the incident. In the public eye, the subject is referred to as the Fatih Terim Fund, but Fatih Terim's name seems to be hidden in the records... A young woman who is a Denizbank branch manager (Seçil Erzan) tells people that she has established a special and secret fund at Denizbank by gaining Fatih Terim's trust and using his name, and promises large short-term returns in dollars. According to the findings that have emerged so far, about 50 million dollars belonging to approximately 20-25 people, who are said to be acquaintances or relatives of Fatih Terim, have either evaporated in risky markets or been transferred to others (the bank manager and her partners). The third possibility is both... According to allegations, some acted early and even used violence to recover their money with interest.

INSPECTOR REPORT: Denizbank says that the bank has no responsibility in the incident and that it is entirely an organization of the branch manager! What is interesting is the inspector's report. It wrote: "Even if one were to believe the promise of a 253 percent return in dollars over a 46-day term, not being suspicious of these documents and handing over money in person and through a third party is behavior not expected from any person of average intelligence." Do you regret losing your money, or do you regret being humiliated in public by bank inspectors?

THE DISTANCE IS SHORT, THE CHEESE IS BIG: If the cheese is big and the distance is short, there is definitely a trap at the end. This was the basic message given by the Tom and Jerry cartoon, which tells the adventures between a cat and a mouse and was shown very frequently on television for a while. It taught children to be vigilant against promises and the contradictions of life while entertaining them. Our generation used to go to primary school alone and on foot. Our elders would warn us strictly: Never take candy apples, chocolate, etc., from people you don't know... One should have learned at that age not to take or want something from others that has not been earned, or not to be deceived by promises that sound good but do not fit logic and reason... I wish the Tom & Jerry cartoon were broadcast on television again...

UNRESTRAINED GREED: At times, the unrestrained greed for profit of some people emerges. As a result, you either get involved in dirty business and obtain unfair gains. (Mafia-style activities, drug and arms trafficking, enrichment through influence peddling in politics, black market, and various fraud schemes) If your morals or talents do not allow you to do such things, but you try to chase unearned high returns because of such unrestrained greed within you, you become a victim of fraudsters. Unrestrained greed creates a perfect market for fraudsters.

We have written and said it many times before. Our country has become a haven for dirty money in recent years. We are on the grey list of the OECD Financial Action Task Force. We are first in Europe and 14th in the world in the organized crime index. The Net Errors and Omissions item in the Central Bank's balance sheet also shows that the wheels of an economy in need of external resources are largely turning with dirty money. Where there is dirty money, all actors involved in money laundering (a segment extending from the real estate market to beauty centers that have recently appeared in our country, street gangs, and drug dealers) have achieved rapid enrichment. Of course, some people in the state's oversight mechanisms, from politics to bureaucracy, also took their share of this unregistered black economy. This unearned wealth (dirty money wealth) obtained by people with no education or craft was very clearly reflected to the public. Illegal activities were not held to account, and it remained profitable for those who did them. This tempted many people and fueled the "greed to get rich quick."

PONZI SCHEME: It is a fraud game in financial markets developed by an Italian-American named Charles Ponzi. It is claimed that there is a very profitable business or economic activity that most people are unaware of or have not yet realized. Interest (profit share for those who say it is forbidden) is promised well above current market interest rates. The high returns promised to those who enter the system first for periods of two or three months are paid with the money deposited by those who enter the system last. As the first ones win, others around them who see and hear them join the system. After a while, the number of new entrants decreases. The system collapses.

When Charles Ponzi launched this system in 1920, he convinced people of this: He would convert US dollars into Spanish Pesos and earn arbitrage income. Then, he would buy postage stamps with this money and sell the postage stamps at a high price in dollars, and distribute 50 percent profit in 45-day periods. A newspaper wrote about the absurdity of the business, and the system collapsed. Ponzi was sent to prison, got out of prison, and this time applied the same method in the real estate market.

PYRAMID SCHEME-TITAN CHAIN: The method inspired by the Ponzi system and used in its most common form became the Pyramid Scheme. The person who enters the system by depositing money grows the pyramid by bringing another member into the system and thus earns money. There is no economic activity involved. The system was classified as fraud. Upon this, those using the Pyramid Scheme tried to legalize it by including the marketing of products that were not of much value. Similarly, the 1983 banker disaster occurred. Multi-partner companies, real estate cooperatives, and marketing activities of conservative-looking individuals and organizations, especially targeting Turkish workers abroad, are also examples of Ponzi-type fraud that should not be forgotten. In the early 2000s, a major Titan Chain fraud occurred. People who lived flashy lives with this system increased the number of their victims by giving invitations at five-star hotels and finally took the money and ran away. About a year ago, a very young person used photos taken in the office of the then-Minister of Interior and made a solid hit in the cryptocurrency market, then fled to one of the Balkan countries. As long as people have the greed to earn more than they deserve without creating added value, fraud activities through ways like Ponzi or Pyramid schemes will continue.

WHAT IS EXCESSIVE IN GREED FOR PROFIT, TURKEY: We define interest and profit earnings well above market averages as excessive. However, negative interest rates have been applied in the world in recent years. The negative interest rate in Turkey is incomparably higher than the rest of the world. While inflation was at the level of 80 percent according to TUIK and 160 percent according to ENAG, they gave 18-20 percent interest on deposits. In the last two years, a wealth transfer of unprecedented proportions has taken place in Turkey. The real incomes of the working class (minimum wage and pension salaries) evaporated at a level of 55-60 percent according to ENAG inflation. The profits of the 500 Largest Industrial companies increased by 60 percent in real terms. Except for a small minority, the wealth of those who had money began to melt away. The tracks of the horse were mixed with the tracks of the dog, those who wanted to protect their money against inflation were pushed into the arms of adventurous funds (fraudsters) by state policy, and the work of fraudsters became easier. More interestingly, the government won the elections again after this wealth transfer, which has no precedent in the world.

THEORETICAL STRUCTURE OF ADDED VALUE OR EARNED INCOME: Added value or the share taken from national income (we can read it as earned income) occurs according to factor incomes. The reward for labor is wages. The reward for entrepreneurship (we can also read it as industrial capital-commercial bourgeoisie) is profit. The reward for financial capital (the lender) is interest. The reward for land (large landowners) and real estate income is rent. Although added value is theoretically divided into four main groups, in the final analysis, rental income, interest income, and profit are evaluated in the same pot. They are classified as capital income and wage income. After being adjusted for inflation, the increase in national income in real terms is not distributed evenly.

Economist Thomas Piketty, who has earned a well-deserved reputation in the world for his work on income distribution, wealth distribution, and the inequalities caused by the neoliberal system, makes important findings in his book Capital in the Twenty-First Century. The conclusion he reaches is this: Throughout history, the return on capital has been higher than the growth rate. In the 2000-year period, the average return on capital has varied between 4-5.5 percent, while the growth rate was between 0.1 percent and 2 percent until the beginning of the 20th century. Afterwards, it is at the 4 percent level. In between, there have been much faster capital returns due to reasons such as technological developments, wars, occupations, looting, major economic crisis periods, and monopoly markets, but the average real capital income growth that provides enrichment in the system is 5 percent on average in the two-thousand-year process and is only one or two points higher than the average national income growth in the last two centuries. This is the source of such wealth inequality.

Those who do business by borrowing money in economic life create added value by investing and trading with this money during that time, provide national income growth, and pay interest in return. Whether it is forbidden from a religious perspective is another matter, but it is a legitimate income. Those who do not call it interest also obtain interest income like honey by calling it profit share. In the end, there is an added value created by interest. However, wanting an interest return well above the interest or average profit margins formed in the market, the desire to possess much more than the added value that interest will create, means chasing unearned income. Chasing this greed ultimately leads to becoming prey to fraudsters. In summary, there is no limit to entrepreneurial or innovation income, but if we look from the interest front, according to Piketty, interest income above 5 percent in real terms is excessive in the two-thousand-year historical process.

ARE DERIVATIVE MARKETS, CRYPTOCURRENCIES PONZI? There are short-term leverages and sometimes unprecedented profit rates in derivative instruments in financial markets. So, are these markets a Ponzi scheme? New generation financiers do not evaluate derivative markets and crypto assets as a Ponzi Scheme. But if things go wrong, as in the 2008 Mortgage crisis or the 2021 Cryptocurrency markets, the Ponzi effect is seen, and money evaporates. Leverage in crypto markets is the increase in prices with the increase in demand that will be created by those who will enter the system, and thus the increase in the profits of those who enter the system first. Sweet profits emerge at the very beginning. So, are instruments called cryptocurrency money? This is where economists like me, who are accused of being dinosaurs, do not call cryptos money, and we receive plenty of criticism from new generation market economists. As a dinosaur economist, I will summarize my justification, the young generation will explain later, we will learn.

Money is the seigniorage right of states. "I print this money, and as a state, I guarantee it," they say. It is a piece of paper and ink worth three cents, but it says 100 TL or 100 dollars on it. For a piece of paper worth three cents to buy 100 liras worth of goods or services within the borders of the Republic of Turkey, there is a large state organization behind it (whether you like it or not, it has nothing to do with being democratic). It has its constitution, laws, judiciary, army, and police. If you get up and issue another piece of paper and say that I guarantee that you can buy 100 liras worth of goods and services everywhere in Turkey with this piece of paper, you have attempted an uprising heavier than an armed uprising against the state. It is counterfeiting, and the penalty (before it was abolished) was death. For 100 dollars, which is worth three cents, to buy 100 dollars worth of goods and services all over the world, there is a navy that spends billions of dollars, travels all the seas of the world, and bases and nuclear missiles in many parts of the world behind that piece of paper. Earning 100 dollars of income with a piece of paper worth three cents is the seigniorage right of the USA. If you try to get involved in that seigniorage right, the end is war, death. Crypto assets whose owner is unknown are not money. There are attempts to use them as a medium of exchange like money, but the end is dark. Unless a new state model and a union of states model are formed in the world, a new currency will not emerge. For a new currency, a major war is needed where technological developments trigger social changes, change state structures, and ultimately the loser will be the USA.

International finance capital is currently following crypto markets and even uses them quite well to evaporate the excess dollars they release into the market from time to time. For example, the loss (evaporated money) in crypto markets in one year between 2021-2022 reached 2 trillion dollars. Let's take a brief look at Bitcoin, the leading currency of the crypto market.

July 12, 2021. Bitcoin value: 31 thousand 777 dollars. Four months pass. November 8, 2021 Bitcoin value 65 thousand 510 dollars. In dollars, a tremendous profit of 106 percent in four months.

Two months pass. January 17, 2022. Bitcoin falls from 65 thousand 510 dollars to 36 thousand 294 dollars. 45 percent of the money has evaporated. In November 2022, that is, exactly one year later, the value it reached is 16 thousand 250 dollars. 75 percent of the dollars invested in Bitcoin have evaporated.

When we come to November 2023, today, Bitcoin is 37 thousand 775 dollars. For those who bought two years ago, 40 percent of the money is still evaporated. For those who bought Bitcoin in November 2022, there is a 132 percent profit in dollar terms. Tremendous... If your heart can take it, go ahead and enter this market. But if I were you, I would play Texas Poker with a small amount of money, it's more fun. Horse racing is not bad either...

FATIH TERIM AND HIS FOOTBALLERS: While I'm at it, I want to share an observation about football. In this incident, the impression I have about the mentioned footballers and especially Fatih Terim's students in Galatasaray and the National Team is this: They were reacting very harshly to all referee decisions against them, whether justified or unjustified. At the slightest foul committed against them, they would run to the referee, make a card gesture, and try to get the opposing player sent off. The problem grew, spread, and received so much reaction in world football that, as a result, making a card gesture to the referee began to be punished with a card according to FIFA rules. Objecting to injustice is one thing, intending to usurp the rights of the opposing team with excessive objections is another. In the money market, the greed to earn above normal without creating much added value is the desire to shift others' shares in national income growth towards oneself. Demanding that an opposing team player be sent off by objecting to the referee in football to the point of shrewishness, whether justified or not, amounts to the same thing. The desire to earn more than one deserves...