The Pyramids that ruined Albania
In 1997 albanian financial pyramids had crashed burring at least 1,2 billion dolars. What’s more around two thousand people have been killed in a street fights. If you would like to compare it to Polish conditions it would be as the same as 15 billion euro and 25 thousand killed.
Because the pyramids were fundamental for Albanian economy and because of the fact that their crush almost have lead Albania to the civil war the Albanian financial pyramids are being treated as one of the biggest frauds in history.
To be honest the problem laid not in the fact that the pyramids existed but that nothing but the pyramids existed and whole economy depend on them. The found investment companies (the biggest ones: Vefa Holding, Kamberi and Gjallica) were busy with their economic activity such as for example cosmetic trade market, poultry farms, petrol stations and supermarkets or goods smuggle to Serbia which was covered by embargo by the UN. At the same time the same companies received deposits offering 100% annual interest. Standard financial pyramid without the economical activity existed as well and as a result the specific economical model has been created with sixteen financial pyramids as a main base. The existence of a regular business was not an option. The real economy could not develop without any founds. Lots of goods (including food) were coming from other countries and the prices at the house market were ridiculously high. Sooner then later this had to come to an end.
The end of the savers capability
In the typical financial pyramid the very high interest is being paid from the money bought by the new investors and the new ones are being paid of from the next ones. The whole system works very well until the interest is higher then the new income. And this is the moment where the pyramid has to fall. The crush of the system is its integral part. We can find a very good graphic at U.S. Securities and Exchange Commission website: http://www.sec.gov/answers/pyramid.htm.
In Albania the pyramids began to crush in 1995 when embargo restriction for Serbia had hit the smuggling market. After that it turned out that two out of three million people did put their money in to the pyramid system and there were no new investors and no new founds. In autumn 1996 the International Monetary Found had warned that Albania is closed to financial collapse. In these situation financial pyramids, being afraid that the investors will take their money out, did increase the interest rates (for example Vefa Holding were offering 32% interest rate for 55 days, the others 30%, 40% and even 50% monthly). But this has helped a little and not for long. First to crash were Sude and Grunasi (Maksude Kademi also known as Gipsy Sude and Aleksander Grunasi have left the country). Soon others followed. The government has managed to block about a quarter of a billion dollars what has made people to come out on the streets.
The fight over the compensations
The country was in chaos: fights on the streets, robberies, fire-rising, around million weapons have been stolen (it was send to Kosovo in the end). About two thousand people were killed and more then ten thousand have had escaped to Italy. Eventually the situation was brought to normal by international peaceful contingent (mainly Italian soldiers), new election and appointment of the provisional government. It took long months for the situation to calm down. In December 1997 liquidators of the founds managed to pay out the compensations (on the average half of the invested money). As a result of the failure Albanian domestic product was smaller by one third.
Ryszrd Holzer.
To be honest the problem laid not in the fact that the pyramids existed but that nothing but the pyramids existed and whole economy depend on them. The found investment companies (the biggest ones: Vefa Holding, Kamberi and Gjallica) were busy with their economic activity such as for example cosmetic trade market, poultry farms, petrol stations and supermarkets or goods smuggle to Serbia which was covered by embargo by the UN. At the same time the same companies received deposits offering 100% annual interest. Standard financial pyramid without the economical activity existed as well and as a result the specific economical model has been created with sixteen financial pyramids as a main base. The existence of a regular business was not an option. The real economy could not develop without any founds. Lots of goods (including food) were coming from other countries and the prices at the house market were ridiculously high. Sooner then later this had to come to an end.
The end of the savers capability
In the typical financial pyramid the very high interest is being paid from the money bought by the new investors and the new ones are being paid of from the next ones. The whole system works very well until the interest is higher then the new income. And this is the moment where the pyramid has to fall. The crush of the system is its integral part. We can find a very good graphic at U.S. Securities and Exchange Commission website: http://www.sec.gov/answers/pyramid.htm.
In Albania the pyramids began to crush in 1995 when embargo restriction for Serbia had hit the smuggling market. After that it turned out that two out of three million people did put their money in to the pyramid system and there were no new investors and no new founds. In autumn 1996 the International Monetary Found had warned that Albania is closed to financial collapse. In these situation financial pyramids, being afraid that the investors will take their money out, did increase the interest rates (for example Vefa Holding were offering 32% interest rate for 55 days, the others 30%, 40% and even 50% monthly). But this has helped a little and not for long. First to crash were Sude and Grunasi (Maksude Kademi also known as Gipsy Sude and Aleksander Grunasi have left the country). Soon others followed. The government has managed to block about a quarter of a billion dollars what has made people to come out on the streets.
The fight over the compensations
The country was in chaos: fights on the streets, robberies, fire-rising, around million weapons have been stolen (it was send to Kosovo in the end). About two thousand people were killed and more then ten thousand have had escaped to Italy. Eventually the situation was brought to normal by international peaceful contingent (mainly Italian soldiers), new election and appointment of the provisional government. It took long months for the situation to calm down. In December 1997 liquidators of the founds managed to pay out the compensations (on the average half of the invested money). As a result of the failure Albanian domestic product was smaller by one third.
Ryszrd Holzer.
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