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Rebuilding pyramids, Russian style

Russia's infamous "dark soul" is alive, if not well. In an article in a recent issue of Novaya Gazeta, Sergei Mavrodi, the architect of the MMM pyramid scheme that swindled millions of Russians out of their life savings, says that nothing would have persuaded him to invest in Russian government treasury bills (GKOs), which he calls "a low-tech version" of his own scam.

Before the Russian government added dyet difalt to a lexicon of Russified English words including bizness and offshorny, Mavrodi's MMM saw off all pretenders in the great pyramid stakes. At its height, it claimed 10 million shareholders, with more than 60 offices in Moscow and another 76 across Russia. The scheme promised untold wealth and even ran its own advertorial soap opera.

After that, a new pyramid scheme appeared - and vanished - almost every week. But none could match the scale and global breadth of the government's $40bn GKO stock, which, Mavrodi argues, had all the traits of a classic pyramid scheme. Bond redemptions were met by issuing new debt rather than from federal tax revenues, which this year are running at about 10% of GDP - compared with 35% to 40% in most industrialized countries.

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