Imagine opening a savings account at a high street bank and depositing fifty quid.

Let’s say you chose the bank because it promises an exceptionally good rate of return on your money — as much as 12 to 15 per cent a year, way better than any other savings account.

Then the bank tells you, sorry, you can’t check your balance online, but we’ll send you statements in the post. Bit odd, that, you think. But you forget about it.

Then you read a story somewhere revealing that at the end of every quarter, this same bank sells all of its assets for cash, then buys them again at the beginning of the following quarter to avoid having to tell the authorities what it owns. Bit on the shifty side, you think. But again you quickly forget about it.

And then you find out that the bank is audited by a virtually unknown firm with only one accountant, and that at least one reputable analyst is convinced that the only way any organisation can reliably pay a 12 to 15 per cent return on savings is via some kind of gigantic pyramid scheme — kept afloat only because gullible investors keep handing over more cash.

Imagine all that. What would you do?

Well, if you were Steven Spielberg — or any of Bernard Madoff’s clients, who were presumably aware that all of the above applied — you’d shrug and recall that you met the man himself once, lovely bloke, very generous with the terminally ill kids, used to run the Nasdaq, been in business for 48 years. Crook? Naaah.

Astonishing what a simple confidence trick can achieve. Joining the right clubs. Attending the right charity galas. Wearing the right suits, speaking with the right accent. Before you know it you’ve hustled $50 billion out of some of the most financially sophisticated individuals and corporations on Earth.

Yet it appears that somehow Madoff (fittingly, the Americans pronounce his name “made off”) did it. His firm, Bernard L Madoff Investment Securities, was founded in 1960. For how long was it bent? Ten years? Twenty? Forty eight?

The current suggestion from investigators is that the fraud began some time in the late 1980s, with Madoff simply lying about his phenomenal returns and using money from new investors to fund any withdrawals, of which there were few (why take your money out of an account that you believe is earning you a fortune?)

America’s critics will argue that Madoff’s alleged scam is more evidence that Wall Street is inherently corrupt, and that the entire US economy has essentially been a pyramid scheme since the late 1980s.

Sadly, this is hard to deny. Bubbles have always been different from pyramid schemes because in a bubble, investors actually believe the inflated values assigned to assets such as houses (or internet companies, or tulips). In other words, there is no Madoff-like bad actor behind it all, using Person B’s investment to pay Person A’s profit, knowing full well that B will never get his money back — unless, that is, Person C comes along.

But in the case of the recent housing bubble, for example, the US Government was the bad actor. The profits people were making by buying and selling houses were being funded by the dodgy mortgages being doled out by Freddie Mac and Fannie Mae and implicitly underwritten by Washington — even though it was clear that many of these loans were based on lies and never going to be repaid.

In that context, a $50 billion rip-off seems almost trivial. And yet for Americans, Madoff’s existence might prove therapeutic. In times such as these, it helps to have villains. Otherwise people have to start getting angry with themselves.

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