Is Social Security the Biggest Ponzi Scheme in History?
There’s no shortage of news about Bernie Madoff’s astounding Ponzi scheme through which he (allegedly) bilked a great many investors and charitable foundations out of billions of dollars. The fact that he is out on reduced bail and has used that freedom to send millions in jewelry to his children and write checks for a few billion more to friends and family is even more astounding. But what amazes me is how Congressional leaders are posturing about it. They’re appalled, they say. Something must be done, they promise. But wait. Isn’t that the pot calling the kettle black?
For those few of you unfamiliar with how the Ponzi scheme works, it’s where a shyster takes in money from marks investors to “invest” for them, pockets it, produces spurious reports illustrating the stellar performance of the “fund’s” portfolio, gets more investors and uses some of the newly invested money to pay a few of the earlier investors, then continues the practice until he has a ton of money in his pocket. The portfolio, of course, is essentially worthless and he has all the money squirreled away in off shore accounts. Then he moves to an island somewhere in the Pacific or to a country without an extradition treaty with the U.S. and lives large. The trick is to keep the investors believing their investments are earning astounding returns while he collects more and more money from new investors. You’ve probably heard of Ponzi schemes, but Madoff’s may be one of the largest such frauds (ahem…alleged frauds) in history.
Or is it? Isn’t that exactly how our government has been operating our Social Security system? They take money from us for our retirement, then use it for other purposes, knowing full well that, with more going out than coming in, our retirement money will eventually be depleted. And how are they trying to delay the inevitable? By increasing our Social Security taxes, reducing our benefits and telling us that it’s all the fault of a burgeoning baby boomer generation. Come on! It’s Ponzi, pure and simple, but on an infinitely larger scale.
They’re doing the same thing with other special purpose taxes. To make the scheme work, they first adopted the practice of transferring all tax revenue into the General Fund, then tapping that fund to pay for pet programs of their choosing—social welfare has been a major sinkhole—and promising to “pay it back” during robust years that never seem to materialize.
Highway and gasoline taxes are also examples of Ponzi. They’re supposed to help pay for the repair and maintenance of our infrastructure. But as we’ve discovered, our bridges and highways are in terrible disrepair from neglect because the money, once transferred into the General Fund, was allocated elsewhere. And once again, Congress is “appalled”.
So President-Elect Obama has pledged to hire three million more government workers to repair our dilapidated bridges and highways, thereby solving the both the infrastructure and unemployment problems with one ingenious, albeit astronomically expensive, program. Brilliant. Except taxpayers will be expected to pay the wages of all those new government employees, along with the accompanying bureaucracy needed to manage them, in order to pay a second time for work we already paid for with taxes!
Obama fancies himself the FDR of our time and wants to give us another “New Deal”. But those of you familiar with history know that FDR’s “New Deal” was a dismal failure. And as we all know, those who refuse to learn from history are doomed to repeat it. We’re being Ponzied. Again.
Doug
in Economics, Money, Opinion, Politics, Scams & Spam
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Here is another good article about where Madoff might have hidden all the loot. We may never find much of it.
http://www.time.com/time/business/article/0,8599,1870050,00.html
The amazing thing is, if he hadn't needed about $9 Billion for payouts, he might still be ripping people off and stashing it all away! You know he is bargaining to give some back for a lighter sentence. He'll do a little time and then sail away to that island in the Pacific to "live large". He is pond scum!!
I never looked at it that way but you are right, the wheeler dealers in Washington have operated Social Security the same way. They wanted social programs so bad, they "borrowed" from our retirement funds to pay for it and now they are lieing to cover it up. Damn we're so screwed!
There is a big difference: When we catch our government doing it, there is nothing we can do about it...:(
Are you accusing the U.S. government of operating a ponzi scheme? Watch out or you might be accused of being anti-government lol.
Better watch out Harry Reid doesn't order a hit on you as an anarchist :)
You are right, SS is a giant ponzi scheme now. It didn't start out that way but it became that way once Congress figured out that they could use all that money to fund medicaid and calculated that the well wouldn't run dry in their lifetimes. But surprise surprise, it's drying up faster than they thought it would. They can't undo a social program (they would piss off too many voters) so they are ruining the program with patchwork. Like most ponzi schemes, this one got discovered so there job now is to divert blame. They are dancing pretty fast these days, especially after the Fannie Mae fiasco caused by their social meddling. Want to get rich? Start a ponzi scheme!
It may be a ponzi-like after effect, but I don't think it started out with that intent.
Greg: No, but they knew they were abusing the system with their scheme to use money in the "lock box" for other purposes with the excuse that they would pay it back later. That is horribly irresponsible if not criminal. In corporate America, we call it embezzlement.
Yes, and we, the financiers of America, get stuck with the tab. If your bookkeeper embezzled a ton of your money, you would fire them, send them to jail and probably sue them for restitution. But when our elected (hired) officials, who WORK FOR US, embezzle our money, we grumble but do nothing. So when our society completely decays into ruin, we will have no one to blame but ourselves. Think it won't happen? Talk to the Romans!
WE ARE TOO F'ING LAZT!!! WE HAVE TO GET OFF OUR ASSES AND SEND THESE THIEVES PACKING!!! Or maybe we'll just leave the dirty work to someone else like we've been doing.
Krowski is right. we are lazy, too lazy to take care of or own business. I don't know what it might take to get us off our asses but I don't see anything happening. We argue about our 2 party system, we complain ad nauseam, but when it comes to actually lifting a finger, we do nothing, we don't want to "get involved". If it all falls down around us, we'll just point at the other guy for not doing his part when we didn't do a damn thing ourselves. I bitch a lot about protesters blocking traffic, but at least they are doing something.
You are all right. We are lazy. We elect people to work for the citizens. It is there job to manage things for us. We should be able to trust them. The problem is that some are crooks. We couldn't know that ahead of time. When elections come we can vote for someone else. That is how the system works.
Are you kidding me Victor? We vote so that is all we can do? If they rob us blind then we vote again in 4 years? That is all you think we should do? Then you are lazy and what is wrong with this country. You are why politicians know they can steal in broad daylight and people like you won't do anything about it. More like you and we could be a third world country! Stay on your ass, don't lift a finger and we will get there.
"Fool me once, shame on....me. Fool me twice...... ya' can't fool me again...."