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Social Security: Giant Ponzi Scheme

Tuesday, December 30th, 2008
Posted in Education by Joel Gross

A Ponzi scheme is an illegal scam that operates by paying old investors with new investors money, until the scheme opera

Ponzi Scheme Illustration

Ponzi Scheme Illustration

tor runs out of new investors/victims.‚  Bernard Madoff, a hedge fund operator, recently was discovered to have been running the largest Ponzi scheme anyone has yet been arrested for, allegedly stealing $50 billion from his investors.‚  Madoff basically took new investors money to pay consistent (but false) 10% returns to his older investors.‚  He finally was caught when his fund completely ran out of money.‚  The SEC said it appeared that all of the assets of Madoff’s hedge fund business were missing.

Ponzi schemes are well-known criminal enterprises and the way they work is simple. For example,‚  Ponzi schemes get the first round of 5 investors to put in $100 apiece and promise to double their money. Then, the scheme operator raises another round of money from 20 investors and uses the proceeds to pay off the first round of investors, and usually skim the rest off the top.‚  The scheme operator goes back and finds more and more rounds of investors until the Ponzi scheme blows up because there is no more new victims.‚  Essentially, you rob Peter to pay Paul.

Social Security operates in exactly the same manner as a Ponzi scheme.‚  Money is taken out of current workers (new investors) paychecks and paid to retirees (former investors).‚  The Social Security system is unsustainable over long periods and has only lasted as long as it has because the government holds a gun to it’s citizen’s heads and orders them to continue investing in this Ponzi scheme.‚  No current worker would contribute to the Social Security Ponzi scheme if given the choice because it is well-known that Social Security is getting close to collapsing.‚  Unfortunately, the retirees’ (former investors) hold such strong political clout in the United States that we current workers are forced to continue investing in the Ponzi scheme.

Social Security Ponzi Scheme

Social Security Ponzi Scheme

Even the U.S. Government Accountability Office and most private organizations agree that the Social Security system is unsustainable.‚  Anyone who has taken accounting or finance classes understands that the basic math of the Social Security system doesn’t work- making it the largest Ponzi scheme in the history of mankind.‚  If this scheme was being perpetrated by a private organization, everyone involved would be sent to prison.‚  However, since it is the government itself running the Ponzi scheme, we are all forced to continue paying in.‚  Since there are no regulatory constraints on the size of the Social Security Ponzi scheme, it will continue to grow until it chokes out all economic life in our country and its collapse will be crushing.

The so-called “Greatest Generation” has screwed future generations once again.‚  These greedy people who put in place the Social Security Ponzi scheme have given themselves wonderful benefits and huge amounts of cash at the expense of future generations.‚  Unfortunately, my generation cannot put off the Social Security bill any longer and long before we can try cashing in on it, it will collapse and the debt from it will be the death toll of the United States as a global economic and political power.‚  If this makes you as angry as it does me, kick your great-grandpa in the balls.

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