Tuesday, May 12, 2009

Ponzi, Madoff, and Social Security

I've been thinking there is a real correlation here and now I'd like to present my evidence. In following the headlines, we were told that Madoff had a Ponzi scheme, and so I read about Ponzi himself and this is what I basically understand to be the plan. Solicit investors for a promised return that is better than what they are receiving now, or even better; a payoff down the road for a product or investment that they are never personally involved in, just paper work. Then solicit more investors and use their money to pay the first investors what was promised. Next, you have to have paperwork, lots and lots of paperwork to be able to show [overwhelm] someone that asks any questions. Make it so economically high brow that anyone that would dare ask would only feel that they are making themselves look ignorant. And always keep your original investors satisfied. They are the ones that think they own the plan! You can always change the promised return and extend the date of delivery for the later investors or as Ponzi and Madoff discovered, you can simply run out of new investors and leave everyone holding the bag. Now, I mentioned a correlation with these two gents and social security. There are similarities to a Ponzi scheme and Social Security, no doubt, but there are also differences. In a Ponzi scheme, he couldn't print more money or bonds, the government can. In a Ponzi scheme, the contribution and investment was voluntary, in social security, it is mandatory. In a Ponzi scheme, when the truth is discovered, the "idea guy" goes to jail, as Mr. Madoff just discovered, whereas in regard to Social Security, the "idea guy" FDR died a beloved hero. In a Ponzi scheme the initial investors don't know the secondary investors are paying their return, but in Social Security the first investors are collecting with full knowledge of the loss that the secondary investors will suffer and without conscience of what the later investors are contributing with no hope of ever seeing a cent of their investment while it remains mandatory. Without a doubt, Ponzi and Madoff were greedy and dishonest, but they were just individuals, and their investors were, for the most part, strangers. How can an entire country of "leadership" and elders knowingly do this Ponzi scheme to their grandchildren?
An inheritance may be gotten hastily at the beginning; but the end thereof shall not be blessed. a Proverb of Holy Scripture

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