“Ponzi scheme” is a term that has been in the news heavily the last few weeks. Much to my surprise this does not involve getting both of the Tuscadero sisters to date the Fonz at the same time, which everyone knows is a “Fonzy scheme”.
A “Ponzi Scheme” is a type of fraudulent pyramid scheme named for Charles Ponzi because his operation took in so much money that he became a millionaire in just 6 months in 1920. A Ponzi scheme usually promises and initially gets unusually high returns in a short period. The scheme relies on an ever-increasing flow of money from investors with new money being used as payouts to earlier investors. It differs from a multi-level pyramid scheme in that the schemer acts as the central hub for all participants, but in a pyramid scheme the newest level of recruits are required to bring in still more new recruits in order to benefit directly.
Bernard Madoff is the reason for all the news about Ponzi schemes recently, as he has been accused of being the mastermind behind a fraud that is estimated to include more than $50 billion in losses. How is this guy not in jail? He gets to live in his mult-million dollar apartment on bail, even though he has been caught several times violating court orders to leave his assets alone. And, if anybody is a flight risk it has to be somebody with access to what he has.
The reasons Ponzi schemes all eventually fail are that either the schemers all vanish taking the remaining investments with them, legal authorities expose the scheme or the scheme collapses as investments slow due to promoters not being able to bring in enough new investments to payout the promised returns.
Why does a Ponzi scheme sound so much like our own Social Security System? It takes money from later investors (taxpayers) and pays off earlier, now retired taxpayers. Like a Ponzi scheme, Social Security also paid out unusually high returns. Charles Ponzi only promised returns of 40%, but initial recipients of Social Security achieved returns approaching 100,000%. Baby boomers have paid into this scheme their entire lives, including paying numerous increases to the required contributions, with no possibility of ever receiving the same returns of those retirees during the first 70 years. Also, the number new investors (taxpayers) can’t keep up with the number of baby boomers reaching retirement.
Democrats don’t consider this to be an imminent crisis. It’s to be expected from the same dimwits that have bought into this global warming scam. So far their solutions require higher payments from investors to keep the scheme afloat. They want to demand additional funds for a failing system. This same thinking could have kept Madoff’s scheme or Ponzi’s scheme going too. This same bailout happy, Democratic controlled Congress won’t think twice about writing a Chinese backed check to bailout their beloved fraud program.
Social Security needs to be blown up and reworked. I would prefer the option for individuals to opt out and plan for their own retirements. This Ponzi scheme has to go the way of the Fonz – retire it.