Wednesday, January 28, 2009

At least he didn't put a gun to anyone's head...

I know this is old news, but check out this headline:

"Feds say Bernard Madoff's $50 billion Ponzi scheme was worst ever"

Worst ever? I can think of a bigger one.

Wikipedia: "A Ponzi scheme is a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit."

The money withheld from each of my paychecks for Social Security does exactly that. The whole system has always been set up to work that way.

Wikipedia: "[Ponzi schemes are] destined to collapse because the earnings, if any, are less than the payments."

Social Security is only different in the sense that you go to jail if you don't participate.

These plans works like magic, as long as the number of new investors/suckers steadily increases. But when the number of new investors/suckers invariably slows down...well, then you have a problem. This is why Social Security is unworkable, and always has been.

People like to think the government thought it through before passing it, or at least that the government has a plan to fix it, but that's simply not the case. The only "fixes" offered are cutting benefits, and increasing the age at which benefits begin. The most these measures can accomplish is delay the inevitable collapse, while simultaneously decreasing the program's efficiency.

Because the government has ignored reality and perpetuated an unsustainable redistribution of wealth for decades with Social Security, it's no surprise the government is desperately throwing good money after bad to try to prop up overpriced homes.

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