Saturday, December 20, 2008

The Great United States Ponzi Scheme

A lot has been made of the recent discovery of the $50 billion Ponzi Scheme allegedly perpetrated by one Mr. Bernard Madoff.

For those who may not know, a Ponzi scheme is an investment offering an unusually high rate of return. The scheme involves paying said return to its existing participants using money received from new participants rather than paying out actual earned income, as there is little or no underlying income to be had. The scheme is always destined to collapse once there aren't enough new participants to cover the returns owed to the existing participants. (Visit Wikipedia for a more detailed explanation.)

My question is this: we know that Ponzi Schemes are highly illegal due to its fraudulent nature. Does our Social Security system fall into this category? If so, shouldn't the perpetrators of this fraud be prosecuted? The Social Security scheme is far greater and affects more people than any other fraud in the history of the world. The $50 billion Madoff scheme pales by comparison. While Social Security isn't offering an especially high rate of return, the rate it is offering is certainly unsustainable. It's not okay that the system has not yet collapsed. It's still a fraud, and the likelihood of an eventual collapse is 100%.

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