Biggest Ponzi Scheme

[therover]

Reading a recent article about Madoff and it stated this was one of the biggest Ponzi Schemes of all time.

My brother thinks Social Security IS the biggest Ponzi Scheme ever.

Interesting take.

[Varqanir]

Your brother is correct.

[PB_Crawl]

[quote]Varqanir wrote:
Your brother is correct.[/quote]

would it really be a ponzi scheme? everyone knows theyre being cheated for the most part.

[Varqanir]

A Ponzi Scheme is a fraudulent investing scam promising high rates of return with little risk to investors.

The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.

There’s nothing in this definition that says that the participants need to be unaware of the fraud, just so long as they keep participating. Threat of punishment for non-compliance seems to do the trick.

And look around: how many people are really aware that it’s a scam? Old people are still getting their Social Security checks, so it all must be legitimate.

[Gregus]

And they were investigated numerous times by the govt and found legitimate with no fraudulent activities. That alone tells me someone was scapegoated, possibly?

[Bill_Roberts]

Who is the “they?”

There’s no question of the fact that by definition SSI is a Ponzi scheme: the payouts to current participants is not from return on investments, or payback of principal, from monies earlier paid by participants, but from incoming monies from new participants.

And the promise of future payment to current participants is based not on return from monies now being put in and invested, or return of any such principal, but on an assumption of being able to get it from monies being put in by future participants.

That is a Ponzi scheme by definition.

Now that is determined to be fraudulent and illegal when any private entity does it.

When the government does it, of course it’s not going to be determined by the government to be fraudulent no matter how many “investigations” are done.

Or if you are referring to Madoff: I’m not aware that he was investigated earlier and found clean.

[Gregus]

You have to forgive me as i don’t remember the gov’t agency that did the investigations. It was on the news last night but alas the agencies name evaporated from my head. But it was to the effect that it was investigated 2 to 3 times and cleared each time.

Now whether the investigations were serious or more of a nod and wink between money grubbers is another issue all together. but a distinct possibility given the amount of greed and corruption and get rich instantly mentalities that brought us to where we are today.

[Magarhe]

Fed reserve issuing money and creating inflation is the biggest Ponzi scheme out.

Madoff certainly has some balls, that is hilarious he pulled that off. You can’t make this shit up.

[Bill_Roberts]

[quote]Magarhe wrote:
Fed reserve issuing money and creating inflation is the biggest Ponzi scheme out.[/quote]

No, it is not a Ponzi scheme whatsoever… find yourself a credible source giving you a definition of “Ponzi scheme.”

You are using the term as a simple pejorative.

[Regular_Gonzalez]

While we are on the subject, the sharemarket also has a fair bit in common with Ponzi schemes. Especially if we are talking about shares that don’t pay any significant dividends.

[Bill_Roberts]

[quote]Gregus wrote:
You have to forgive me as i don’t remember the gov’t agency that did the investigations. It was on the news last night but alas the agencies name evaporated from my head. But it was to the effect that it was investigated 2 to 3 times and cleared each time.

Now whether the investigations were serious or more of a nod and wink between money grubbers is another issue all together. but a distinct possibility given the amount of greed and corruption and get rich instantly mentalities that brought us to where we are today. [/quote]

If Madoff was investigated before and announced to be clean, then those investigators need to be investigated now themselves, as Madoff himself has admitted that he’s been carrying on these practices the entire time. And the scale is so large that there seems no way that this could have been previously undetectable to investigators.

[lixy]

[quote]Bill Roberts wrote:
Magarhe wrote:
Fed reserve issuing money and creating inflation is the biggest Ponzi scheme out.

No, it is not a Ponzi scheme whatsoever… find yourself a credible source giving you a definition of “Ponzi scheme.”

You are using the term as a simple pejorative. [/quote]

Duh!

But it doesn’t make the analogy any less valid. For banks and social security.

[Varqanir]

[quote]Magarhe wrote:
Fed reserve issuing money and creating inflation is the biggest Ponzi scheme out.

[/quote]

I think you’re confusing “running a Ponzi scheme” with “running a counterfeiting racket.”

[LankyMofo]

Tell your brother to give Peter Schiff his credit next time.

From Peter Schiff’s website:

December 16, 2008

In Madoff We Trust

As the multi-billion dollar Ponzi scheme orchestrated by Wall Street insider Bernard Madoff unravels in the media spotlight, the nation is being presented with a rare opportunity to understand the true nature of many of our most cherished financial structures. Hopefully we have the wisdom to connect the dots.

Although the $50 billion loss engineered by Madoff is truly a staggering accomplishment (and was done using old-fashioned fraud rather than the mathematical wizardry that has characterized Wall Street?s recent larcenies) the size of the scheme pales in comparison to the multi-trillion dollar Ponzi structures run by the United States government. In fact, rather than looking to jail Madoff, President-elect Obama should consider making him our new Treasury secretary. If not that, at least make him the czar of something!

Madoff?s inspiration came from Charles Ponzi, the Italian-born American immigrant who promoted an investment plan in the early 1900s? that traded postal coupons. Rather than paying investors from legitimate investment returns, Ponzi hit upon the innovative idea of paying out early investors with money collected from new investors. By creating an illusion of success, interest in his investment plan ballooned. Over time the schemes have become known by many other names, such as chain letters or pyramid schemes. They are united by the fact that they always fail in the end.

When the influx of new investors inevitably slows to the point where distributions to current investors can no longer be maintained, investors look to withdraw funds. When this happens, the entire structure falls apart. The profits received by those who ?invested? early as well so any funds skimmed off by the promoter, are offset by all the losses of those who came late to the party.

To a large extent, the same concept has driven the major asset bubbles of the last decade. Given the ridiculously high valuations that were assigned to tech stocks and real estate during their respective booms, the only way the bubbles could be perpetuated was if newer ?investors? could be found to pay even more outrageous prices (the greater fool). But when these new buyers balked, the whole structure crumbled. Although there was no Ponzi or Madoff to orchestrate these manias, the entire financial and economic apparatus of the country had successfully convinced the public that ?investments? in tech stocks and condominiums were bullet proof and that the supply of new buyers was endless.

Unfortunately, the Ponzi economy doesn?t stop there. A chain letter is no more viable when run by governments than when run by private citizens. However, government orchestrated pyramids have the advantage of required participation. As a result, they can maintain the illusion of viability for several generations. But the longer such schemes operate the larger will be the losses when they ultimately collapse.

The Social Security Administration runs its ?trust funds? with precisely the same methods used by Madoff and Ponzi. As money is collected by from current workers, the funds are then dispersed to those already receiving benefits. None of the funds collected are actually invested, so no investment returns are ever generated. Those currently paying into the system are expected to receive their returns based on the ?contribution? made by future workers. This is the classic definition of a Ponzi scheme. The only difference is that Ponzi didn?t own a printing press.

The United States Government runs its own balance sheet based on the Ponzi principal as well. Our national debt always grows and never shrinks. As existing debt matures, proceeds are repaid by issuing new debt. Interest payments on existing debt are also made by selling new debt to investors. The whole scheme depends on an ever growing supply of new lenders, or the willingness of existing lenders, to continue to roll over maturing notes. Of course, as was the case with Madoff, if enough of our creditors want their money back, the music stops playing.

In Madoff?s case, the rug pulling was provided by the huge financial losses suffered by some of his clients in other non-Madoff investments. When enough of these clients looked to sell some of their apparently well-performing Madoff assets to help offset such losses, the scam collapsed. The same thing could befall the United States Government. Now that China and our other creditors are looking to spend some of their U.S. Treasury holdings to stimulate their own economies, look for a similar outcome with even more dire implications.

The main difference is that while Madoff took elaborate steps to conceal his scheme, the U.S. government operates in broad daylight. It truly is amazing how faith in government is so pervasive that many can believe that politicians will succeed where private individuals fail, and that governments are somehow immune to the economic laws that govern the rest of society. Like those unfortunate to have been duped by Madoff and Ponzi, the world is in for a rude awakening.

[therover]

[quote]LankyMofo wrote:
Tell your brother to give Peter Schiff his credit next time.
[/quote]

My brother feels Schiff isn’t worthy of the elbow patches of his tweed coat.

[LankyMofo]

[quote]therover wrote:
LankyMofo wrote:
Tell your brother to give Peter Schiff his credit next time.

My brother feels Schiff isn’t worthy of the elbow patches of his tweed coat.
[/quote]

A bold statement considering what I value those elbow patches at. Regardless, I wasn’t hearing anyone claim SS was a ponzi scheme until Schiff said it. Maybe he got “his” theory from Schiff, maybe not.

[Varqanir]

[quote]LankyMofo wrote:

Regardless, I wasn’t hearing anyone claim SS was a ponzi scheme until Schiff said it. [/quote]

Really?

Maybe you just haven’t been paying attention.

http://www.isil.org/resources/lit/time-to-end-ss.html

Social Security: From Ponzi Scheme to Shell Game

http://www.socialsecurity.org/daily/05-11-99.html

The Social Security Ponzi scheme

[lixy]

[quote]LankyMofo wrote:
Regardless, I wasn’t hearing anyone claim SS was a ponzi scheme until Schiff said it. [/quote]

From the wiki:[i]

This criticism is not new. In his 1936 presidential campaign, Republican Alf Landon called the trust fund “a cruel hoax”. The Republican platform that year stated, “The so-called reserve fund … is no reserve at all, because the fund will contain nothing but the government’s promise to pay.”[/i]

Social Security debate in the United States

[LankyMofo]

[quote]Varqanir wrote:
LankyMofo wrote:

Regardless, I wasn’t hearing anyone claim SS was a ponzi scheme until Schiff said it.

Really?

Maybe you just haven’t been paying attention.

http://www.isil.org/resources/lit/time-to-end-ss.html

Social Security: From Ponzi Scheme to Shell Game

http://www.socialsecurity.org/daily/05-11-99.html
The Social Security Ponzi scheme - American Thinker [/quote]

It certainly appears that I wasn’t paying attention. The sad part is I’m sure you could find more links if you wanted to.

So I guess this means therover’s brother’s theory isn’t an interesting take at all?

[orion]

[quote]LankyMofo wrote:
Varqanir wrote:
LankyMofo wrote:

Regardless, I wasn’t hearing anyone claim SS was a ponzi scheme until Schiff said it.

Really?

Maybe you just haven’t been paying attention.

http://www.isil.org/resources/lit/time-to-end-ss.html

Social Security: From Ponzi Scheme to Shell Game

http://www.socialsecurity.org/daily/05-11-99.html

The Social Security Ponzi scheme

It certainly appears that I wasn’t paying attention. The sad part is I’m sure you could find more links if you wanted to.

So I guess this means therover’s brother’s theory isn’t an interesting take at all?[/quote]

If a tidal wave comes your way, are you interested in who has the most interesting take on it or who has the most accurate one?