Biggest Ponzi Scheme

Off Topic Politics & World Issues
41

[quote]jsbrook wrote:
The key characteristic of a ponzi scheme is misleading investors into believing they will make either unrealistic returns or abnormally high short term gains on their investment. And a Ponzi scheme is designed to collapse. [/quote]

A ponzi scheme is basically a pyramid scheme.

The only twist is that usually the participants do not know that it is one.

Surprisingly enough, even when you explain to people how it works you get lots of participants because most people are too dumb to get that it must collapse or they figure that they themselves will benefit.

42

Yes. Though not all pyramid schemes are Ponzi schemes (nor did you say that they were.)

Perhaps it would help to post an authoritative definition.

From the US Securities and Exchange Commission. Being the folks that prosecute these things, they ought to know:

[b]“Ponzi” Schemes

Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. Ponzi thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons. Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period?and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.

Decades later, the Ponzi scheme continues to work on the “rob-Peter-to-pay-Paul” principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses. For more information, please read pyramid schemes in our Fast Answers databank.[/b]

Very simply, if the “dividends” you pay investors in fact do not come from return on investment but come from principal being put in by new participants, regardless of whether your dividends are generous or not, you are running a Ponzi scheme, as the government sees it, and subject to being convicted for fraud.

The fact that SSI’s promised returns are measly does not change that it is a Ponzi scheme. Only investing the money and paying based on return from investment would remove it from that category.

It succeeds as a Ponzi scheme despite measly promised returns on account of the fact that the government forces you to pay (if self-employed) and/or you cannot prevent your employer from taking it out, as he is forced to do so.

As with any Ponzi scheme, however, it will predictably fail, leaving the final “investors” holding the bag, with all the money they put in having gone to pay previous enrollees, with some just taken for general spending as well. Bye-bye money!

43

Of all the schemes, Nigerian is my fav!

Oh, and the democratic party.

44

And by the way, on the ridiculous returns thing:

While SSI would be a Ponzi scheme even if it had never done this, actually it DID use to do this.

I remember back in the 70s a discussion with some extended family members including a real old bat distant relative. She could not grasp that Social Security was a ripoff for the younger generation. I still remember her horrible old-bat voice declaiming “Social Security is a wonderful thing.”

Yeah, sure, wonderful for her to have never had to pay in more than a few bucks per week if even that, and getting big checks “in return.”

Enabled, of course, not by her payments into the system producing earnings enabling such, but rather because most of what monies were being taken in from the later generations were deemed available to pay her generation.

However, it only works for so long for some to so profiteer off of later victims of – I mean “contributors to” – the scheme.

45

[quote]Bill Roberts wrote:
That is what one might get from relying on the quote appearing as the first Google hit (a brief quoted excerpt from Wikipedia) as being the authority. Or if you got it elsewhere, from relying on that source.

What you cite is a mistaken attempt at definition, if you are indeed providing all the information that that attempt states.

Whether a financial operation is a Ponzi scheme or not has nothing inherently to do with amounts of return promised. Rather, it has everything to do with how the payouts are done: from revenues derived from principal put in by the participant and/or return of that principal, or by using principal put in from present and future participants to pay previous ones.

It is typical though for such schemes to obtain ever-expanding clientele by providing extremely attractive returns. But it’s not necessary that an operation do that to be a Ponzi scheme.[/quote]

I disagree with you. Something can technically be a Ponzi scheme without that attribute, but that is still the essence of a Ponzi scheme. Renne Toney may still (loosely) have a vagina and female internal organs, but I would not call her a woman.

46

[quote]Bill Roberts wrote:
And by the way, on the ridiculous returns thing:

While SSI would be a Ponzi scheme even if it had never done this, actually it DID use to do this.

I remember back in the 70s a discussion with some extended family members including a real old bat distant relative. She could not grasp that Social Security was a ripoff for the younger generation. I still remember her horrible old-bat voice declaiming “Social Security is a wonderful thing.”

Yeah, sure, wonderful for her to have never had to pay in more than a few bucks per week if even that, and getting big checks “in return.”

Enabled, of course, not by her payments into the system producing earnings enabling such, but rather because most of what monies were being taken in from the later generations were deemed available to pay her generation.

However, it only works for so long for some to so profiteer off of later victims of – I mean “contributors to” – the scheme.[/quote]

Those for whom it works, aka “old people” have all the time in the world though to organize themselves and lean on politicians.

In Europe they are the majority of voting people in some countries now.

I think the idea that you can simply vote on anything will soon be thoroughly tested.

47

[quote]jsbrook wrote:
Bill Roberts wrote:
That is what one might get from relying on the quote appearing as the first Google hit (a brief quoted excerpt from Wikipedia) as being the authority. Or if you got it elsewhere, from relying on that source.

What you cite is a mistaken attempt at definition, if you are indeed providing all the information that that attempt states.

Whether a financial operation is a Ponzi scheme or not has nothing inherently to do with amounts of return promised. Rather, it has everything to do with how the payouts are done: from revenues derived from principal put in by the participant and/or return of that principal, or by using principal put in from present and future participants to pay previous ones.

It is typical though for such schemes to obtain ever-expanding clientele by providing extremely attractive returns. But it’s not necessary that an operation do that to be a Ponzi scheme.

I disagree with you. Something can technically be a Ponzi scheme without that attribute, but that is still the essence of a Ponzi scheme. Renne Toney may still (loosely) have a vagina and female internal organs, but I would not call her a woman.[/quote]

I just don’t know how you can post that “technically” it is as I say but the “essence,” supposedly, is different. Other than perhaps being a person who cannot admit being wrong, thus having to find some other category of truth in which supposedly you are right? (Don’t know if you are the sort that can’t admit being wrong or not: it is just a possible explanation for this incredible statement of yours above.)

Sorry, SSI presently not promising ridiculously high returns does not remove it from being a Ponzi scheme; the fact that the return Madoff’s clients received was not completely out of reason for what could happen from legitimate investment does not change his operation from being a Ponzi scheme either.

Tell you what: Find ONE quote from ONE prosecutor or person quoted in any major media as being expert on this subject who denies or expresses doubt that Madoff was running a Ponzi scheme on the grounds of insufficiently “unrealistic returns or abnormally high short term gains” to qualify.

When you can do that, then you will have one piece of evidence to support your claim that how the money is handled is mere technicality while the “essence,” supposedly, is rate of return.

Until then, you’re wrong – and by the way I am quite sure you will find no expert or prosecutor finding Madoff’s within-market-range returns to change the nature (whether a Ponzi scheme or not) of his operation.

Neither does rate of return change the nature of SSI. It’s how the money is handled that is the crux of the matter.

48

[quote]Varqanir wrote:
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. [/quote]

If the Dems in Congress had allowed Roosevelt’s idea to allow stock market investing, can you imagine how wealthy this country would be now, with a steady inflow of capital into the system? Wow!

Knowing that it would eventually breakdown may have been intentional. Create a problem, assume lots more powers to fix the problem.

The libs are far more demonic than we give them credit for.

49

Social Security is not really a Ponzi Scheme in the normal sense because it is not voluntary.

Bernie Madoff, for instance, did not threaten you with prison or your business with dissolution if you refused to “invest”.