Thursday, December 18, 2008

Social Security Is a Ponzi Scheme

Bernie Madoff will rightly go to prison for running a Ponzi scheme. So how does one explain why our elected government officials are still running free running a Ponzi scheme (aka, Social Security)?

Social Security has been a Ponzi scheme from the beginning. The money paid in went immediately to retirees. What little was in fact left over was invested in government bonds that paid a lower interest rate than the inflation rate (yes, the government lent itself the money at a low interest rate), meaning the money has been losing value in light of inflation. In the meantime, the money we pay in continues to go out to retirees, whose money was already spent on other retirees. This system works fine so long as there are more people working than retiring at a fairly high percentage. But as that percentage goes down, SS taxes will have to go up, or the system will collapse sooner rather than later. And it will collapse, as all Ponzi schemes do.

Yet another example of something the government does legally that is illegal for others. One could also include the protection racket (property taxes, where if you don't pay them, they take all your stuff away from you, and keep you paying under threat). Taxes are essentially tribute, after all. One could argue that we are in fact getting something for the money we pay, which is true -- but Kroger doesn't threaten to lock me in their storage room unless I buy groceries from them, even if I do need to eat.
Post a Comment