Thursday, April 2, 2009

The fierce urgency of, "Gee, I never thought of it that way."

ponzi scheme.jpg

A while ago, I heard a layman's explanation of a ponzi scheme. It went basically like this...

Well, you start out with a few people who get a bunch of people to invest money. You get that money and part of what new investors pay in. The investors you cheated get the rest of the new investor's money. As long as there are enough new investors paying to keep the old investors happy, the system works. It stops working when you don't have enough new investors.

My response, since I'm not above butting into to a conversation uninvited, was, "You've just described Social Security; just replace investor with taxpayer."

According to the Wikipedia article I cited, the Social Security Administration says that social security isn't like a ponzi scheme. Personally, I find that hilarious. You think that even a questionable source as Wikipedia could come up with a citation besides the controlling body of the entity in question.

The Social Security Administration says social security isn't like a ponzi scheme. You don't say?!?!?!?!? You could knock me over with a sledge hammer.

Bernie Madoff probably said the same thing about his ponzi scheme. At least that time, we had the good sense to get someone else's thoughts on the subject.

I've talked about this before. When somebody tells you something, consider the source. That source might have a reason to tell you something other than the unvariegated truth.

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Anonymous said...

I fear that even having more investors/taxpayer won't solve the problem quickly.

I also agree that it is a Ponzi scheme.

Anonymous said...

I was here.