Friday, September 9, 2011

Friedman, Social security and Ponzi schemes

Mr. Friedman will not answer the simple question: Is Social Security a Ponzi scheme?

The answer is that of course it is.

If I stop paying into my life insurance plan, I am still eligible for the rewards accrued. Because insurance companies invest my money to create an ROI.

If people stopped paying into SS, it would immediately be bankrupt. Because it is a Ponzi scheme. There is no investment; the payers support the retired. And if you should die before you receive all the money you paid in, your children do not receive it. The government keeps it.

Imagine the economic security of the poor if their 12-16% payments into SS for the last 20 years gave them even an insurance industry return. Imagine the nest eggs the poor could have left their children. Given general life spans, imagine how many black men are supporting old white women in their dotage.

I can not understand any supposed intellectual that will not agree that SS is economic crap. 'Crap' is a financial term BTW.

Put another way, the rich use return on investment and compounding to grow richer. Because SS is a Ponzi scheme, the poor are structurally prohibited from participating.

Lastly and most importantly, Mr. Friedman well understands all of this. He will just not admit it. Why? Because fixing SS would entail investing the money with people like Mr. Santelli. And he would hate to do that. More philosophically, it would turn every citizen into an investor, with a stake in the economy. Now why would any Progressive want that? And perhaps most immediately, it would require the state to stop stealing SS and admit they have been wrong all along.

UPDATE: SS as Ponzi scheme is now one of the most debated topics on the Internet. Here is the definition according to the SEC:

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

"Ponzi" Schemes
Tue, 13 Sep 2011 15:18:37 UTC
That is exactly what SS does.

One of the most often cited defenses of SS is that it is not meant to be a deception. The obvious rejoinder is that Social Security Insurance is neither insurance or secure. It makes no investments; in fact the 'fund' has been raided to pay for other government 'programs.' And the argument seems to be that if folks are gullible enough to participate despite its fraudulent claims, it must be legal. Seriously? Is that the argument you want to go with?

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