A Ponzi Scheme by any other name is Social Security


September 17, 2011 | 2:55 AM

A Ponzi Scheme by any other name is Social Security

A Ponzi Scheme by any other name is Social Security

GOP Presidential front-runner and Texas Governor Rick Perry has been blasted by the liberals and moderates since he dared to utter openly the truth about what Social Security has become – a great big scam! I applaud Perry for having the nads to actual talk about this federal bilking system.

But first gentle readers, let’s get some brief history on what a “Ponzi” scheme actually is. If you were to discover one, where would you turn? Why the Securities and Exchange Commission – that’s who! So I have borrowed some data from the SEC.gov site on this wonderful topic.

What is a Ponzi scheme?

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. Hmm – this system started out with 16 payor to 1 payee. Now it’s under 3 payor to 1 payee and dropping. Only in this retirement, you have forced contributions as opposed to free market solutions. You have always been fed the baloney of how safe your money was with the feds…. When this was established the life expectancy was 67, so you were expected to die two years after you started collecting. THE SYSTEM WAS NEVER DESIGNED FOR WHAT IT HAS BECOME.

Why do Ponzi schemes collapse?

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out. Go back and look at the payor to payee ratio. This despite a growing population in the last 50 years. Oh wait, I forgot only half of America pays taxes, silly me. You get 2% versus market returns?? Whoa – you mean all that cash the feds have clipped me for might not be there for me when I retire? Virginia say it ain’t so!

How did Ponzi schemes get their name?

The schemes are named after Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. At a time when the annual interest rate for bank accounts was five percent, Ponzi promised investors that he could provide a 50% return in just 90 days. Ponzi initially bought a small number of international mail coupons in support of his scheme, but quickly switched to using incoming funds to pay off earlier investors. I think we should rename these as “Leech Plans” after the blood sucking leeches that we all despise. I leave the description of the leech for your imagination.

Does the SEC investigate Ponzi schemes?

The SEC investigates and prosecutes many Ponzi scheme cases each year both to prevent new victims from being harmed and to maximize the recovery of assets to investors. The majority of such cases are brought as emergency actions, which often seek a temporary restraining order and an asset freeze. REEAAAALLLLYYY????? Why the hell hasn’t Congress been under investigation for the past 50 years?

During FY 2010, the SEC filed 47 enforcement actions involving Ponzi schemes or Ponzi-like payments. Don’t know about you, but I feel better.


So, here is the real issue – can it be saved and should it be saved? The answer is yes and yes with options for getting out of the system. First, you have to shut SS contributions off from any other federal agency. Then you have to put some options out there – for those that want out a payout period of 10 to 20 years where their contributions help fund the current system with portions of the payments going to private investments to get real returns. While that may sting on having that committment for that long, reality is that most Americans are willing to help fund the program for those that need it as part of their civic duty. The Social Security Administration would then become somewhat of a third-party administrator on conducting the private funds to the investment sector.

Can this work – darn tootin it can! Here is a little grid on how to scale out and get more dough with your bread.

If salary is > $40,000.00
and if current age is > 30
and if FICA deduction is > 7.00%
Amount of Social Security Deduction > $2,800.00
and if this were “Private Contribution” to Free Market > 56.50%
Annual Amount of “Private Contribution” > $1,582.00
and if Annual Free Market Return were > 7.00%
Number of Years to Retirement age 66 > 35
Value of Nestegg at Retirement age 66 > $235,581.09
Best Estimate of Status Quo  
Social Security Rate of Return > 2.00%
Value at Social Security Rate of Return > $82,255.09

The numbers speak for themselves. Can 7%  be achieved over 30 plus years in the market? Yes, but pro’s need to be involved. I am talking the schooled, educated, licensed boys and girls whose fannies get in a sling if they don’t work for your money.

I hope Perry is not the only one who grabs this stick and starts beating the libs over the head with the truth. It’s time to have the talk while we can still correct the problem.