Charles Ponzi was one of the greatest swindlers of all time. His name is used to describe a fraudulent investment scheme in which initial investors are paid abnormally high returns using funds invested by subsequent investors.
Ponzi schemes ultimately break down for lack of true economic substance. One such scheme has been in the news recently. It seems that Bernard Madoff managed over a period of years to amass an investment fund valued in the billions of dollars by promising a safe and secure return at rates which could not be matched elsewhere. Madoff had sterling credentials and a client list which included wealthy elites and serious pension funds. He had been in business for years without any hint of a problem. But Bernie was a fraud, and now there is great wailing and gnashing of teeth at the country club.
Group think, one sheep following another, is part of what makes a Ponzi scheme work. Madoff's clients each considered themselves to be among the fortunate members of a special group. Their confidence was mutually supportive to the point that they stopped thinking for themselves.
There is another great Ponzi scheme operating in America, a program that promises long term health and security to its investors, each of whom has a personal account to which regular contributions are supposedly deposited. But contributions made by newer investors are used to pay off older investors, so there are no actual investments in the personal accounts.
Like any other Ponzi scheme, the U.S. Social Security Program, which includes Medicare, will ultimately collapse on itself. When it does there will be true hardship and poverty among those who depended upon the promises of the fraudulent Ponzi promoters in government.
Since the average American has no personal savings plan, his years of Social Security contributions amount to a life savings - all of which will suddenly vanish.
No one wants to believe that Congress would expose the people to such risk. But this misplaced confidence in our elected elites is the group think that holds the Social Security Ponzi scheme together. If anyone other than our elected elites attempted such a crime, they would long ago have been arrested and imprisoned.
Most thinking people already know or suspect that this is true. And yet nothing is done. All of us with earned income continue to make contributions to the Social Security Ponzi scheme.
The rolling economic disaster we are experiencing all over the world this year should serve as ample reminder that the laws of simple economics cannot be forever ignored without consequence. Irresponsible lending leads to defaults. Irresponsible spending leads to bankruptcy, and bogus Ponzi schemes never succeed.
If just one percent of us banded together and refused to participate in the Income Tax / Social Security system, a million taxpayers acting as one, the Ponzi promoters would be exposed, and the scheme would collapse now before any more of our savings are stolen.
But, sheep being what they are, we will continue to be fleeced until the scheme unwinds on its own.
When you see the anguished news stories about the victims of Bernie Madoff, know that soon it will be your turn.
Ponzi is coming for you.