Is social security a ponzi scheme? What proof can you offer?

Answer 1

YES

As all of us age and there is less and less to put in to it then it runs dry not to speak of the robing it by Congress.

It was never meant to be for life and it was thought at the time that people would die first and with the advaces of health care this made it fail from the start. And we need to be able to invest more of it on our own.

A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business, named after Charles Ponzi.

Contents [hide]
1 Overview
2 Hypothetical example
3 What is and is not a Ponzi scheme
4 Notable Ponzi schemes
4.1 Highest dollar schemes
4.2 Other notable schemes
5 As a political metaphor
6 See also
7 References
8 External links



[edit] Overview
A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going.

The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more and more investors become involved, the likelihood of the scheme coming to the attention of authorities will continue to increase.

The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi was not the first to invent such a scheme, but his operation took in such a large amount of money that it was the first to become known throughout the United States. Today's schemes are often considerably more sophisticated than Ponzi's, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit lapses in judgment arising from an investor's lack of information.


[edit] Hypothetical example
An advertisement is placed promising extraordinary returns on an investment – for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage," "hedge futures trading," "high yield investment programs," or something similar.


A mugshot of Charles PonziWith no proven track record for the investors, only a few investors are tempted, usually for smaller sums (say $5,000). Sure enough, 30 days later, the investor receives $6,000 – the original capital plus the 20% return ($1,000). At this point, the investor will have more incentive to put in additional money, and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns.

The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. There is no "global currency arbitrage," "hedge futures trading," or "high yield investment programs" actually taking place. Instead, when Investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W.

One reason that the scheme initially works so well is that early investors – those who actually got paid the large returns – quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme don't actually have to pay out very much (net) – they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return.

The catch is that at some point one of three things will happen: (a) the promoters will vanish, taking all the investment money (less payouts) with them; (b) the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads, and more people start asking for their money); or (c) the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise, they find that much of the "assets" that should exist, do not.

Answer 2

"Retirement systems, like Social Security, are openly declared for what they are. In a genuine Ponzi scheme, the perpetrators falsely claim that there is some business that generates the promised revenues. In Social Security, people know where the money comes from, and actuaries supply written predictions of future cash in-flows and out-flows."
-http://en.wikipedia.org/wiki/Ponzi_scheme

While SS is a Ponzi scheme it is so openly, therefore it's not really by definition.
It is arguably worse than a Ponzi scheme as it is claimed to be voluntary (hush hush) while at the same time practically forcing everyone to participate whether they really want to or not (numeration at birth, etc). Furthermore, there is no way to really 'opt out' of the system, it's like the Hotel California. One could theoretically stop paying the SS taxes and refuse to collect any benefits, but the SSA won't willingly agree to such a decision and will still have an SSN assigned to that person.

One could only guess that these tactics are based on the flawed logic of the SSA that "As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever."
All it takes is enough people realizing that they would be better off making their own financial decisions and retirement planning to not 'voluntarily participate' in SS and the system collapses.

Answer 3

By the definition of the term, yes.

But it's a legal Ponzi scheme.

A Ponzi scheme is an investment operation that pays returns out of the money paid in by subsequent investors, rather than from net revenues generated by business.

Current taxpayers pay into the system, which pays out to previous retirees -- when the current taxpayers retire, their payments will come from future taxpayers.

If SSI was a savings model where each person was paid based on what they contributed, it would be different./

Answer 4

Yes it is.

Proof: People who created it are not participants in it.

While they take a paycheck from these funds when they are moved to Government Expense account. and give themselves pay increase every 6 months.

Look it up and you will know. None of the Government Employees from top to bottom pay in to Social Security be they belong to State, City, District, or Federal Government.

They have guaranteed 80% pention for life after retirement in some cases Congressman who have served one full term only get life time pention. and this also increases every 6 months at the rate of 3 to 7 percent each year.

Answer 5

It was initiated on the premise that life expectancy would remain at 65-70.
Based on that premise, more funds would be taken in than paid out.

Longer life spans have corrupted that notion, and it operates closer to a pyramid. In order to be solvent new and more payers are needed. After the baby boomers retire, and considering so many jobs being outsourced, leaving more low paying jobs, and fewer workers/payers, the pyramid is failing. As all pyramids fail.
Consider how many jobs are being done by robots and computers. The savior in all this is the ability of gov. to increase SS tax on future generations.

Answer 6

No.

Because in a Ponzi scheme, at least some people did well.

With social security, we ALL do poorly.

Answer 7

Yes, monthly revenue is directly transfered to the expense account.

Answer 8

social security needs total reform.