BIGGEST LEGAL PONZI SCHEME

After Bernie Madoff, many people are familiar with the concept of a Ponzi scheme. Basically people are promised results that can not be met. They are told everything is fine and when people need money, they are sent funds from new investors so nobody can suspect anything. It works fine until several people start requesting funds and the pool isn’t large enough to a make the payments.

On August 14, 1935 President Franklin Roosevelt signed Social Security into law. Since that time the government has “borrowed” from the fund. That has not been a problem since those paying into the program were larger than those receiving benefits. This is the stage when the Ponzi scheme does not trigger warning signs. Make no mistake, the money contributed by beneficiaries has been spent long ago.

In 1935 there were 42 workers paying into the program for every 1 beneficiary. By Social Security estimates in 2030, when all the baby boomers have been beneficiaries for some time, there will be 2 workers for every beneficiary. Can we hear the voices of our children saying “Mom and Dad, I love you BUT I can no longer afford you.”?

When changes are made in Social Security, such as lowering benefits and increasing taxes, remember two ratios. 42 to 1 and 2 to 1. The Ponzi scheme has unraveled.

Scroll to Top