Posted on 09/08/2011 6:23:38 AM PDT by Graewoulf
At 7:33 AM CDT Rick Santelli asked guest host Thomas L. Friedman, New York Times foreign Affairs Columnist, and author of his new book " That Used to be Us, " the following question: " Is Social Security a Ponzi Scheme ? " Tom replied, " Your question is idiotic ! " Rick then replied: " Your answer is idiotic! "
GAME ON !
Either Social Security is a Ponzi scheme, or it is welfare--period.
Given SS is in trouble, means it is a Ponzi scheme. The fact SS is failing means the government has perpetrated a fraud on the citizens. SS's success is purely dependent on new workers coming into the system to directly pay the recipients. Traditional pension systems require funding and capital. Traditional annuity systems require capital and accurate actuarial support.
SS was sold to the public as an annuity, not a pension. In the 1930s, the only available retirement financing was to go to an insurance company (most were called "Insurance and Annuity" companies back then), and buy an annuity. You paid money in monthly premium (like an insurance premium) for a number of years, and you got a monthly payment out until you died. Annuities were sold by insurance companies (not investment companies), because annuities required an actuary to structure them.
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BERNIE MADOFF |
SOCIAL SECURITY |
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Takes money from investors with the promise that the money will be invested and made available to them later |
Takes money from wage earners with the promise that the money will be invested in a "Trust Fund" and made available later. |
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Instead of investing the money Madoff spends it on nice homes in the Hamptons and yachts. |
Instead of depositing money in a Trust Fund the politicians use it for general spending and vote buying. |
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When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors. |
When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the geezers. |
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When Madoff's scheme is discovered all hell breaks loose. New investors won't give him any more cash. |
When Social Security runs out of money they simply force the taxpayers to send them some more. |
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Bernie Madoff is in jail. |
Politicians remain in Washington. |
You bring up an interesting point: “Annuities were sold by insurance companies.”
I am curious what effect the SSS had on competition in the Annuity business. If competition was significantly reduced, then the SSS would be in violation of the 1890 Sherman Anti-Trust Law.
Only a matter of time before GE gives him the boot.
Good 'ol Orin Hatch...leading from the rear.
I think that if we really wanted to help senior citizens we'd get interest rates up so that they could stretch their savings.
Excellent graphic! Thank you!
The purpose of this post is for us on FR to get above the noise of the MSM and establish a dialog amongst ourselves that will have a positive influence on the financial futures of our grandchildren and their descendants.
Your graph does all of that for me. Thanks.
Wrong, wrong, wrong.
SS is, by definition, a Ponzi scheme.
What you are trying to describe is sone form of a SUCCESSFUL Ponzi scheme.
It is still a Ponzi scheme.
” (- - - help senior citizens - - - )
The senior citizens , and I am one, will be paid.
My grandchildren and their descendants will pay heavily for the SSS that we created, and none of them will receive a single FDR dime!
Ignore it if you choose to, but it is still reality, ah, what a concept!
FWIW, I’ll be eligible in a few short years. I don’t think I will see it because I don’t think the US government, as we know it, will exist by then. I read too much history and study human nature too much to think what’s going on now is just more “business as usual”.
Sometimes “business as usual” is put on hold while things like the levelling of Poland take place.
Yes.
It needs to be phased out, no doubt. But those who are already hooked into it will need to be covered somehow or they will vote for Obama.
They want to raise the age again.
If SS payments only went to people over 65 who actually paid in to the system during their working years, the solvency could be extended. Too many people who don’t meet that standard are recieving SS benefits.
But even with that, the system should be phased out completely over time. Dependancy should not be encouraged, or subsidized by any of us against our will.
Of course, it's a forced (at the point of a gub'mint gun) "Ponzi" scheme.
The only thinn that sends some of our "elderly citizens" go round the bend when hearing such terms is that they know they were taken, the others getting a check who either paid in nothing or very, very little. Those who paid in lots more than they will ever get back, know it and they hate to admit, after the fact, that had they put in the same amount on their own in almost anything, including whole life policies, they'd have much more and something to give away to family or charity, etc. after they are gone, unlike the SS Ponzi Scheme!
Based on this, in 1950 there were about 7 workers per retiree. To keep this ratio, you would need a retirement age of 70 by 1990 and 75 by 2030. Holding the age at 75 after 2030 results in a temporary ratio drop to about 6 during baby boom retirement and would recover after that bubble passes. This seems reasonable.
The other part of the equation is payments. Payments should be distributed among retirees based on contributions. But total payments each year should be based on the fund balance and fund income to manage the fund over time.
Changes to provide a better return on the fund balance could allow increased payments.
There is so much to see on your excellent graphic!
One thing that jumps out at me is how constant the population growth has been over the last 45 years.
If the illegal aliens, ( 25 M +/- ), could be removed, your graphic would show a decline in population growth.
The person who indicated that the government would simply print more money is correct. Unless there is a massive change to system now, the only way the government will get out of this box is to monetize the problem. Of course, that solution will be only temporary, as it will destroy America’s credit and unleash rampant inflation. So the seniors will get SS cheques with the amount promised, but the value of those cheques will be a fraction of what they anticipated. I suspect that this will more palatable to the gutless politicians than to actually have to pass the reforms in advance. The US is headed the way of the Weimar Republic.
Ponzi scheme participation is generally voluntary, that is the only difference I see.
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