Greatest Ponzi scheme of all time?

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GR8TFUL's picture
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Joined: Oct 13 2008
Posts: 79
Greatest Ponzi scheme of all time?

 From an email / newsletter I received:

A Ponzi Scheme 1,000 times the size of Madoff's Wall Street Scam

The Federal Reserve cut interest rates again yesterday, this time to zero, firing their last bullet at the deflation monster and sending the markets skyward. Apparently the markets didn't notice the fraud, Ponzi schemes, corruption, stock manipulation and other lying going on in the markets that day.

Again...the power of wishful thinking.

With US$50 Billion in his pocket and a smile on his face, Bernie Madoff told investors on a conference call that his entire business was a scam. And so ended another of Wall Street's ‘biggest' lies. Things like this will be the new norm, and we'll see more of them in the coming weeks and months.

When the sun is shining and the Fed's easy money policies are churning out cash, it's easy to keep your lie hidden. But when the going gets tough and other liars make it harder to get by, these guys start to come out of the woodwork.
My personal favorite so far is a fellow named Otto Spork, a former dentist and Canadian fund manager who ran a similar scheme to Madoff's. The big difference here is that Spork's firm invested heavily in Icelandic glaciers and then reported huge gains to his investors. Apparently the ice markets are a hot place to be these days...

But Otto's scam is small potatoes compared to the biggest Ponzi scheme out there. This from CNN's Cliff Mason...

"But I can't deny the similarities between how social security operates and what Bernie Madoff was allegedly doing with his investors, or should we call them marks?

With the Social Security system, workers pay 12.4% of their salaries into the system to cover payments to retirees, who themselves paid into the system when they were working. Except the original recipients of social security in the depression never had to pay payroll taxes because the system didn't exist when they were working.

Now look at the definition of a Ponzi scheme courtesy of wikipedia: "A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from the profit from any real business."

As a creation of the previous Great Depression, the Social Security System may find its end in the coming years, as Baby Boomers begin to collect their dues and the system's obligations begin to rapidly outpace new deposits. Indeed, should the next few years be as turbulent and costly as 2008, the system could simply unravel.

But many of you are already either fed up or frustrated. You've had enough, and you just want to know something for certain. You want to know the truth. And rightfully so, because so much of the world economy really is just lies piled on top of more lies piled on top of even more lies.

barrt's picture
Status: Silver Member (Offline)
Joined: Aug 25 2008
Posts: 171
Re: Greatest Ponzi scheme of all time?

Ive been watching Al Jazeera TV news this evening, its pretty good, very interesting and a breath of fresh air compared to the US networks, you get the other side of the coin for sure. Perhaps it is true that everyone has an agenda, maybe so but you do get some eye opening stuff!

They had Peter Schiff on there tonight witha few other panelists, he was saying the same thing about the SS being a ponzi scheme, not only that but he reeled off a big list of things that were all ponzi schemes, very interesting segment, you should have seen the faces of the others, particulary the glamorous female host who seemed to be bent over her desk in glee. A cluess UK hedge fund reviewer looked completely lost when it was her turn to speak, marvellous tv

machinehead's picture
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Joined: Mar 18 2008
Posts: 1077
Re: Greatest Ponzi scheme of all time?

'Except the original recipients of social security in the depression
never had to pay payroll taxes because the system didn't exist when
they were working.'

true that the first generation of SocSec retirees made out like bandits
... although they did pay SOMETHING. SocSec started collecting FICA
payroll taxes in 1936. The taxes were very low then -- capped at only a
few dozen dollars a year, even for high earners. The very first SocSec
retiree was actually publicized -- a lady in Vermont who retired in
1941. She enjoyed a long retirement. It was calculated after her death
that she had obtained a 100-to-1 return on her payroll taxes -- having
paid in about $400 during 5 years of work, and then pulled out around
$40,000 during several decades of retirement.

What is astounding
and deplorable is that Social Security is exempt from following the
ERISA pension funding requirements that are imposed on the private
sector. ERISA was implemented in 1974, on the sound and prudent
principle that the present value of future pension obligations should
be calculated and funded from current earnings, rather than deferred
into an uncertain future. Arguably this principle is even more
important for Social Security than for corporate plans, because SocSec
is so much bigger, and it is mandatory.

But have you ever heard
ANYONE -- particularly accountants, actuaries and tax lawyers, who are
perfectly aware of this issue -- advocate making SocSec comply with
ERISA, appoint independent directors with fiduciary obligations
to SocSec beneficiaries, and so forth?

No, of course not.
Because bringing SocSec reserves up to ERISA standards would require
TRILLIONS of cash that Usgov does not have. Such a revelation would
make clear that presidential administrations and Congress have been
collaborating for 50 years to loot Social Security reserves for electoral
benefit, stealing trillions in the process. That this grand theft,
which makes Bernie Madoff look like a small-time shoplifter by
comparison, continues to be swept under the rug, implies that
corruption and malfeasance are much more deeply ingrained than we would
like to imagine. Professional organizations of accountants and lawyers
have prostituted themselves by not taking a stand against the ongoing
mismanagement and looting of Social Security, and calling it what it is

Woodman's picture
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: Greatest Ponzi scheme of all time?


 Peter Schiff notes what a Ponzi scheme SS is in this article:

The difference from Madoff is the government can print money.


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