Looting 101
How the Ponzi Scheme Gained Popularity in America
Kenneth Stuart
Issue date: 4/15/09 Section: Final Approach
During the Great Depression, President Franklin D. Roosevelt introduced the concept of a social program to ensure that senior citizens have some source of income in retirement. Roosevelt had the right idea, but the unintended consequences of the Ponzi-scheme-like setup of the program means that seniors may once again suffer immense hardships in the "Great Recession" of the late 2000s and 20teens.
The term "Ponzi scheme" refers to a confidence game named after Italian immigrant Charles Ponzi. Ponzi came to the United States just after the dawn of the 20th century, and, like Bernard Madoff, former Chairman of the Nasdaq stock exchange, acted as a money manager for people whose trust he'd gained. Both promised high returns in a short period of time. Playing to human weaknesses of fear and greed, Madoff and Ponzi were able to attract new customers, and maintain the illusion of legitimacy through expansion and loyalty.
The con goes well as long as income exceeds outlays. Eventually there just aren't enough clients, or not enough new money from clients involved. Ponzi and Madoff both met their match: funds eventually dried up. Ponzi battled the courts and spent over 15 years in prison.
Authorities weren't quick to jail Bernie; Madoff enjoyed almost 3 months in his flat in Lower Manhattan after his confession in mid-December of 2008. Among the sources of his $50 billion Ponzi scheme: individual life savings, pension funds, and university endowments.
With the explosion of population growth after the Second World War, the United States realized that the level of return on Roosevelt's Social Security program needed to fund a global empire: disguised in defense expenditures, foreign aid, other social programs, and internationalist initiatives. A robust younger generation quickly went to work and paid the tax with the idea that the funds were for their parents, the "Greatest Generation."
What is absent from common understanding is that the Social Security Administration typically runs surpluses. Standard protocol holds for the routine loaning of the cash to other federal agencies. Financial crises and government spending over the past 50 years make the possibility of meeting future obligations for the Baby Boomers, and subsequent generations, unlikely. Without a significant increase in the taxation or levying of fees for services rendered, Roosevelt's dream appears destined to meet the fate of the average Ponzi scheme.
The term "Ponzi scheme" refers to a confidence game named after Italian immigrant Charles Ponzi. Ponzi came to the United States just after the dawn of the 20th century, and, like Bernard Madoff, former Chairman of the Nasdaq stock exchange, acted as a money manager for people whose trust he'd gained. Both promised high returns in a short period of time. Playing to human weaknesses of fear and greed, Madoff and Ponzi were able to attract new customers, and maintain the illusion of legitimacy through expansion and loyalty.
The con goes well as long as income exceeds outlays. Eventually there just aren't enough clients, or not enough new money from clients involved. Ponzi and Madoff both met their match: funds eventually dried up. Ponzi battled the courts and spent over 15 years in prison.
Authorities weren't quick to jail Bernie; Madoff enjoyed almost 3 months in his flat in Lower Manhattan after his confession in mid-December of 2008. Among the sources of his $50 billion Ponzi scheme: individual life savings, pension funds, and university endowments.
With the explosion of population growth after the Second World War, the United States realized that the level of return on Roosevelt's Social Security program needed to fund a global empire: disguised in defense expenditures, foreign aid, other social programs, and internationalist initiatives. A robust younger generation quickly went to work and paid the tax with the idea that the funds were for their parents, the "Greatest Generation."
What is absent from common understanding is that the Social Security Administration typically runs surpluses. Standard protocol holds for the routine loaning of the cash to other federal agencies. Financial crises and government spending over the past 50 years make the possibility of meeting future obligations for the Baby Boomers, and subsequent generations, unlikely. Without a significant increase in the taxation or levying of fees for services rendered, Roosevelt's dream appears destined to meet the fate of the average Ponzi scheme.
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