The Ultimate Ponzi Schemes


Bernie Madoff is the scum of the earth. Hands down, no doubt; building up a Ponzi scheme in order to bilk people out of billions of dollars is infuriating, and this man should spend the rest of his life behind bars. Let’s hope that the authorities track down as much of his ill-gotten money as possible, and find some way to return it to investors.

But Bernie Madoff is a small fry. A shrimp. A rank amateur. A bit player. Or as John Stossel puts it,

Madoff is a Piker

I hope that you’ll go and read the article above, but here is the synopsis: the greatest perpetrator of Ponzi schemes is your United States government. And my guess is that a high percentage of my readers support the Ponzi schemes that the government has been running, because I doubt that many of my readers have followed me down the path of libertarian thinking (just another name for Constitutional fidelity, IMHO). I have long railed against the first of these Ponzi schemes, what I call “Socialist Security”: All the “Security” that Socialism Can Provide. Socialist Security is a Ponzi scheme, plain and simple, and I’ve long said that the first reason to oppose Socialist Security–not to partially “privatize” it, a la George W. Bush (though that would have been a massive step in the right direction), but to eliminate it–is not that Socialist Security is “ineffective” or “ill-managed”, but that Socialist Security is immoral. And when you understand that the government has been lying to us from the very beginning about Socialist Security, that there is no “trust fund” or Algore “lock box” into which your funds are going, but that they are simply being used to pay off current retirees, and when you further understand the ratio of workers to retirees that is going to be in play in 30 years (2-to-1), then you understand that the system will, a la Madoff, collapse, and one of two things will happen: either you will (immorally) get no money, the money you were promised after putting into the system for your working life, or the money you get will be worth pennies on the dollar, because the government will (immorally) print more money to “cover” the gap.

But as Stossel points out, Socialist Security isn’t even the worst of the two: Medicare is. I won’t get into all of it, but the facts are simple: the government has been lying to us, running a Ponzi scheme, and the kicker is that, at least with Bernie Madoff, the whole thing was voluntary; greedy investors jumped at a chance for big profits, and it all came crashing in when no more dupes could be found. But to fund the immoral Ponzi schemes we call Socialist Security and Medicare, your money is confiscated, and you have no say.

The floor is now open for any of my readers to defend the indefensible: the immoral Socialist Security and Medicare.


  1. Graham on January 18, 2009 at 7:25 am

    One question on this- suppose that social security (including old age pensions) does get eliminated.

    What should then happen to people who have paid their contributions? Should they then not get the money they feel they are entitled to when they reach pension age?

    If the pension were scrapped, then there would still be pensioners who were claiming their pension- and the money would still have to come from somewhere for them. (Of course, existing pensioners could be told that their pension is now zero).

    And to ensure the money to keep their pensions going is there, then money would need to be taken from people who are working- who might then be a bit annoyed that they are now paying into a system which they will never benefit from.

    Whatever its flaws, any pensions system is a long term project and takes decades to shut down when the “Off” button is pressed. And in those decades there is a generation or two of voters who will know that they are paying twice- through tax etc. for those who are getting pensions, and through their own contributions to their own future pensions. How many of those voters are going to say “Yes, I’m happy to contribute for years and get nothing out of it” and vote for the person who offers that?

    Even if you were to close it down slowly, for example, by saying that those not yet at pension age would get a certain percentage of the Basic State Pension when they retire, then there would still be the problem that those people’s pensions would have to come from somewhere, and even in 81 years time there would still be very elderly people getting a tiny state pension, paid for by the taxpayers of 2090.

    • Byron on January 18, 2009 at 8:32 pm

      Socialist Security will never be “shut down”, IMHO. Despite what I’ve written, it remains among the most popular of government programs. I am in a fairly rare minority in my opinions, though to me it’s obvious that we have a massive problem. That problem is furthered by virtue of the fact that we have a bunch of utterly gutless politicians, but of course they’re in office because we keep re-electing them, as they tell us what we want to hear (Fleetwood Mac called it “Sweet Little Lies”). At some point, somebody will have to do something, but we’re already WAY past the time to address this. My guess is that (too late to fix anything), the retirement age will be moved to 68 and the percentage taken out will increase a bit. Then, realizing that they’ve acted too late, the government will print funny money to “pay off” retirees. Immoral, is what it is.

  2. Laurie on January 19, 2009 at 12:46 am

    I don’t disagree it’s a bad system, but I had the same question as Graham, what can we do about it now? I think most of us, since we have no choice anyway, just hope the money doesn’t run out before we get some return on what we’ve paid into it. Personally I’ve never liked the idea of SS, but it’s pretty much a runaway train at this point.

    • Byron on January 19, 2009 at 8:28 am

      Which is my point exactly.

      I have no idea what to do, although I’m sure there are some libertarian minds greater than mine who can offer some solutions. Chances are that somebody at the Cato Institute ( has offered some ideas, although I just went there and the Search function is apparently on the fritz. I say, “I have no idea what to do”, but as I said in the original post, Bush’s idea of partial privatization is a step in the right direction. Break down people by age groups; give everyone at least a partial “opt out” provision; reduce benefits on some sliding scale accordingly. Raise that retirement age by one year every 2-3 years ’til it reaches 68 at least. Find some incentive (not sure what it’d be) for people to forego all or part of their Social Security payments (would rich folks give them up if they got some kind of other benefit?). Since the government is lying to us anyway, and will somehow end up breaking its promises anyway, begin breaking those promises by reducing benefits to people not yet receiving them, again on a sliding scale. For people under 60, say, cut them by 20%; under 55, by 25%; under 50, by 30%…I’m just spitballing, and I don’t know all the numbers, but I do know that the crisis deepens every day our buffoonish Congress does nothing.

  3. Graham on January 19, 2009 at 4:31 pm

    Raising the pension age is do-able, and takes time, but any pension reform is a long-term project, and needs cross-party support.

    A couple of years ago, Lord Turner of Ecchinswell drew up his report into the future of state pensions, and argued that the pension age needed to rise gradually from 65 to 68 by 2050. I will not be able to draw my state pension until 67. The Turner Report is backed by all main parties and most of it is being introduced- although it is a bit of a shock to realise that there is a good chance that the Minister for Pensions who implements the final stages in the 2040s might not have been born yet!

    Lord Turner’s defence of raising the pension age is that you either get an inadequate pension at 65, or wait for a slightly better one at 68, and in the long-term, not raising the pension age becomes too expensive for the economy to handle.

    And 68 is not intended to be the final limit, as Lord Turner did note that the increasing life expectancies will mean that it will have to rise in the second half of the century, but he was not able to give detailed proposals for that. Although at the rate of increase in his report, a baby born today would probably not be able to draw their pension until they are 71.

    • Byron on January 19, 2009 at 7:21 pm

      That “cross-party support” has been difficult to come by, as Republicans (rightly, IMHO) want to give people more say in what to do with their money, and the Democrats manage to scare people with the idea and so rally people against their own freedom. Mind-numbing…

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