Comments on: Ponzi Schemes and Social Security

By: woody188

woody188 — Wed, 30 Nov -0001 00:00:00 +0000

That’s a very interesting comparison. But who is it that is holding us hostage, the government, or the retired populace collecting the money? And don’t forget the injured and disabled also collect from the fund.

By: drich291

drich291 — Wed, 30 Nov -0001 00:00:00 +0000

Wrong metaphor! Social Security is not a retirement investment fund. It is a social insurance fund, intended to protect the retired elderly from poverty, as well as assist the disabled, etc. It is not intended as a means of retirement savings. Like insurance, you pay a premium every month in order to receive protection. The benefits received by those who need them and qualify for them come from the pool created by those premiums and the returns from investing them. Granted, there are some aspects of Social Security that distinguish it, however it is still not a means of retirment savings. Unless you think that insurance is also a Ponzi scheme, you have picked the wrong metaphor.

By: knockknock

knockknock — Wed, 30 Nov -0001 00:00:00 +0000

It’s not that I’m questioning the validity of the statements, it’s more that I’m questioning the sources given within the article.

Wikipedia? Rockwell’s blog?

By: Paolo

Paolo — Wed, 30 Nov -0001 00:00:00 +0000

Hi Drich291,

I disagree. Social Security is very much a Ponzi Scheme. The money is not “invested” in any meaningful way. It simply goes into the Social Security “Fund” and goes right out to pay current retirees, less overhead expenses. The only way the money is “invested” is in government bonds; that is, debt instruments dependent on yet more future taxation to pay for them. This, I submit, is a revolving-door Ponzi Scheme. The “premiums” of those paying in go immediately out to those who were early in on the game.

Insurance, on the other hand, is not a Ponzi Scheme. Let us say you buy term insurance that has no cash “investment” value. That is, payments only occur in the event of your untimely death. With term insurance, thousands of people voluntarily pay a small sum to be insured against the unlikely (statistically speaking) event of death. The costs are low because (let us say) out of pool of ten thousand people between the ages of 25 and 55, only a small percentage are likely to die unexpectedly. Of course, as age goes up, so does the risk of death, so the premiums also increase.

With “cash value” life insurance, a certain percentage of your premiums actually are invested in areas where one expects a return. Thus, the money you invest earns interest. This is not the case with Social Security (except as mentioned previously regarding government debt instruments).

By: Paolo

Paolo — Wed, 30 Nov -0001 00:00:00 +0000

Actually, Wikipedia is generally quite accurate. Lew Rockwell definitely writes from a libertarian perspective, but this is certainly not a disqualifier, any more than it would be a disqualifier to cite a source that is conventionally “liberal” or “conservative.”