$138M??

[eccentric_rambler]

Sure is pay walled. However read a lengthy article a few days ago somewhere else that detailed his arrest. Never heard of the man before but looks like he was running a typical Ponzi scheme. I’m sure that’s fun while it lasts. Nobody seems to have figured out how to make it work…

There is no way to make a Ponzi scheme work. It is by definition fraud or theft and just a sophisticated way to cheat people.

Essentially what he was doing was taking investors money and instead of investing it in new ATM machines like he was claiming to do, he was using the new investor money to pay previous investors and fund his lavish lifestyle. That is fraud. Apparently a large number of the ATM machines his company claimed to own never existed.

I’m not some big sophisticated investor. But this is one of the reasons why I would never invest in this sort of private company. At least when you buy into established public companies on the stock exchange you know they are being independently audited and have lots of regulatory oversight. That doesn’t mean they still can’t perpetrate fraud. Witness Enron or more recently Theranos. Which is why investing broadly in the market through index funds is safer than putting all your eggs in just a couple of baskets.

He was also running an affinity scam and basically playing on his religious affiliation to attract investors. Which is something people in my own extended family have been victims of in various instances over the years. Using religious affinity to attract and scam people is one of the oldest cons in the book and the plain world isn’t immune from it. In fact, maybe more susceptible.

The Ponzi scheme of fiat currency seems to have lasted a while. Usually lasts 80 years.

Add Social Security to the list.

[Ken]

There is no way to make a Ponzi scheme work. It is by definition fraud or theft and just a sophisticated way to cheat people.

Essentially what he was doing was taking investors money and instead of investing it in new ATM machines like he was claiming to do, he was using the new investor money to pay previous investors and fund his lavish lifestyle. That is fraud. Apparently a large number of the ATM machines his company claimed to own never existed.

I’m not some big sophisticated investor. But this is one of the reasons why I would never invest in this sort of private company. At least when you buy into established public companies on the stock exchange you know they are being independently audited and have lots of regulatory oversight. That doesn’t mean they still can’t perpetrate fraud. Witness Enron or more recently Theranos. Which is why investing broadly in the market through index funds is safer than putting all your eggs in just a couple of baskets.

He was also running an affinity scam and basically playing on his religious affiliation to attract investors. Which is something people in my own extended family have been victims of in various instances over the years. Using religious affinity to attract and scam people is one of the oldest cons in the book and the plain world isn’t immune from it. In fact, maybe more susceptible.

The Ponzi scheme of fiat currency seems to have lasted a while. Usually lasts 80 years.

Add Social Security to the list.

Social Security isn’t an investment program. It is an old-age insurance program. It is right there in the program’s formal name which is the “Old-Age, Survivors, and Disability Insurance Program” (OASDI)

Like any form of insurance, you pay in dues which entitle you to certain benefits. Car insurance, health insurance, homeowner’s insurance, flood insurance, and life insurance are no different. When you make an insurance claim, you don’t get your own money back. Your dues paid for other claims. The only question is whether the plan is actuarily sound. And if it isn’t then insurance rates need to go up or benefits go down.

That doesn’t make social security or any form of insurance a Ponzi scheme. It is how insurance works.

[JohnH]

A Ponzi scheme is one in which people are coerced into paying in, with a promise of returns in the future, but the only way to have those returns is to convince more suckers to keep paying in.

Can you explain how social security doesn’t meet this description?

[eccentric_rambler]

What's that Lincoln quote about calling a lamb's tail a leg?

[Ken]

A Ponzi scheme is one in which people are coerced into paying in, with a promise of returns in the future, but the only way to have those returns is to convince more suckers to keep paying in.

Can you explain how social security doesn’t meet this description?

A Ponzi scheme is a form of fraud in which investors are deceived into believing that they are investing in an actual business (in the case of Daryl Heller) or stock market fund (in the case of Bernie Madoff) when in fact the business or investment fund is fictitious and fake profits paid to early investors come not from profits or earnings, but from contributions by later investors. And then the fiction of a highly profitable business or investment fund is used to lure in new unsuspecting investors.

Social Security is simply an old age and disability insurance plan. It is insurance against outliving your savings or becoming disabled while working. As such is is like any other insurance plan in which premiums paid by participants are used to pay claims. Life insurance, health insurance, car insurance all work the same exact way.

For regulated forms of insurance like ACA health plans, state regulators and actuaries make sure that the premiums are sufficient to cover claims and if they get out of balance, rates go up or down in response. Or things like deductibles and coverages get adjusted. There is nothing fraudulent about properly regulated health insurance or life insurance. Some unregulated forms of insurance like some unregulated Christian health sharing co-ops are fraudulent but not legitimate regulated insurance.

Social Security has paid out every benefit owed to every retiree since the program started in 1937. Just like any other insurance plan, it needs some adjustments in the future to continue to do so (increasing premiums or reducing benefits) or it will need some government subsidies to continue. But that is widely known so no fraud is being perpetrated.

Our car insurance and health insurance rates went up this year as happens. Nothing fraudulent about that. Both are regulated. The same thing will need to happen with Social Security except that Congress is the regulatory agency and they will need to choose what combination of measures they need to take (premium increases or benefit cuts) to bring the program into actuarial balance. If they do nothing, either benefits will get cut or the program will need to be subsidized by general revenue tax dollars depending on what the courts ultimately say. That question has never been litigated in the Federal courts.

It is always a moving target from year to year. COVID made the program more actuarially sound because it killed off a lot of old people who were drawing benefits or about to, which saved the program tens of billions. Trump is currently making the program less sound by deporting lots of undocumented immigrants who happen to pay billions into the program but aren't entitled to benefits. Every advancement in geriatric medicine that allows people to live longer makes the program less actuarially sound. That's not a bad thing, curing disease is a good thing. But it has costs.

There are plenty of easy adjustments that Congress can make to bring the program back into actuarial balance. They are just politically difficult. But nothing about it is fraudulent.

[JohnH]

Every Ponzi scheme pays out… until it doesn’t.

[Ken]

Every Ponzi scheme pays out… until it doesn’t.

In 1937 when Social Security was passed, approximately 2/3ds of American elderly lived in poverty. And the numbers were worse for elderly widows and people of color. Poorhouses were a real thing. As was homelessness, hunger, and real suffering among the elderly.

Today the poverty rate among the elderly is about 10%. Which makes Social Security the single most effective anti-poverty measure in American history. There isn't even a close second.

Absent Social Security, studies estimate that the current poverty rate among the elderly would shoot up from 10% to 40%. And many children who rely on Social Security because they have deceased parents would also be plunged into poverty.

That isn't a Ponzi scheme. It is the most effective (and efficient) anti-poverty measure ever adopted in this country. The administrative costs of the old age portion of the program are at 0.4% which makes it the most efficient retirement pension program in the country. Far more so than any private pension plan. The administrative expenses of the disability portion of the program are at 1.6% because there is much more overhead involved with reviewing disability claims than determining that someone has reached retirement age. The total administrative costs of the combined program are at 0.5%.

Social Security is also responsible for keeping the economy going in large swaths of rural America. Absent the monthly infusion of Social Security, many small towns and rural communities would literally shrivel up and blow away. Go to any small rural town and count the number of people using Social Security checks to buy groceries and pay rent. It isn't a small percentage.

It will continue to operate for as long as we choose to keep the program running. Nothing Ponzi about it.

[JohnH]

Every Ponzi scheme pays out… until it doesn’t.

In 1937 when Social Security was passed, approximately 2/3ds of American elderly lived in poverty. And the numbers were worse for elderly widows and people of color. Poorhouses were a real thing. As was homelessness, hunger, and real suffering among the elderly.

Today the poverty rate among the elderly is about 10%. Which makes Social Security the single most effective anti-poverty measure in American history. There isn't even a close second.

The amount of school shootings has significantly increased since then too; is Social Security responsible for that?

Child poverty and starvation from lack of food has become virtually nonexistent. Did SS do that?

[Ken]

Every Ponzi scheme pays out… until it doesn’t.

In 1937 when Social Security was passed, approximately 2/3ds of American elderly lived in poverty. And the numbers were worse for elderly widows and people of color. Poorhouses were a real thing. As was homelessness, hunger, and real suffering among the elderly.

Today the poverty rate among the elderly is about 10%. Which makes Social Security the single most effective anti-poverty measure in American history. There isn't even a close second.

The amount of school shootings has significantly increased since then too; is Social Security responsible for that?

Child poverty and starvation from lack of food has become virtually nonexistent. Did SS do that?

Social Security has dramatically decreased the poverty rate among the elderly.

It has also dramatically reduced the poverty rate for dependent children who are orphaned by the death of a parent. About 1.3 orphaned minor children receive survivor benefits from Social Security. And millions more minor children live with and are supported by grandparents who are on Social Security and who are therefore, indirectly clothed, fed, housed, and supported by Social Security.

Are you even trying to argue this point?

[JohnH]

In 1937 when Social Security was passed, approximately 2/3ds of American elderly lived in poverty. And the numbers were worse for elderly widows and people of color. Poorhouses were a real thing. As was homelessness, hunger, and real suffering among the elderly.

Today the poverty rate among the elderly is about 10%. Which makes Social Security the single most effective anti-poverty measure in American history. There isn't even a close second.

The amount of school shootings has significantly increased since then too; is Social Security responsible for that?

Child poverty and starvation from lack of food has become virtually nonexistent. Did SS do that?

Social Security has dramatically decreased the poverty rate among the elderly.

It has also dramatically reduced the poverty rate for dependent children who are orphaned by the death of a parent. About 1.3 orphaned minor children receive survivor benefits from Social Security. And millions more minor children live with and are supported by grandparents who are on Social Security and who are therefore, indirectly clothed, fed, housed, and supported by Social Security.

Are you even trying to argue this point?

It’s a rather large leap to give SS credit for all that. If working people didn’t have 15% of their wages stolen from them, then they might have been able to fund their own charitable schemes.

Case in point - the Amish don’t participate in SS. They also don’t hav a problem with children whose parents die not being supported, impoverished elderly, or grinding poverty in general.