JustThinking.us

 What is a Ponzi scheme?

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.

Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.

In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

Clickee  Clickee

Why do Ponzi schemes collapse? 

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue.

Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

And there you have it.

Social Security as explained by the SEC.

 First of all, apologies to whomever put together the below chart.

I grabbed it off from somewhere thinking that there was some identification on the chart to acknowledge and link to.

There is not.

Now I can't remember where I found it.

If somebody has seen it before, let me know.

I will cheerfully give credit and link to the source.

The following chart provides an outstanding example of how our government keeps us apart and at each other's throats.

Anybody paying the slightest bit of attention has heard that the rich pay the lion's share of the INCOME TAXES in this country.

It is true.

The top 1% of taxpayers pay about 35% of our nations INCOME TAX.

The top 25% pays about 83%.

The top 50% pays about 96%.

It is also true, the rich earn the lion's share of our national income, but on a percentage basis they pay more in taxes than they earn in income.

But INCOME TAXES on individuals only makes up 43.5% of the total tax receipts of the federal government.

42.3% is paid in in the form of "PAYROLL TAXES" aka "WITHHOLDING TAXES" aka FICA, aka Social Security and Medicare taxes which are deducted directly from wage earners paychecks and are sent to the government.

The balance mostly comes from by corporate taxes which we all pay when using the goods or services provided by corporations, and some other relatively minor sources.

The withholding rate for "The Old Age and Survivors Insurance Trust Fund (OASI), again what most of us call Social Security or FICA is 12.4% of one's taxable income.

The rate for Medicare is 2.9% of one's taxable income.

For a total of 15.3% tax on wage earners above the INCOME TAX.

In the case of Social Security, the tax is largely paid by middle and lower income taxpayers because the income against which it is applied is capped at $106,800.

Here's where the truth gets bent.

 I'm trying to put the best construction on this.

You are told that the funds go to the "Social Security Trust Fund" or the "Medicare Trust Fund".

And that's true as far as it goes, but what really happens is that the Federal Government issues debt (bonds) which is exchanged for your (cash) payroll taxes.

And subsequently sends your payroll taxes (cash) to the general fund.

Every dime of income the Government collects regardless of source, ends up in the general fund where it is spent as though it were exactly the same thing as "INCOME TAXES".

Name an activity that the Federal Government participates in, and that is where your FICA is being spent.

Wars in Afghanistan, Iraq, now Libya, maybe Iran.

Defending Europe (NATO) from Russia, or Japan, Australia, New Zealand and Taiwan and South Korea from North Korea and China, the Saudis from Iran.

Not to mention from their own people. 

Welfare benefits, unemployment compensation, food stamps.

Government salaries, pensions, benefits and perks.

National parks, roads, bridges, education, research.

Office supplies.

Now, some of that stuff you can legitimately call an investment in America.

But is it appropriate to be investing people's health and retirement monies on all of the above?

Here's the government's argument,

"Some people are not able, or prepared to invest their retirement money themselves.  What if they make bad investment decisions and lose their money?

Were some people in control of their retirement funds they would indeed make some bad investments and suffer losses.

But just for fun, imagine a prospectus selling an investment in the defense of Europe.

Here's the offering.

You provide military equipment and personel to Europe free of charge, and in so doing allow the average European citizen a month of vacation every year, mostly free health care, and retirement at around age 58.

You don't get a plug nickel back, get to work until your 61.5 at least, but ................. you get to say that you're making the world safe for Democracy.

You can be a drooling moron and you're still passing on that opportunity.

So, here's the consequences:

Upper income people feel abused because they're thinking they're doing all the heavy lifting.

The middle class feels abused because they thought they were saving for their retirement, but are starting to realize that Social Security is likely to go broke, their money having been squandered. 

In truth, it ain't gonna go broke.

The government will print the dollars to pay you back.

The bad news is that each dollar is likely to be worth a helluva lot less than the one you payed in.

Retirement money is just being spent and not invested, which results in the poor feeling abused because there are no jobs, and subsequently no future.

While all they hear is "The Rich" bitching about their taxes.

Former US Comptroller David Walker in July of 2010.

Click on the quote for a Google search of David Walker video.

It's your patriotic duty.

I mean it!!!!!

I'll admit it.

I didn't read the entire page about Ponzi Schemes at the SEC site.

Feeling quite satisfied with myself, I quit reading where the post ended.

My friend Terry, anal puppy that he is, read every word and came up with the following.

What are some Ponzi scheme �red flags�?

Many Ponzi schemes share common characteristics. Look for these warning signs:

High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk.

Be highly suspicious of any �guaranteed� investment opportunity.

Thanks to Terry for a very nice pickup.

Among the really good reasons to troll The Heritage Foundation site is that only really, really smart people troll The Heritage Foundation site.

The following quote shows up in the comments of a piece titled "Americans Have Every Reason to Doubt Social Security Solvency"

"The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs.

Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways.

First, benefits for current retirees are paid from the Social Security revenue.

Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue."

Can you say Ponzi Scheme?

Ok, in the first chart below, we see the ratio of workers to beneficiaries go from 41.9 to 3.3.

Then, in the table further below, we see the tax rate move from 2% to 15.3%.

Hmmmmmmm .............

The Heritage Foundation strikes again.

That sucker dove from 41.9 to about 9 in about half a heartbeat.

From The Tax Foundation

Click anywhere below to link. 

I like to troll through Dr.Mark Perry's blog every week or so.

Dr. Perry is a professor at the University of Michigan, Flint Campus, School of Management.

Here's a nice table that illustrates what might be the single most profound issue with the "Social Security Trust Fund".

We are living a lot longer.

But retiring younger.

Click anywhere in the chart for Mr. Perry's fine blog, "Carpe Diem"

The result?

The solution???

You ain't gonna like it!!!

Raise the retirement age from 61 and 65 to 67 and 71.