I haven’t seen much lately about Ponzi schemes, much less about how Social Security is a Ponzi scheme “with a gun”. I first became aware of the nature of Social Security when I got into the life insurance business and was able to discern the difference between insurance, and Social Security which declares itself to be insurance but is not. The act which created Social Security is the Federal Insurance Contributions Act, or FICA. When I discovered that there was fraud involved in creating Social Security back in 1937 (two years before I was born), I realized that most of government itself is based on fraud.
When I joined the John Birch Society in 1968 I was able to increase my understanding of the depth and breadth of that fraud. In the mid ’80s the society asked me to go on some speaking tours for them, under the auspices of the American Opinion Speakers Bureau. One of the topics I spoke on was Social Security. I pointed out the fraud in great and glorious detail. My talks weren’t very popular. People didn’t want to hear about it. So the society gave me other topics to talk about, like the Second Amendment and the Federal Reserve. The crowds were better for those topics.
I remember a conversation I had with my father-in-law about the fraud of Social Security. He was one of my professors in the business school at Cornell, and an avowed socialist. He thought Social Security was the greatest thing that had happened to the United States since Germany’s “Iron Chancellor” Otto von Bismarck installed the welfare state there in the 1880s. When I suggested that rather than my paying money to Washington only to have the money returned to him (he was on Social Security), I would be happy just to write him a check directly, he went ballistic. We never talked about Social Security again.
Here’s the best definition of how Ponzi schemes work and how they can last so long, even without a gun. This is from Gary North:
The characteristic feature of Ponzi schemes is this: the victims do not accept the economics of the scheme. No matter how long it goes on, and no matter how close the scheme is to bankruptcy, the existing victims roll over their investments. They will not accept any evidence that the scheme is ultimately bankrupt. They will not look at the economics of the scheme. They are committed to their belief that they cannot lose, despite the fact that the economics of the scheme guarantees that they will lose. To admit this would be to admit that they had been fools in the past, and that they are fools in the present. So, they will not admit this. They keep rolling over the money. They even buy more shares.