It is the height of irony that the US federal government has put Bernie Madoff in prison for running a ponzi scheme: he took people’s retirement funds and spent it frivolously instead of investing it. Many have pointed out that the largest ponzi scheme in the history of humanity is actually run by the US federal government itself: the Social Security System. The US government has taken people’s retirement–but not voluntarily, as the felon Madoff, but by force through payroll taxes. Then it spent it frivolously instead of investing it.
Yet today, Zacks (via Yahoo) defends the ponzi security system:
There is a huge amount of hysteria in the country that says that Social Security is nothing but a ponzi scheme and is about to go bankrupt. This is simply not true, and is mostly being propagated by those who would love to see Social Security turned over to Wall Street. Doing so would put the retirement security of millions of Americans into grave danger. …
Starting in 1982 with the Greenspan Commission, Social Security recognized the demographic time bomb posed by the “baby boom” and subsequent “baby bust.” As a result, the idea was that people would pay in more than required for Social Security to run on a pay-as-you-go basis (which is how it was run up until that point). The extra funds would go into a trust fund. That trust fund now holds $2.5 Trillion. So how is that money invested? It is invested in the safest assets around: T-Notes and Bonds. The government holding its own liabilities is a bit strange, and that is where the claim that the Social Security trust fund is composed of nothing but “worthless IOUs comes from. However, if that is true, then it is equally true that the assets of a T-bond fund run by Vanguard or PIMCO are also composed of worthless IOUs.
So the Social Security System has basically taken people’s retirment money and lent it to the Federal government which has spent it as part of its continual deficit spending. It did not invest it in anything that could give workers a return on their investment, but spent it. Now, in order for the government to pay back the Social Security System–all those wonderful t-bills and bonds–it will have to either borrow from someone else, or steal it a second time in the form of further taxes from the very people who are paying into the system. Either the anonymous author of the article is dumb, or she thinks all the rest of us are.
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. Deficit spending is simply a scheme for the confiscation of wealth.
… the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.
The dollar has already entered its terminal phase. The word “doom” is written across it for anyone with the eyes to see. Sad to say, there is no way to reverse its downward slide. With more than $13 trillion in public debt and some $100 trillion in unfunded mandates, our federal government has assumed far more obligations than it can ever make good on. Worse still, these figures are growing larger every year.
Thus, the basis of a civil society is breaking down in the US because the world’s most powerful political entity is a criminal organization which is running ponzi schemes and uses its power to borrow and create money, producing inflation which robs citizen’s of their wealth.