Social Security: National Ponzi Scheme

The U.S. Securities and Exchange Commission was set up to combat fraudulent practices.
The SEC's Web site explains that "Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s."

It goes on to say, "Decades later, the Ponzi scheme continues to work on the 'rob-Peter-to-pay-Paul' principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses."

That is how the SEC described the recent Bernard Madoff $50 billion Ponzi scheme, "a stunning fraud that appears to be of epic proportions."
A Ponzi scheme does not generate any wealth whatsoever; that is why it ultimately collapses.

So long as the number of late comers — you might call them suckers — grows, the fraudulent scheme has life.

In 1940, there were 42 workers per retiree, in 1950 there were 16, today there are three and in 20 or 30 years there will be two or fewer workers per retiree.
Social Security is unsustainable because it is not meeting the first order condition of a Ponzi scheme, namely expanding the pool of suckers. Social Security has been one congressional lie after another since its inception.

There is little or nothing that can be done to prevent the economic and political chaos that will result from the collapse of Social Security.
Today's recipients of Social Security, along with their powerful AARP lobby, represent a powerful political force.
Few politicians are willing to risk their careers alienating today's senior citizens for the benefit of Americans in 2040.
After all, what do today's seniors and politicians care about a 2040 calamity? They will be dead by then.

Investors Business Daily editorial