I think a lot of people just want to forget about 2008 and move on to 2009. I hope everyone has a safe and festive new year. Time to turn off the computer and twist open a cold beer!
Happy New Year!
Wednesday, December 31, 2008
Black Wednesday at the Liquor Store
New Years Eve at the liquor store and it was Busy! Busier than any retail stores I visited before Christmas. If my sources are correct, alcohol and lottery ticket sales have actually increased during 2008 while sales in durable goods decreases. What does this mean? You can draw your own conclusions, but I waited in line for ten minutes at this "big box" liquor store this afternoon. There had to have been at least 150 people there buying their favorite drink(s) of choice for a New Years blow out. Granted this liquor store is much larger than your local neighborhood liquor store, but they had 8 checkout lanes open, and they were all lined up at least 6 - 8 people deep.
Monday, December 15, 2008
Social Security a Ponzi Scheme?
Isn't the funding of Social Security a giant government run Ponzi Scheme? How many of you expect to receive Social Security benefits when you retire? I don't think many of us planning to retire in 25 years have any belief the system will be around to take care of us. So why do we continue to be duped into paying into this scheme?
We bring this up in light of the unraveling of a $50 Billion Ponzi Scheme initiated by George Madoff, a trusted investment authority and former chair of NASDAQ. His scheme was investigated three times by the Securities and Exchange Commission (SEC), once in 1992, 2005, and again in 2007. Only once in 2005 did he receive a notice of violation of trading rules for which he paid a fine. Once again, our own government has proven ineffective to prevent fraudulent investing activity such as we seeking with the failed oversight of Fannie Mae and Freddie Mac.
As this story unfolds, it is time to take a serious look at how our Social Security system is funded. Look closely and you will see similarities to the Madoff scheme.
What is a Ponzi Scheme? Taken from Wikipedia:
"It usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises (and pays) requires an ever-increasing flow of money from investors in order to keep the scheme going."
Analysis: The current Social Security system generates an ever-increasing flow of money from investors (taxpayers) and is paid out to retired citizens. As the government sees fit, it will raise the Social Security tax in order to keep the scheme going.
"The system is destined to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases."
We bring this up in light of the unraveling of a $50 Billion Ponzi Scheme initiated by George Madoff, a trusted investment authority and former chair of NASDAQ. His scheme was investigated three times by the Securities and Exchange Commission (SEC), once in 1992, 2005, and again in 2007. Only once in 2005 did he receive a notice of violation of trading rules for which he paid a fine. Once again, our own government has proven ineffective to prevent fraudulent investing activity such as we seeking with the failed oversight of Fannie Mae and Freddie Mac.
As this story unfolds, it is time to take a serious look at how our Social Security system is funded. Look closely and you will see similarities to the Madoff scheme.
What is a Ponzi Scheme? Taken from Wikipedia:
"It usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises (and pays) requires an ever-increasing flow of money from investors in order to keep the scheme going."
Analysis: The current Social Security system generates an ever-increasing flow of money from investors (taxpayers) and is paid out to retired citizens. As the government sees fit, it will raise the Social Security tax in order to keep the scheme going.
"The system is destined to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases."
Analysis: There are no actual earnings on the books, since the money received by the promoter, the U.S. Government, is quickly dispersed to those individuals collecting the funds. The first generation that paid into the system received money from the second generation, the second generation receives money from the third generation. But what happens when the amount of money dispersed to the second generation (baby boomers) exceeds the amount of money generated by the third generation?
Since local authorities will not interrupt its funding, we will have to wait for the Social Security system to self-destruct when the value of payouts exceeds the value of taxpayers payments. The sooner Social Security destructs, the sooner we can stop paying into this Ponzi Scheme.
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