Thursday, December 9, 2010

So Simple that a Caveman Could Understand:

Why did Bernie Madoff go to prison? To make it simple, he talked people into investing with him. Trouble was, he didn't invest their money. As time rolled on he simply took the money from the new investors to pay off the old investors. Finally there were too many old investors and not enough money from new investors coming in to keep the payments going.

Next thing you know Madoff is one of the most hated men in America and he is off to jail. Some of you know this, but not enough of you.

Madoff did to his investors what the government has been doing to us for over 70 years with Social Security. There is no meaningful difference between the two schemes, except that one was operated by a private individual who is now in jail, and the other is operated by politicians who enjoy perks, privileges and status in spite of their actions.

Do you need a side-by-side comparison here? Well here's a nifty little chart.



Takes money from investors with the promise that the money will be invested and made available to them later.
Takes money from wage earners with the promise that the money will be invested in a "Trust Fund" and made available later.
Instead of investing the money, Madoff spends it on nice homes in theHamptons and yachts.
Instead of depositing money in a Trust Fund, the politicians use it for general spending and vote buying.
When the time comes to pay the investors back, Madoff simply uses some of the new funds from newer investors to pay back the older investors.
When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the geezers.
When Madoff's scheme is discovered, all hell breaks loose. New investors won't give him any more cash.
When Social Security runs out of money, they simply force the taxpayers to send them some more.
Bernie Madoff is in jail.
Politicians remain in Washington ..

'The taxpayer: Someone who works for the federal government but doesn't have to take the civil service examination.'

- Ronald Reagan

"If you put the Federal government in charge of the Sahara Desert, in five
years there’d be a shortage of sand.” Milton Friedman


Eric Martin said...

I'm 51 years old. I have known all my life that I would ultimately get very little or nothing back from Social Security.

However, my parent's generation is collecting way more than they put in.

My only consolation is to view my current FICA payments as a direct transfer to my parents, who worked hard for many years.

Baxter said...

Sara P typesets like she thinks...

terry said...

For over 70 years Social Security which no Republican voted for when it passed Congress by the way. They hadn't developed their trickle down yet. Has been paying American's rich and poor on a timely basis and will contiue to do so despite all the naysayers. I been hearing about Social Security's demise since the 60's, Won't happen Won't Happen. That Chicken Little story is so old it's scary people still believe it.

terry said...

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.1 After 2037, it'll still be able to pay out 75% of scheduled benefits--and again, that's without any changes. The program started preparing for the Baby Boomers retirement decades ago.2 Anyone who insists Social Security is broke probably wants to break it themselves.


terry said...

A man comes to your door and says "FIX YOUR ROOF; your roof is going to fall down in 2037, I am sure of it"
You answer, "Come back in 2036!"