The world is full of crooks and liars...
And no ordinary con-man, Charles Ponzi was perhaps the most famous swindler of them all.
A nearly penniless Italian immigrant, Ponzi bilked thousands of investors out millions in 1920.
His bait, however, was as old as the hills. He promised his investors a 40% return in just 90 days. Naturally, it worked like a charm.
In fact, at his peak, Ponzi's promise became so irresistible that he was making $250,000 a day in a time when that kind of haul was off the charts.
But as everyone later came to learn, King Ponzi had no clothes. Behind the curtain there was nothing...absolutely nothing.
The promised investments in postal stamps were never made and Ponzi's scheme collapsed on its own weight. Ponzi's magic, as it turns out, was in simply using the money he stole from new investors to pay off the old. He robbed Peter to pay Paul.
And when no more greater fools could be found, Ponzi's investors lost everything and Charles eventually went to jail. Nice mug shot huh?
But unfortunately, Ponzi's scheme was really never put to rest. Others like Bernie Madoff just picked up where Charles left off. One of them is your Uncle Sam, who is now running the greatest Ponzi scheme of them all.
It's called Social Security and for suckers like me who will never see a dime in return, it's the national scam writ large—-one of many.
And while I have no problem with keeping promises to retired folks, the way the program has been bankrupted by politicians irks me to no end. What's more, they continue to insist to the gullible that there is "nothing to see here" when everyone else knows otherwise.
The funny thing is the whole mess is now starting to blow up in their faces—just like it did with Mr. Ponzi himself.
The bad news is that the growing recession is making it happen well ahead of schedule since unemployed people can't be fleeced.
As result, the Social Security system is now paying out more than it receives.
That's called cash flow negative and 78 million baby boomers are only going to make it worse. The numbers in this case will never add up.
Unless, of course, we bail them out too...
From the Washington Post by Allan Sloan entitled: Social Security could be next to need a bailout
"Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.
A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.
Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing — in other words, a taxpayer bailout.
No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.
The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).
This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.
Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.
If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.
It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.
But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present."
I wonder if the Chinese have any idea that they are never going to get their $800 billion back?
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