Ponzi And The SEC

Posted: 9/16/2018

Trigger

Just watched this History Channel documentary about Ponzi: In Search Of History - Charles Ponzi & His Scheme (History Channel Documentary). Ponzi actually had a long history of petty crime of fraud and theft before his infamous Ponzi scheme.

“... In its heyday, nearly 75% of Boston's police force had invested in Ponzi's scheme. Ponzi's investors even included those closest to him, like his chauffeur John Collins and his own brother-in-law. … ” (Source 1)

Some people even send Ponzi money for future investments while he was in prison after his conviction for fraud! Hope springs eternal! After release from prison he started a new swindle in another state, i.e. Florida.

An Irony Of History

I was so stunned when the above documentary mentioned the name of the company under which Charles Ponzi conducted his scheme: Securities Exchange Company (abbreviated SEC). Ponzi started his fraudulent company in 1920.

The all powerful and unconstitutional U.S. Securities and Exchange Commission was formed in 1934, in the aftermath of the Wall Street stock market crash of 1928, is also commonly abbreviated as SEC. Was this name deliberately chosen?

As they say truth or reality is often stranger than fiction!

Sources:

1. https://en.wikipedia.org/wiki/Charles_Ponzi

Social Security Is Worse Than A Ponzi Scheme

Free To Choose

A Ponzi or Pyramid Scheme is committed by one or more criminals and victims were free to choose to participate. Once the criminal is caught, the criminal will be indicted and sentenced to jail terms.

No Choice

Social Security is a big government run scheme that coerces every worker to pay taxes for a promise that he or she will receive some arbitrary benefits in retirement. Thus, big government discourages responsible workers to set aside part of their earnings for retirement as they see fit. Social Security should never be applied to the whole population as a one size fits all big government solution.

Greed Of Big Government

From about 1987 until today the Social Security Trust Fund has generated considerable surpluses year after year (officially referred to as Net Asset Increase), which the US Congress has appropriated to pay for their pet projects. The proper thing to do for the US Congress was to lower the FICA taxes or refund workers. To skim these profits was too much temptation for each Administration and US Congress since 1987.

Year	Workers With Taxable Earnings	Net Asset Increase	Net Asset Increase Per Worker
2011	157,736,000	$     95,031,000,000	$             602
2005	158,511,000	$  162,415,000,000	$         1,025
2000	154,732,000	$  132,174,000,000	$             854
1995	141,000,000	$     45,041,000,000	$             319
1990	133,600,000	$     59,134,000,000	$             443
1987	125,600,000	$     23,068,000,000	$             184
1985	119,800,000	$       8,725,000,000	$               73
1980	113,000,000	$     (2,001,000,000)	$             (18)
1970	93,090,000	$       2,371,000,000	$               25
1960	72,530,000	$           184,000,000	$                  3
1950	48,280,000	$       1,905,000,000	$               39
1940	35,390,000	$           306,000,000	$                  9

Source: http://www.socialsecurity.gov/policy/docs/statcomps/supplement/2012/4b.html#table4.b1

& http://www.socialsecurity.gov/policy/docs/statcomps/supplement/2012/4a.html

What’s Really Not Behind The Entitlement Crisis

What Is This About?

On the Opinion page of the US Edition of The Wall Street Journal was an article published on 7/15/12 headlined “What’s Really Behind theEntitlement Crisis” (subscription required) by Ben J. Wattenberg with the American Enterprise Institute.

All Alarm Bells Started Ringing

“Entitlement Crisis” made me curious. However, if someone claims to tell you “What’s Really Behind” something then my alarm bells start ringing immediately. What is the author selling, e.g., snake oil, cheap analysis etc.?

Abstract Of Article

Wattenberg bases his explanation on demography. “[The] heart of the problem are birth rates … total fertility rates … that have fallen sharply all over the world”. Thus, “there will be relatively few working age people to underwrite the benefits of the many seniors who have paid into national retirement systems such as Social Security and Medicare”. Nothing new here. This has been well known for decades.

However, then the author discusses so called “pro-natal” (According to Wikipedia also known as Natalism or a belief that promotes human reproduction) programs that were in particular employed in Western Europe to increase total fertility rates. Wikipedia again: “It [pro-natal] typically advocates policies such as limiting access to abortion and contraception, as well as creating financial and social incentives for the population to reproduce.”. He admits that the actual effects of such programs are hard to quantify.

Further, the author argues that “[i]n theory, pro-natal programs are the best bet”. As he hopes it would perhaps be “reflating fertility”.

Another Look At The Entitlement Crisis

First, I think, the author is quite wrong to believe that promoting the total fertility rate to go up again is a solution. The worldwide, decades long trend for TFR is downward towards 2 or below for good and well understood reasons. Thus, pro-natal policies are an exercise in futility. These demographic trends probably have to be accepted. In the following decades, the human approach to procreation may dramatically change anyway thanks to advances in medicine and genetics etc.

Second, the author implicitly presumes that big government pay as you go entitlement programs like Social Security are a given and are desirable. He is wrong on this too. It is high time to get big government out of the way to provide one size fits all retirement benefits for the whole population. Pay as you go national retirement systems are akin to Ponzi schemes. Such systems are but huge power grabs by big government. In recognizing this lies a much better solution to the entitlement crisis: individual self reliance in form of personal retirement savings. The earlier we get young people to accept this form of responsibility, the better. Once implemented, total fertility rates become much less relevant.