1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/9099/will-the-other-ponzi-schemes-please-stand-up/

Will the other Ponzi schemes please stand up

December 12, 2008 by

Wall Street executive Bernard Madoff was recently arrested after admitting to his sons and later, to the FBI, that he was running a gigantic Ponzi scheme — to the tune of $50 billion. He is now being sued by a number of investors.

Since he voluntarily admitted to the crime, he sets a good example for individuals like Michael Astrue, commissioner of the Social Security Administration.

With a budget of over $600 billion and more than 62,000 workers, the SSA is one of the largest pyramid-Ponzi schemes in existence.

Yet there is one difference: contributions to social security are compulsory, whereas Madoff’s firm didn’t coerce starry-eyed investors. While neither has the moral high ground, if Mardoff is going down — to be consistent — so should the SSA.

Be sure to read Adam Young’s germane, “The Life of Carlo Ponzi.”

{ 43 comments }

Alex Truth December 13, 2008 at 7:39 am
Brad December 13, 2008 at 9:38 am

Of course all the difference in the world is Madoff presumably created this scheme to benefit himself while the SSA was built to help others. There’s nothing like “helping others” to make the heart skip a beat and warm, glowy feeling build in one’s stomach. What chemical response this is in the brain and body is I don’t know, but it’s there (and perhaps offers a good side when applied freely between willing participants). It’s, of course, this warm glowy feeling, poorly applied, that is the root of all good intentions, and is the simplest answer as to why government can do what individuals can’t. If there’s a warm fuzzy in the bargain, any State action is on the table. And, of course, trying to talk someone out of their addiction to the “warm, glowy, fuzzy feeling” is like talking them out of their religion.

David C December 13, 2008 at 10:22 am

>if Mardoff is going down — to be consistent — so should the SSA.

Yeah, but there is another difference. Mardoff at minimum was willing to confess and admit to wrongdoing. The SSA thinks it’s their god given right to exploit the elderly.

givetalks December 13, 2008 at 10:24 am
prettyskin December 13, 2008 at 10:52 am

When we the people play along in the SSA Ponzi scheme, doesn’t it feeds into the arrogance and entitlement of those who is running the game? Young implies that without players there is no game.

Having this knowledge of SSA Ponzi scheme and doing nothing about it is more dangerous. Passing the baton on to the nation’s most vulnerable inhabitants, the children.

Greg Ransom December 13, 2008 at 11:24 am
Bruce Koerber December 13, 2008 at 12:24 pm

What a gigantic Ponzi scheme promotes, one that is perpetuated by mandatory coercive measures, is a criminal mentality and a centralization of power. Access to other criminal activities, such as the counterfeiting operation of the Federal Reserve, easily enhances that centralization of power.

And what stands in its way? The Constitution!

Armed with all the dollars it needs to bribe anyone who can strategically increase the centralization and accrual of power, the braintrust of this crime ring goes about persuading the ego-driven politicians (beholden to the corrupt money going into their election coffers) to whittle away at the foundation of the Constitutional Republic.

The power granted by the dollar (since it is the wolrd reserve currency) attracted their attention and so they lustily sought to expand their sphere of interest. Now the criminal ring, functioning as the unConstitutional coup, has become a worldwide economic terrorist plunging all nations into the spector of perpetual warfare against one another instead of rebellion against the true enemy – the unConstitutional coup in the United States.

Frank December 13, 2008 at 3:48 pm

While I agree that Social Security should end, I wonder how this can be done and what will happen to those who depend upon it for survival. My mother is 70, a widow, and payed into the system her entire life. How can we transition out of this system without throwing her and others like her into the street?

Mark Knutson December 13, 2008 at 4:54 pm

Those with an interest in ponzi may also avail themselves of my own treatment on http://www.mark-knutson.com.

I have the intentions of adding an anti-federalist, Austrian portion to my site, but its very much in its nascent stages.

jason4liberty December 13, 2008 at 5:01 pm

Frank,

Not to be harsh, but YOU support her. I’ll support my family. While we are at it, we should also move to a hard money that ensures savings as a store of value, rather than paper that devalues at the whim of the government. Inflation is the great destroyer of wealth – particulary “safe” investments like paper “money” in the bank.

Christopher December 13, 2008 at 7:07 pm

I keep forgetting, what did people do before Social Security?

Gil December 13, 2008 at 7:52 pm

I think the Skeptical Optimist asked a better question: are we stealing from future generations or are they inheriting a large working system with a high standard of living provided by previous generations and which still needs upkeeping?

http://www.optimist123.com/

Kevin B December 13, 2008 at 8:07 pm

Gil: “…are we stealing from future generations or are they inheriting a large working system with a high standard of living provided by previous generations and which still needs upkeeping?”

Don’t you need some sort of time-machine to steal from the future?

Virtual Exile December 13, 2008 at 8:14 pm

How did U.S. citizens ever allow themselves to be trapped in this dystopian redistributionist scheme?

magnus December 13, 2008 at 10:05 pm

How did U.S. citizens ever allow themselves to be trapped in this dystopian redistributionist scheme?

Here’s how — the federal government (although there is nothing “federal about it, actually) created a series of economic shocks, crises and disruptions, including aggressive wars, and then stepped in pretending to be the solution, even though it had created the problems in the first place.

Kinda like when they, a couple of weeks ago (after inflating the crap out of the mandatory currency in general, and housing credit in particular for decade, then tying that inflation to the stock market, thereby destroying the solvency of most of the US financial sector) threw a few hundred billions of dollars of imaginary cash around, purporting to “solve” this crisis, and in the process nationalized another industry or two.

George Rogers December 13, 2008 at 10:07 pm

Robbing Peter to pay Paul

George Rogers December 13, 2008 at 10:08 pm

Robbing Peter to pay Paul

George December 14, 2008 at 1:32 am

My mother is 70, a widow, and payed into the system her entire life. How can we transition out of this system without throwing her and others like her into the street?

And what will happen to her and others like her when the social security checks show up but are worthless?

That’s the path we are on — congress has chosen this path, by default or design, pick one.

Picture a ten times drop in the dollar/increase in prices. Gas is $18/gal, bread is $26/loaf, rent is, perhaps $5k/month (or perhaps since it’s not in compentition with imports it’s much lower).

After this wages might be pretty similar here and in China (if wages don’t increase in measure)…

And the SS CPI adjustment will undercorrect for this, say 5x at best (and lagged, so the adjustment happens a year later from the price increases). How will those on SS do?

This path isn’t new, it’s the one we’ve been on all the time, it’s just more obvious now. Short term “fixes” eventually lead to long term problems. Long term is now.

The government doesn’t care.

If there is a choice (possibly there isn’t), it’s to end SS and related government mucking sooner vs later. Later things will be worse and will cause even more suffering. A working currency/economy is worth something. So end government mucking and SS now while the currency is working or wait and have the currency /government fail too (and it will end SS).

PS: SS was created to grab the money. The idea of helping people was the cover story. The money’s been grabbed, it’s gone. Now all that’s left is to redefine the story…

Gil December 14, 2008 at 3:44 am

“Don’t you need some sort of time-machine to steal from the future?”

Gee, what does that cartoon mean then . . .?

Timothy foster December 14, 2008 at 5:02 am

You steal from the future by taking loans out in there name (national debt) to pay the bills and pay the bills interest and the interest off that again…

This is to pay for our life style not to build a sustainable life style so it will not in fact help our children. In fact it holds us back in many ways, it is not the source of our wealth as it pulls the smartest away from wealth creators…

Gil December 14, 2008 at 5:57 am

Besides “it’s stealing because guvmint = thuggery, taxes = theft, etc.”, how does a national debt automatically equal hardship for future generations? Why can’t the national debt also mean that future generations will inherit a large-scale infrastructure that they in turn will continue to expand and grow wealthier and further future generations (in the year 2500, say) will inherit a hugely wealthy infrastructure which has been funded with debt but they too will continue to expand and grow. Don’t some rich kids stand to inherit business holdings that are funded with debt (i.e. they’ll inherit debt from their ancestors) but the business growth and profitability means they’re getting assets rather than liabilities? Or alternatively telling a self-sufficient farmer not to have children because “it’s more mouths to feed” when he see the situation as “more hands to create more food”?

fundamentalist December 14, 2008 at 8:34 am

Gil: “Why can’t the national debt also mean that future generations will inherit a large-scale infrastructure that they in turn will continue to expand and grow wealthier and further future generations (in the year 2500, say) will inherit a hugely wealthy infrastructure which has been funded with debt but they too will continue to expand and grow.”

If the debt financed infrastructure you would have a good point, but it doesn’t. Look at the fed budget. It’s mostly military spending, social security and health care. In other words, it’s almost all present consumption. So future generations will be stuck with a huge debt and very bad infrastructure.

fundamentalist December 14, 2008 at 8:40 am

PS, Even if the feds put all of their money into infrastructure, how do we know it’s the best way to spend limited resources? The state could build many beautiful highways and bridges while the excessive borrowing needed to do it might impoverish the people to the degree that future generations can’t afford cars to drive on them. Experience has proven that the state is the worst allocator of resources that has ever existed in the history of mankind.

Brian Macker December 14, 2008 at 8:51 am

Gil,

“Why can’t the national debt also mean that future generations will inherit a large-scale infrastructure that they in turn will continue to expand and grow wealthier and further future generations (in the year 2500, say) will inherit a hugely wealthy infrastructure which has been funded with debt but they too will continue to expand and grow.”

In case you weren’t paying attention the debt and obligations run up by the government were done in parallel with letting the infrastructure rot.

Your optimistic economist doesn’t understand in the least what is occuring. I just posted a response to him on his article titled, “The USA’s debt burden, according to the TIT Ratio”.

The measure, by definition, goes up during the classical “monetary boom” phase of an Austrian economic bubble. His TIT Ratio is full of silicon, no actually air that will deflate on the bust. The bust being far from over.

Even if the current reflation “works” to extend the ponzi scheme for another minor cycle, that will only serve to make the next downturn worse.

Brian Macker December 14, 2008 at 8:53 am

Gil, those comments will not appear till they pass through his moderation process.

magnus December 14, 2008 at 10:36 am

Gil: Why can’t the national debt also mean that future generations will inherit a large-scale infrastructure that they in turn will continue to expand and grow wealthier and further future generations (in the year 2500, say) will inherit a hugely wealthy infrastructure which has been funded with debt but they too will continue to expand and grow[?]

Two reasons:

1. As fundamentalist said, the SS system does not shift consumption dollars into production/investment (e.g., infrastructure) uses. It does the reverse — it takes money that would otherwise be more often invested in production and shifts it down-scale into increased consumption. (Keynesians actually claim this is a good thing. It is, however, so profoudly and obviously wrong that I have concluded that most self-professed Keynesians must be lying.)

2. If these “infrastructure” projects you speak of were actually desired by consumers and economically sound (i.e., worth what it costs to build and run them), then private builders would have already built them.

Frank December 14, 2008 at 11:20 am

Not to be harsh, but YOU support her. I’ll support my family.

I might be able to if we were to eliminate payroll taxes. If I were able to keep 30% more of my income, that money could go toward helping my family.

However, there are people out there who bought into the government promise and actually believe the money they’re getting is the money they paid in. Some of these people have no family at all. Perhaps charities could help, but if you want to attract people of different political stripes the Austrian School, I think you have to be willing to make some concessions.

If an addict stops using “cold turkey”, it can be very dangerous, depending on the drug. Similarly, there must be a safe and compassionate way to wean people off the government teat.

Ron Paul often talked about ending social security and transitioning away from dependence on government. And this, along with his other points, led me to abandon neo-Liberalism in favor of libertarianism.

And what will happen to her and others like her when the social security checks show up but are worthless?

If this happens, then we’ll all be in the same boat and this talk is simply rearranging the deck chairs on the Titanic.

But if we survive the national bankruptcy, then what?

Kevin B December 14, 2008 at 8:47 pm

Gil & Timothy,

And if/when the future defaults, who has been robbed?

Timothy foster December 14, 2008 at 9:54 pm

Kevin B,

Those who loaned to the USA in direct cash and left with very little base to sell they’re goods (which is better than paying us to buy from them)

The USA government with loss of trust in the buying power of our money unless we go to a hard currency

The USA population in the realization that we have little infrostructure and will need to rebuild

All of this is than if we dont

keijo December 15, 2008 at 6:43 am

Gil,
You can’t steal from the future. Increasing the debt is not stealing from the future, it’s stealing from your kids (probably not intentionally by the people at this forum). It’s exactly the same as if I went to the bank and asked for a big loan to finance the consumption of my parents. Theyre going to be retired when it’s time to pay back. The only difference is that I don’t have any say in whether I want to take this loan or not in the system as it is. If people realised this about national debt they wouldn’t be so kean on using this idiotic Keynesian policy. Besides if it were voluntary I doubt that there would be long lines in front of the bank, which proves that the Austrians are right.

Alex December 15, 2008 at 10:58 am

The way to “fix” social security with minimal disruption is to phase it out over time. Private companies have phased out defined benefit plans into defined contribution (401k) plans successfully for some time now. Put a 10 year or 20 year phase out in place, let the actuaries make the calculations and have the social security taxes phased out as well.

Now some might say, force people to save for retirement and use the existing social security structure that is in place, i.e. collect the “taxes” but have them go into a persons “private” account. As long as the accounts are truly private and the gov’t has no ability to access these funds, nor mandate the investment types, it would be better than the current social security ponzi scheme. You could even let people opt into a new social security system, similar to buying annuities/guaranteed return investments.

The answer, phase out the defined benefit system to a private defined contribution system.

As an aside, I think the federal gov’t has played its hand (in the current banking fiasco) concerning the method it will use to pay off the unfunded liabilities of medicare and social security, inflation of the money supply. They will simply set the rate of increase in the medicare/social security benefits and then inflate the money supply beyond that. After that, gov’t pols will blame capitalism for raising the prices of goods/services. They’ll probably blame foreign trade while they’re at it, maybe invade a country or two.

Walt D. December 15, 2008 at 7:40 pm

We forgot the grand old daddy of them all – fiat money.

redshirt December 16, 2008 at 9:27 am

Frank, I am thinking hard about how I am going to support my parents in the coming year. Inflation will be hugely problematic. I think the near term issue is the big one.

Long term, I don’t think transitioning out of the SSA would be all too tumultuous. Increase the payout to those that invested already and need now. Convert some of that cash to commodities. Decrease the tax burden on everyone. Work out some age based and total contributions percentage for everyone. Liquidate that monster!

-r

redshirt December 16, 2008 at 9:45 am

Frank, I am thinking hard about how I am going to support my parents in the coming year. Inflation will be hugely problematic. I think the near term issue is the big one.

Long term, I don’t think transitioning out of the SSA would be all too tumultuous. Increase the payout to those that invested already and need now. Convert some of that cash to commodities. Decrease the tax burden on everyone. Work out some age based and total contributions percentage for everyone. Liquidate that monster!

-r

Lester Hunt December 16, 2008 at 11:39 am

Redshirt, Where is the money used to pay contributors off supposed to come from? It must be coming from people who will get nothing in return for it, which doesn’t sound politically feasible to me.

jgo December 16, 2008 at 7:32 pm

“Of course all the difference in the world is Madoff presumably created this scheme to benefit himself…”

Just as the pols and bureaubums who created the Socialist Insecurity Abomination created it to benefit themselves.

“We shall tax & tax, and spend & spend, and elect & elect.” — Harry L. Hopkins, as reported by Baltimore Sun 1938-10-14 NY Times 1938-11-10

“Now, get this through your head. We’re going to spend & spend & spend, and tax & tax & tax, and re-elect & re-elect & re-elect, until you’re dead or forgotten.” — Harry L. Hopkins, as reported by Evening Star 1938-11-09

Don January 10, 2009 at 10:19 am

Right on Tim! Right on!

sirgeraldbirkin July 31, 2009 at 10:38 pm

WHAT IS A PONZI SCHEME?
According to SEC filing dated October 30, 2006 – Sidney D. “Trip” Camper was fired from Elandia Inc. when the Ahkoy family fell victim to investment fraud headed by Elandia’s Allen Stanford and Trip Camper. Forced to resign by Allen Stanford himself (see SEC link below), Trip Camper moved on to his next victim, a private company in Los Angeles. In true School of Stanford form, Trip Camper promised to take the private company public. Instead, Trip Camper recruited a new partner in crime, Ed Berkhof and together they formed a “shell” holding company, milked the private company of thousands of dollars, illegally obtained company stock and pretended to be the company owners- and owners of all the assets. By pretending to own the company’s assets, Trip Camper and Ed Berkhof worked to dupe private investors out of capitol that they used to pay themselves and their creditors. This is a Ponzi Scheme. Instead of taking the company public, Trip Camper and Ed Berkhof spent thousands of dollars, took a trip to London on a company American Express card, performed a hostile takeover, and ruined the honest, profitable company. Since then, the Ahkoy family is suing Elandia Inc., Allen Stanford is in Federal prison, and Trip Camper is still using The Stanford Group as a reference on his curriculum vitae. FBI will hopefully catch up with Allen Stanford’s den of thieves. Don’t let this happen to you.

http://www.secinfo.com/d14D5a.v6Q98.c.htm

sirgeraldbirkin July 31, 2009 at 10:38 pm

WHAT IS A PONZI SCHEME?
According to SEC filing dated October 30, 2006 – Sidney D. “Trip” Camper was fired from Elandia Inc. when the Ahkoy family fell victim to investment fraud headed by Elandia’s Allen Stanford and Trip Camper. Forced to resign by Allen Stanford himself (see SEC link below), Trip Camper moved on to his next victim, a private company in Los Angeles. In true School of Stanford form, Trip Camper promised to take the private company public. Instead, Trip Camper recruited a new partner in crime, Ed Berkhof and together they formed a “shell” holding company, milked the private company of thousands of dollars, illegally obtained company stock and pretended to be the company owners- and owners of all the assets. By pretending to own the company’s assets, Trip Camper and Ed Berkhof worked to dupe private investors out of capitol that they used to pay themselves and their creditors. This is a Ponzi Scheme. Instead of taking the company public, Trip Camper and Ed Berkhof spent thousands of dollars, took a trip to London on a company American Express card, performed a hostile takeover, and ruined the honest, profitable company. Since then, the Ahkoy family is suing Elandia Inc., Allen Stanford is in Federal prison, and Trip Camper is still using The Stanford Group as a reference on his curriculum vitae. FBI will hopefully catch up with Allen Stanford’s den of thieves. Don’t let this happen to you.

http://www.secinfo.com/d14D5a.v6Q98.c.htm

sirgeraldbirkin July 31, 2009 at 10:38 pm

WHAT IS A PONZI SCHEME?
According to SEC filing dated October 30, 2006 – Sidney D. “Trip” Camper was fired from Elandia Inc. when the Ahkoy family fell victim to investment fraud headed by Elandia’s Allen Stanford and Trip Camper. Forced to resign by Allen Stanford himself (see SEC link below), Trip Camper moved on to his next victim, a private company in Los Angeles. In true School of Stanford form, Trip Camper promised to take the private company public. Instead, Trip Camper recruited a new partner in crime, Ed Berkhof and together they formed a “shell” holding company, milked the private company of thousands of dollars, illegally obtained company stock and pretended to be the company owners- and owners of all the assets. By pretending to own the company’s assets, Trip Camper and Ed Berkhof worked to dupe private investors out of capitol that they used to pay themselves and their creditors. This is a Ponzi Scheme. Instead of taking the company public, Trip Camper and Ed Berkhof spent thousands of dollars, took a trip to London on a company American Express card, performed a hostile takeover, and ruined the honest, profitable company. Since then, the Ahkoy family is suing Elandia Inc., Allen Stanford is in Federal prison, and Trip Camper is still using The Stanford Group as a reference on his curriculum vitae. FBI will hopefully catch up with Allen Stanford’s den of thieves. Don’t let this happen to you.

http://www.secinfo.com/d14D5a.v6Q98.c.htm

sirgeraldbirkin July 31, 2009 at 10:38 pm

WHAT IS A PONZI SCHEME?
According to SEC filing dated October 30, 2006 – Sidney D. “Trip” Camper was fired from Elandia Inc. when the Ahkoy family fell victim to investment fraud headed by Elandia’s Allen Stanford and Trip Camper. Forced to resign by Allen Stanford himself (see SEC link below), Trip Camper moved on to his next victim, a private company in Los Angeles. In true School of Stanford form, Trip Camper promised to take the private company public. Instead, Trip Camper recruited a new partner in crime, Ed Berkhof and together they formed a “shell” holding company, milked the private company of thousands of dollars, illegally obtained company stock and pretended to be the company owners- and owners of all the assets. By pretending to own the company’s assets, Trip Camper and Ed Berkhof worked to dupe private investors out of capitol that they used to pay themselves and their creditors. This is a Ponzi Scheme. Instead of taking the company public, Trip Camper and Ed Berkhof spent thousands of dollars, took a trip to London on a company American Express card, performed a hostile takeover, and ruined the honest, profitable company. Since then, the Ahkoy family is suing Elandia Inc., Allen Stanford is in Federal prison, and Trip Camper is still using The Stanford Group as a reference on his curriculum vitae. FBI will hopefully catch up with Allen Stanford’s den of thieves. Don’t let this happen to you.

http://www.secinfo.com/d14D5a.v6Q98.c.htm

sirgeraldbirkin August 6, 2009 at 4:52 pm

Victims of Elandia fraud, the Ahkoy Family is suing Elandia in Pacific and Florida courts.

Ponzi schemer Allen Stanford is in the hands of the FBI, and Trip Camper and Ed Berkhof are STILL at large. According to recent articles, “FMC Acquires SMS..” FMC Telecom founder Frank Cassidy is either a NEW partner in crime for Ed Berkhof OR he is simply ANOTHER victim fallen prey to Ed Berkhof’s web of lies and empty promises to “take a company public”. Investors beware! Ed Berkhof is neither a President, COO or Investor of anything. Ed Berkhof is a con artist and a has-been third rate bass player from Florida trying to find a payday.

When will the FBI stop these Ponzi scam artists? Thieves like Allen Stanford, Bernie Madoff, Trip Camper and Ed Berkhof are leaving a path of destruction and a wake of fallen victims of fraud.

View links below for more information on Elandia/Ahkoy:

http://www.secinfo.com/d14D5a.v6Q98.c.htm
http://www.secinfo.com/d14D5a.v6Q98.d.htm

Harry Thompson March 4, 2010 at 11:10 am

Re: Charles Ponzi Day, March 3rd
The political double standards are so transparent, as Madoff, Sanford, Minkow, etc, are jailed for running voluntary Ponzi schemes, whereas corrupt politicians are praised, glorified & re-elected to long-term incumbency, for perpetuating their job protection scam, aka, the mother of all Ponzi schemes, Socialist Insecurity.
So, let the revolution begin, again… no more FICA taxation, without representation. A great quote attributed to Lady Margaret Thatcher tells it all, something to the effect, that the problem with Socialism is that eventually you run out of other people`s money.
Socialist Insecurity is not too big to fail, & politicians will watch it go down the tubes, while out on the campaign trail promising more & more perks to their powerful voting bloc of retirees. FDR would be proud…tax & tax, spend & spend, elect, elect.

Comments on this entry are closed.

Previous post:

Next post: