Before the Jig is Up

CHARLES PONZI was, in a certain sense, quite an astute businsssperson. At least, until he got caught, in 1920. By promising enormous returns to investors in a postage stamp based security, he lured in wave after wave of ill informed investors, and paid the first wave off with the money invested by the second wave, and so on, wave after unwitting wave. Since there was never any value, nor return, on the actual investment, everyone who got returns got them directly from the money which came in later from new investors. The later the investor, the less teh the returns, the greater the rip off. This worked out quite well for the initial investors, but not so well for subsequent suckers. A couple of generations later, Bernie Madoff tried essentially the same approach, and he too got caught. That's the problem with Ponzi schemes; they always unravel, because the number of late investors always, in the long run, falls short of the number needed to pay off those who came before. Its inevitable, like a law of nature. Simple math. On his way to prison, Madoff pointed out, quite correctly, that he was doing nothing different than what the United States government does. Someone may have reminded Bernie of two things. One, one does not justify bad behavior merely by pointing to other bad behavior. And two; it is not illegal, evidently, for the United States government to run a Ponzi scheme, but it was illegal for him to do it, as by now he is doubtless painfully aware, as he sits in his closet sized prison cell. Bernie had a point, though. Consider social security. The program began in 1935, and the money paid into the system by the first investors has long since been paid out. And yet, many of the early recipients of social security are still alive, and are now being paid by those who began paying into the system later, in the "second wave", in the nineteen forties and fifties. People who began receiving payments during the past few years, say, since the turn of the millenium, are being paid not by their own contributions, which are also long spent, but by the people who came after them, or will come after them. Where will the money for tomorrow's recipients come from? Therein lies the trillion dollar question. More people than ever are getting payouts, and the number will continue to grow, as the huge baby boomer generation begins to retire en mass. But the number of contributors to the program, the number of people who are gainfully working and gainfully paying into the system currently, is not increasing. Its levelling off, if anything, shrinking. We the people, we the American government are now beginning to pay out using not money which is alrady there, but which we hope and assume will be there in the near future. In essence, we are getting near the end of the Ponzi scheme in which we all, through no fault of our own, are participating. Anybody in the know will tell you; start taking social security as soon as possible, take it early, and take it often, before the jig is up. For just as surely as the government borrows money it can never repay to pay past due bills, there will come a time when some poor unfortunate unwitting wave of new social security recipients will not recip, because the money will simply run out; there will be no new capital flowing into the system, not enough to sustain the scheme. Before much longer, the feds'll surely find out what's going on, and we'll all end up in jail. The Supreme Court will rule that what we have been doing all along is indeed illegal, and up the river we will all go, as willing participants in a scheme we knew would benefit us, but not our descendants. None of us will get off by claiming to be innocent victims. We were all in it together, we the early investors, and, in any event, ignorance of the law is no defense. It could be that Bernie Madoff never should have been sent to prison. Instead, he should have been appointed Secretary of the United States Treasury. After all, when it comes to Ponzi schemes, he's the expert. But its too late now. We can only hope that we all get jail cells slightly larger than the one they gave Bernie Madoff.