Government is arguaby an inherent Ponzi scheme

[Guest Peeves]

It as in Ontario, USA, Greece etc, requires more investors, (read immigrants) to continue paying it's promises to its contributors or beneficiaries. As a scheme, the promoter, (read government), can promise anything and perpetuate the scheme by borrowing and passing the added interest and deficit to a next generation of contributors.

Shouldn't that be illegal?

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.

The system is destined to collapse because the earnings, if any, are less than the payments to investors. Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.

[Michael Hardner]

It as in Ontario, USA, Greece etc, requires more investors, (read immigrants) to continue paying it's promises to its contributors or beneficiaries. As a scheme, the promoter, (read government), can promise anything and perpetuate the scheme by borrowing and passing the added interest and deficit to a next generation of contributors.

Shouldn't that be illegal?

This isn't particularly original or provocative. Nor is it correct: many people will be paid out before the plan supposedly goes bankrupt.

Social Programs as Ponzi scheme is really more of a slogan used on talk shows by those who want to cut social programs. If you use them on a web forum, it doesn't really work because there are people here to challenge your assertion.

[Guest Peeves]

This isn't particularly original or provocative. Nor is it correct: many people will be paid out before the plan supposedly goes bankrupt.

Social Programs as Ponzi scheme is really more of a slogan used on talk shows by those who want to cut social programs. If you use them on a web forum, it doesn't really work because there are people here to challenge your assertion.

That's obviously why it is arguable.

Many people continue to get get their interest (benefits) due in a Ponzi scheme as well while it's viable.

Similarly.

Many have also lost their pensions, investments for retirement, through their employer-companies that accepted wage deductions to that end and then subsequently went bankrupt. Another Ponzi scheme? The company obviously were requiring deductions by contract and perhaps matching or contributing as well. The earliest retirees received payment till the fund became defunct then all were victims of the 'scheme.'

[Michael Hardner]

Many have also lost their pensions, investments for retirement, through their employer-companies that accepted wage deductions to that end and then subsequently went bankrupt. Another Ponzi scheme?

That's a different Ponzi scheme. It's a lot more like a Ponzi scheme because someone absconded with other peoples' money leaving them nothing.

The company obviously were requiring deductions by contract and perhaps matching or contributing as well. The earliest retirees received payment till the fund became defunct then all were victims of the 'scheme.'

Yes. Government is only responsible for that in that they didn't monitor the thieves, and allowed them to get away with it.

[Guest Peeves]

That's a different Ponzi scheme. It's a lot more like a Ponzi scheme because someone absconded with other peoples' money leaving them nothing.

Yes. Government is only responsible for that in that they didn't monitor the thieves, and allowed them to get away with it.

So I suggest that a governing body that sets the taxes invested in the country then threatens to change the rules of return, later retirement, lower payments is the equivalent of a Ponzi scheme.

They keep promising more but are heading for bankruptcy in Ontario. That should be illegal.

The debt load cannot continue. It is unsustainable. Programs are unsustainable. If more is used than taken in it's a crooked scheme or should be.

[dre]

The key difference between a ponzi scheme is which participants end up getting hosed. In a ponzi scheme participants that enter the scheme late take a bath, and the ones that enter the scheme early profit. This is a core part of the definition of that word.

In the public debt scheme though, its insiders that will be the "winners" in the end, and almost everyone else will lose. So technically its not a ponzi scheme.

If each dollar could actually be physically tracked by using GPS it would be apparent who the winners are, and youll find most of that money ended up in the pockets of government lobbying corporations. Healthcare companies, defense companies, energy companies, etc etc. Even the social spending.

So this is really more of a looting of the economy by powerfull special interests, than it is a classic "ponzi scheme".

[Guest Manny]

We pay our taxes and roads get built, hospitals get funded, garbage gets collected. Where's the ponzi part?

[The_Squid]

This ponzi-scheme nonsense is pure hyperbole. As well, this topic is neither a moral nor ethical issue.

[jbg]

It as in Ontario, USA, Greece etc, requires more investors, (read immigrants) to continue paying it's promises to its contributors or beneficiaries. As a scheme, the promoter, (read government), can promise anything and perpetuate the scheme by borrowing and passing the added interest and deficit to a next generation of contributors.

Shouldn't that be illegal?

This isn't particularly original or provocative. Nor is it correct: many people will be paid out before the plan supposedly goes bankrupt.

Social Programs as Ponzi scheme is really more of a slogan used on talk shows by those who want to cut social programs. If you use them on a web forum, it doesn't really work because there are people here to challenge your assertion.

The difference is that a Ponzi scheme does not have a lawful way to compel citizens to back its debts. A government does.

[Guest Peeves]

This ponzi-scheme nonsense is pure hyperbole. As well, this topic is neither a moral nor ethical issue.

Ok then. Y'all convinced me. It ain't a Ponzi scheme, it's just Political mismanagement. Funny though I still feel I'm (we're) being screwed.

Guess that's what you get if you elect politicians with a socialist bent that promise they'll give you back some of the money they take.

Ponzi schemes are at least perpetrated by crooks and subject to laws.

Politicians like Dalton and Clement can simply participate in malfeasance and get away with it. Now I see the difference. Thanks.

Edited January 16, 2012 by Peeves

[jacee]

Ok then. Y'all convinced me. It ain't a Ponzi scheme, it's just Political mismanagement. Funny though I still feel I'm (we're) being screwed.

Guess that's what you get if you elect politicians with a socialist bent that promise they'll give you back some of the money they take.

Ponzi schemes are at least perpetrated by crooks and subject to laws.

Politicians like Dalton and Clement can simply participate in malfeasance and get away with it. Now I see the difference. Thanks.

If, as dre says ...

... youll find most of that money ended up in the pockets of government lobbying corporations. Healthcare companies, defense companies, energy companies, etc etc. Even the social spending.

"corporations ... companies ..."

Ie PRIVATE SECTOR PROFITS

Wanna make a guess about what party gives the most taxpayer money to the RICH?

It isn't the 'socialists'.

I agree that public money is being misused.

We may disagree about who's doing the misusing.

Edited January 16, 2012 by jacee

[CPCFTW]

If, as dre says ...

"corporations ... companies ..."

Ie PRIVATE SECTOR PROFITS

Wanna make a guess about what party gives the most taxpayer money to the RICH?

It isn't the 'socialists'.

I agree that public money is being misused.

We may disagree about who's doing the misusing.

Except that Dre is completely wrong. Most of the money went to public sector workers, bureaucrats, the sick, disabled, lazy, and the unemployed.

[GostHacked]

The difference is that a Ponzi scheme does not have a lawful way to compel citizens to back its debts. A government does.

How are the debts backed?

[GostHacked]

Except that Dre is completely wrong. Most of the money went to public sector workers, bureaucrats, the sick, disabled, lazy, and the unemployed.

And once the politicians are taken care of, there is little left over for the citizenry of the country.

[Shady]

Ok then. Y'all convinced me. It ain't a Ponzi scheme

No, you were right the first time. It's just that a lot of people don't like to hear the truth. Because it hurts. But borrowing money to provide benefits to people now, that has to be paid back by people who aren't even born yet, is definitely a ponzi scheme. Not to mention immoral.

[jbg]

How are the debts backed?

Theoretically unlimited power to tax. Not that its use would be advisable, mind you.

[Guest Peeves]

No, you were right the first time. It's just that a lot of people don't like to hear the truth. Because it hurts. But borrowing money to provide benefits to people now, that has to be paid back by people who aren't even born yet, is definitely a ponzi scheme. Not to mention immoral.

"My mother thanks you. My father thanks you. My sister thanks you. And I thank you."

Thanks to James Cagney,,,Yankee Doodle Boy.

Actually you hit the point I was subtlety making.

Money is being 'taken in' and borrowed on the heads of generations yet to come. The debt is beyond the means of the government to cover just as is a Ponzi scheme.

Other than that, little semblance, but it did I hope make a thought cross a few gray cells.

Governments (Ontario- USA etc.) that owe more than can be paid out NOW, are like a Ponzi scheme unDER funded.

Because WE keep wanting our chosen masters to give us more unreasonable (interest) regardless the fact that the scheme is incapable of sustainability unless further generations of investors contribute.

[GostHacked]

Theoretically unlimited power to tax. Not that its use would be advisable, mind you.

Maybe you can explain what that actually means? Current debts are backed by paid taxes? With the national debt always increasing (with minor reductions here and there) the debt is backed by taxes that have not been paid yet. The government also always spends more than what it makes, so what does this all mean?

If you are personally in debt, you have to do what you can and work two, three jobs to make ends meet. Your debt is backed by the number of years you can work to pay off the debt. The other option is defaulting on the debt, and you lose everything. I think that would work on a country level as well. The citizenry of the country is stuck working to pay off the bill in the form of taxes. And if the amount of taxes can't make up for the spending plus paying down the debt, you run into a very huge financial problem.

So the government has the power to spend and tax you for their spending. This does not sound like a benefit to the people.

[jbg]

So the government has the power to spend and tax you for their spending. This does not sound like a benefit to the people.

In many cases it isn't. Which is why I put the "advisable" caveat into my post.

One caveat to the caveat, though, is that much of what Government purchases is for long-term use and in no accounting sense should be considered a short-term debt. If I owe, say, $120,000, give or take on my house and I pay $1789 per month, each month, through October 2018, I do not have a $120,000 problem on February 10, 2012, I have a $1789 problem. So with the national debt, except the figures make no distinction between the cost of building a coast to coast highway, and the cost of a farm subsidy. The latter is a short-term expenditure, the former long term.

[GostHacked]

In many cases it isn't. Which is why I put the "advisable" caveat into my post.

One caveat to the caveat, though, is that much of what Government purchases is for long-term use and in no accounting sense should be considered a short-term debt. If I owe, say, $120,000, give or take on my house and I pay $1789 per month, each month, through October 2018, I do not have a $120,000 problem on February 10, 2012, I have a $1789 problem. So with the national debt, except the figures make no distinction between the cost of building a coast to coast highway, and the cost of a farm subsidy. The latter is a short-term expenditure, the former long term.

You have a $1789 + interest +late fee, and a notch on the record if payment is not made. Which is really not a good way to look at it. You still have a problem with the balance of what you owe, no matter how you break it down. Your total debt is what really matters.

The highway is also a long term expenditure. For example 4 lane highway from Barrie ON to Sudbury ON has taken about 20 years to build.

As well, no mention of how top secret military projects are funded? The budgets for these projects are classified as well as the projects. How does one account for the money spent there? How can we tell if the money spent on these projects were worth it?

[jbg]

You have a $1789 + interest +late fee, and a notch on the record if payment is not made. Which is really not a good way to look at it. You still have a problem with the balance of what you owe, no matter how you break it down. Your total debt is what really matters.[/qutoe]

No, it's $1789 including interest and principal, assuming I make current payments, which I do. Thus, I do not have a $120,000 problem.

The highway is also a long term expenditure. For example 4 lane highway from Barrie ON to Sudbury ON has taken about 20 years to build.

But it lasts far beyond that amount of time. I assume that it takes that long to build because it's undermanned and underfunded.

As well, no mention of how top secret military projects are funded? The budgets for these projects are classified as well as the projects. How does one account for the money spent there? How can we tell if the money spent on these projects were worth it?

That's a trickier question.

Edited January 17, 2012 by jbg

[Guest Peeves]

Another view for consideration. In a letter to Editor today.

Consequences unavoidable

The late John Kenneth Galbraith said of money “… it has oppressed nearly all people in one of two ways: either it has been abundant and very unreliable, or reliable and very scarce.” Prior to its 1962–63 American tour, the Mona Lisa was assessed, for insurance purposes, at US$100 million. Since then the purchasing power of the dollar has declined so that in 2010 $720 million was required to buy what $100 million purchased in 1962 when adjusted for inflation, according to the U.S. Consumer Price Index. Therefore, in real terms, the value of the currency declined but the painting held its real value.

We have not got to the place where it takes a wheelbarrow full of dollars to buy a loaf of bread but the U.S. dollar being the world’s anchor currency, nations are not only negotiating currency swaps to avoid dealing in U.S. dollars, the U.S. Federal Reserve is increasing notes in circulation. Therefore, if in real terms the dollar’s purchasing power in 2006 amounted to 7.2 cents, it has diminished since then.

The U.S. dollar is not really money. Because it has to be borrowed into existence, it is a bank note and must be paid back with interest. However, since the money to pay interest does not exist, it, too, must be borrowed into existence, adding to national debt until like all Ponzi schemes the currency collapses.

There is a sovereign debt crisis in America and most of Europe. In America, many state governments and municipalities are bankrupt and Warren Buffet has said, “It increases the possibility that demagogues will come along and do some very foolish things.” People do not like to face the fact a collapse is coming. You may be able to avoid reality but you cannot avoid its consequences.

James M

[dre]

Another view for consideration. In a letter to Editor today.

Thats essentially right.... Bit its still not a ponzi scheme because the people that are robbed of purchasing power when theres inflation are ALL holders of dollars, regardless of when they began participating.

Also in terms of "stealing from future generations", we will only really be stealing from them if they have in their posession fiat dollars and its unlikely that future generations will.

Money is closely linked but a distinctly separate thing from the marketplace. Future generations wont really be effected directly by monetary policy, even if the fiat currency deflates to zero dollars and all debt evaporates. The ONLY thing we can steal from them is resources, and thats the problem with our current monetary system. We try to achieve the desired ammount of employment by creating the money to fund it constantly out of thin air. This causes inflation, but who really cares about inflation besides people dumb enough to sit on large ammounts of a national currency they know is deflating. In theory the CPI could just keep adjusting, and wages and prices could just keep increasing, but purchasing power remains somewhat stable. The problem is it creates an exponential growth curve which dramatically accelerates the rate as which we consume resources, thats where future generations take a bath. And of course its also used as a massive engine of theft for people TODAY to steal from other people TODAY.

[GostHacked]

But it lasts far beyond that amount of time. I assume that it takes that long to build because it's undermanned and underfunded.

It lasts far beyond simply because of continual maintenance on the roads, which is not part of the initial cost to build.

[dre]

Except that Dre is completely wrong. Most of the money went to public sector workers, bureaucrats, the sick, disabled, lazy, and the unemployed.

No thats just false. We know exactly where that money went, it TRICKLED UP to the wealthy. Go and look at all the currency that was created by that debt, and take a look at where it all is... think the unemployed people have it?

Its really simple... That debt created brand new dollars... it was monetary expansion. All you need to do to see who ended up with the money is look at how wealth is currently distributed. A relatively small handfull of people ended up with almost all that money.

And this is exactly what the data shows you. In the US between WW2 and 1975, wealth actually DECONCENTRATED while debt was stable and flat. But as soon as debt began to spiral out of control in the late seventies, wealth because to concentrate quickly. Why? Simple. That debt put a massive ammount of new dollars into the economy, and the upper class was in the best position to chase them. With all those dollars to chase it became easier than ever before to make a fortune much larger.

That debt has been a massive SUCCESS for the wealthy and total disaster for the working class and the poor.

Its really easy to see where all that new currency went.

there are now over one million households with over a million dollars in net worth. These households, 8.2% of families, hold 46.5% of the total net worth. Overall, the top 20% had 69.2% of total net worth, while the bottom 20% had 2.4% and the bottom 60% had 10.8%.

So you have it exactly backwards. Deficit financing is extremely REGRESSIVE and inflation hurts people with small to medium disposable incomes, or people with no income way more than it hurts anyone else. Especially when the money is misspent.

Edited January 20, 2012 by dre