Government employees get to do a lot of things that would land an ordinary citizen in prison.
For example, it’s legal for them to threaten and commit offensive, rather than defensive, violence. They can take property from others without their consent. They spy on anyone’s email and bank accounts whenever they please. They go into trillions of dollars in debt and then stick the unborn with the bill. They counterfeit the currency. They lie with misleading statistics and use accounting wizardry no business could get away. And this just scratches the surface…
The U.S. government also gets to run a special type of Ponzi scheme.
According to the Merriam-Webster dictionary a Ponzi scheme is:
[A]n investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.
In the private sector, people who run Ponzi schemes are rightly punished for their fraud. But when the government runs a Ponzi scheme, something very different happens.
It’s no secret that the Social Security system is effectively one giant Ponzi scheme.
Actually, I think it’s worse. That’s because the government uses force and the threat of force to coerce people into it. People don’t have the option to opt out. They either pay the tax for Social Security or someone with a gun will show up sooner or later. I imagine Bernie Madoff’s firm would have lasted a lot longer had he been able to operate this way.
This whole practice is particularly egregious for young people. They have no chance at collecting the future benefits the government has promised to them. But they’re hardly the only people that are going to be disappointed in the system, which will eventually break down.
There are simply too many people cashing out at the top and not enough people paying in… even with the government’s coercion. That’s a function of demographics, but also the economic reality in which there are fewer people with quality jobs for the government to sink its fangs into. I expect both of those trends to increase and strain the system.
Actually, it’s already starting to happen.
Recently, the government announced that there would be no Social Security benefit increase next year. That’s only happened twice before in the past 40 years.
You see, the government links Social Security benefit increases to their own measure of inflation. If the government says “no inflation” then there are no benefit increases. It’s like letting a student grade his own paper.
So it’s no surprise that the official definition of inflation is not reflective of the real increases in the costs of living most people feel.
Medical care costs are skyrocketing. Rent and food prices are reaching record highs in many areas. Electricity and utility costs are soaring. Taxes, of course, are going nowhere but up.
But the government says there’s no shred of inflation. In actuality, it amounts to a stealth decrease in benefits.
One reason for this is that they constantly change the way they calculate inflation so as to understate it. Free market analysts have long documented this sham. If you take a global view, it’s easy to see that fudging official inflation statistics is standard operating procedure for most governments.
Incidentally, governments and the financial media don’t even understand what inflation is in the first place.
To them, inflation means an increase in prices. But that is not at all how the word was originally used. Inflation initially meant an increase in the supply of money and nothing else. Rising prices were a consequent of inflation, not inflation itself.
It’s not being overly fussy to insist on the word’s proper usage. It’s actually an important distinction. The perversion of its usage has only helped proponents of big government. To use “inflation” to mean a rise in prices confuses cause and effect. More importantly, it also deflects attention away from the real source of the problem…central bank money printing.
And that problem shows no signs of abating. In fact, I think the opposite is the case. The money printing is just getting started.
At least this is what we should prudently expect as long as the U.S. government needs to finance its astronomical spending, fueled by welfare and warfare policies.
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As long as the government spends money, it will find some way to make you pay for it – either through direct taxation, money printing, or debt (which represents deferred taxation/money printing).
It’s as simple as that.
Like most other governments that get into financial trouble, I think they’ll opt for the easy option…money printing.
This has tremendous implications for your financial security. Central banks are playing with fire and are risking a currency catastrophe.
Most people have no idea what really happens when a currency collapses, let alone how to prepare…
How will you protect your savings in the event of a currency crisis? This video we just released will show you exactly how. Click here to watch it now.
Nick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. He is a CFA charterholder. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here.
SS is not a Ponzi scheme. Contributors are not investing in a fraudulent scheme, such as the one Ponzi was involved in. Everyone knows the system was designed to pay current beneficiaries with current revenues. It was this way from the start. During the Reagan administration the government accurately predicted the future increase of retirees so they increased the withholding amounts. Instead of saving this surplus, the government spent it on whatever else they felt like spending it on and replaced the money with a special form of paper IOU. Both Republicans and Democrats engaged in this behavior. Both parties are responsible for keeping the promise made to retirees. There is enough income and wealth in this country to support this relatively meager retirement plan. But there is also a small, wealthy, and powerful segment of our society who do not want to contribute and have been trying to get rid of the program since the day it began.
You are right, it is not a Ponzi scheme, it is far more nefarious. I think you oversimplify things to match your political beliefs. All domestically circulated currency has been a debt of the United States since 1913. Until, in 1933, with the US suffering a banking system collapse (engineered by the owners of the Federal Reserve Bank), they ended the redemption of US notes for gold domestically and enacted the Social Security Act. Since all new domestic currency was now purely debt and not backed by gold, the social security system provides a means for the Federal Reserve to guarantee collection for the debt of the US. That is why the very first thing the HHS does, by law, when you apply for a SS card, is to notify the IRS that an account has been created and collection may begin. The entire system, started by Woodrow Wilson and finalized under FDR is designed to make the fruits of your labor a resource pledged by the US as collateral on the debt of the US. International banksters own you, you are a human resource and the Social Security Act, like the Federal Reserve Act, was a mechanism to do it. The other provisions of SSA such as old age, survivors, death and disability benefits, could be obtained from any insurance company with much better payouts and for far less than 15% of my earnings through a Whole Life insurance policy. Social Security is a tax, whose proceeds are part of the general fund, which is used first to pay for interest on the US debt, just like all other taxes. Since the remaining revenue collected is not enough to pay for the outstanding obligations of the US, they simply borrow more and you (and your progeny for the rest of time) are obligated to pay for it, THAT is the Ponzi Scheme. SSA is simply a mechanism, a cog in a larger machine.
Social Security will never run out of money, it doesn’t have any and never has.
Alan Greenspan describes it on you tube in less than 2 minutes:
/watch?v=gqUzQjXNliU
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/watch?v=DNCZHAQnfGU
Absolutely correct sir.. IRS and FBI sprung out from the Federal Reserve in 1913 which is owned by the Rothschild Dy-nasty.. the new constitution of 1787.. There has been no law requiring citizens of The United States of America to pay taxes to any Federal Agency, much less Puerto Rican Trusts with secret owners. “In 1954, the US and Guam became partners under the Mutual Security Act. The IRS Code of 1954 was also passed and coordinated “Individual Income Tax” for the US and Guam. Since the Constitution forbids un-apportioned direct taxes on the people of the United States, the Federal government had to trick people into volunteering to pay taxes as U.S. citizens of either Guam, Puerto Rico or the US Virgin Islands.”
I don’t disagree with anything you’ve said. But in order to keep SS solvent and effective, the tax revenue received for this program should match the payouts required, and the funds should not be mixed into the general revenue which can be spent however Congress desires. The plan would work fine if it was properly managed. People who don’t want SS at all work very hard to mismanage or disrupt it, then they say “see how this ponzi scheme isn’t working?” This is one of the time-honored aspects of starve the beast economic policy.
Can I opt out?
I have rescinded my SSN and haven’t had a valid ID many years ago. It’s called freedom and there is nothing that the IRS, or anyone else, can do about it. I’m free from having to pay Federal Income Tax, licenses and have no responsibility toward any Federal or State personnel who may think differently. They really have no power over the people who are free…
You Could copy this same article and substitute obamacare for SS.
Gas has gone down so SS didn’t go up. However, retired ppl tend to use less gas, and more medical. And medical has shot sky high, so the analysis of not raising SS seems off-base.
Meanwhile people who just moved here from Cuba claim refugee status and are raking it in…
George Carlin predicted they’d come for the SS & your pensions…it’s simply top down thuggery of usurious generationally psychotic & rabid psychopathic ponerology of ‘Gangsta Banksta’s’ …period…end of story.
SS increase each year according to inflation; thus, the inflation rate is a double edge sword. It can be used as a shadowed-tax; It can be used to refuse to increase social security benefits by lie of inflation statistic. Actually, inflation and deflation is riding shotgun as we speak..
This article might have served it purpose better by providing examples of how inflation is reflected in the material items we buy. The growth of the money supply (assuming it was collateralized with gold in Fort Knox and other fantasies) meant that the value or “buying power” of the individual dollar decreased. Therefore, an item that cost ten dollars yesterday might cost twelve today, and fifteen a few years from now.. In 1974, I bought an economy car for $3500. The same car (new) just seven years later, was $10,000. Today, that same car might sell as a “base model” for $17, 225. There’s a great little calculator on a website called http://www.inflationdata.com. Plug in the value of something, say- ten years ago, and the calculator will tell you what the value of that same purchase would be in today’s dollars.