By Xin Lu
I received my Social Security statement this week and it was a useless piece of paper to me since I do not qualify for retirement benefits yet. I always hear critics of Social Security say that it is a government sanctioned Ponzi scheme, and today I did a little research into why this comparison is often made.
Ponzi scheme is named after Charles Ponzi, an Italian immigrant who promised investors 50% returns in 45 days on an investment of postal coupons. He raked in millions of dollars in investments in less than a year in 1920. In actuality he was paying the earlier investors with money he collected from later investors and did not invest the money at all. Eventually the scheme collapsed because Ponzi just could not find enough new suckers to pay for the ealier investors who wanted to cash out. Ponzi went to prison and after he was released he returned to Italy and became a top financial advisor to Mussolini.
The Social Security program does have a few similarities to a Ponzi scheme...MORE
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