A brief history of Ponzi schemes

In 1935, Franklin Delano Roosevelt started the Ponzi scheme of Social Security – named after Carlo Ponzi's pyramid scheme that defrauded investors out of an estimated $15 million. In 1965, Lyndon Baines Johnson followed with the Ponzi scheme of Medicare. The two schemes continue to operate today with the blessing of Congress, even though the two pyramids will eventually collapse, says Craig Cantoni, a former corporate executive.

Why? Because the unfunded liabilities for Social Security and Medicare are approximately $53 trillion, says Cantoni. Moreover:

  • If current and projected federal deficits are added to the $53 trillion unfunded liabilities, and if unfunded liabilities for public-sector pension plans are added to that sum, then total government indebtedness comes to about $66 trillion, or approximately $475,000 for each income-earning taxpayer.

  • With the nation's average per-capita income being about $45,000, that means that each taxpayer, on average, would have to give the government more than 10 years of income to pay off the indebtedness.

    No doubt to mask this problem, the government will resort to printing money, thus debasing the dollar and fuelling inflation, but the effect will be the same, says Cantoni: Taxpayers will lose more than 10 years of income.

    Amazingly, President Obama has promised to foist another Ponzi-like fraud on the American people: universal health care. Like Social Security and Medicare, the promised benefits will not be realised by later participants, due to unfavourable demographics and bleak economic realities. Over time, taxes for the programme will soar, medical care will be rationed, physician quality will be reduced and medical facilities will become as shabby as state motor vehicle bureaus, predicts Cantoni.

    Source: Craig J. Cantoni, A Brief History of Ponzi Schemes, Journal of American Physicians and Surgeons, Vol. 14, No. 1, Spring 2009.

    For text: http://www.jpands.org/vol14no1/cantoni.pdf

    For more on Federal Spending & Budget Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=25

    FMF Policy Bulletin/ 07 April 2009
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