You Can't Cheat an Honest Man
Page 35
In a 1996 speech, CATO Institute President Edward Crane made the philospohical case for privatization:
...Take Social Security. Never mind that it’s the world’s largest Ponzi scheme that is going to go broke in a decade if it’s not privatized. Just consider what we did when we nationalized retirement income in America. ...we discouraged the personal responsibility of thrift, of saving for one’s own retirement. Some people assumed the government was doing that for them through Social Security. Many more were simply unable to save because of the burdensome payroll tax which is larger than the income tax for most Americans.
This elads to a provocative thoought. Maybe Social Security explains the proliferation of smaller Ponzi schemes.
Be Careful, the Schemes are Pervasive
Got a few extra dollars? Worried about what the future might bring? Thinking that the Wall Street crowd hoards all the best deals for itself? Put your money with us. We have a track record of paying out investors. And, in the remote chance anything goes wrong, we have a special mechanism for getting paid.
The pitch should sound familiar by now.
It’s tempting to think that the comparisons between Social Security and what law enforcement types would otherwise call a “classic Ponzi scheme” is some sort of politically-biased rhetoric. (Most of the writing that’s critical of Social Security is described as politicallybiased...sometimes this is true.)
But, even if the comparisons don’t seem obvious at first glance, consider an interesting bit of analysis—from the SEC itself. In a prepared statement that the agency released for background on Melvin Ford’s Better Life Club Ponzi scheme, the Feds are more candid than you might guess they would be:
Q: Why is a Ponzi scheme any different from Social Security?
A: Social security is a compulsory savings program run by the government. If the social security trust fund runs out of money to pay back retirees, the government can raise money to make the payments through taxes. A Ponzi scheme operator...has nowhere to turn when the scheme goes bust. The last round of investors simply lose their money.
In the 1990s, most investors realize that John Maynard Keynes died a long time ago—and the blind belief that “government” has some kind of power beyond its individual pieces died with him.
The Fed’s promise that the government can enforce a compulsory Ponzi scheme aren’t worth any more than Melvin Ford’s incoherent talk about the velocity of money...or New Era’s larcenous gibberish about a board or high-roller philanthropists. In the case of Social Security, taxpayers are simply the Greater Fools who are forced by law to extend the scheme.
But they can’t keep the scheme going indefinitely. No foolish investor ever can. All Ponzi schemes collapse...the only question is when. Well-run schemes can last a little longer, if the perp manages the money well and takes out his or her cut slowly. But not even a savvy perp can keep prevent the final reckoning..
The questions to ask for context may be: Why are the things so pervasive? Have social welfare programs like Social Security created a lottery mentality in so much of the population that people can’t resist throwing a few extra dollars of good money after bad?
Looking back over the history of Ponzi and pyramid schemes—both recent and not—the answer comes back consistently. Yes.
Your money is a valuable thing. As you age, more of your money will be available for investments. Don’t trust it to any crook who promises big returns with little risk. Anyone making that promise—even if the anyone is a government agency—is lying. They’re just looking for what every Ponzi perp wants...a naive person who’s greedy, gullible and has some money to lose.
A Greater Fool, willing to bet heavily on a Great Idea. Don’t be that person.
PART ONE
How the Schemes Work
PART TWO
Why the Schemes Work
PART THREE
Contemporary Variations
PART FOUR
What to Do if You've Been Scammed
Table of Contents
Introduction Some Background to the Current Situation ...1
Chapter 1: The Mechanics Are Simple Enough ...19
Chapter 2: Location, Location, Location...Then the Money’s Gone ...29
Chapter 3: A Better Mousetrap Makes a Good Scam ...39
Chapter 4: Paying First Class, Traveling Steerage ...49
Chapter 5: 1040-Ponzi ...61
Chapter 6: Sure-thing Investments and Sweetheart Loans ...71
Chapter 7: Precious Metals, Currency and Commodities ...87
Chapter 8: Affinity Scams ...101
Chapter 9: Trust ...117
Chapter 10: Greed ...131
Chapter 11: Family Ties ...141
Chapter 12: Secrecy and Privacy ...155
Chapter 13: Loneliness, Fear and Desperation ...167
Chapter 14: Multi-level Marketing ...183
Chapter 15: Faith, Religion and New Age Gurus ...203
Chapter 16: Charities and Not-for-Profit Organizations ...217
Chapter 17: www.ponzischeme.com ...231
Chapter 18: Make Friends with the Regulators ...243
Chapter 19: Go After the People Who Got Money Out ...257
Chapter 20: Go After the Lawyers and Accountants ...273
Chapter 21: Go After Banks and Financiers ...287
Chapter 22: Fight Like Hell in Bankruptcy Court ...305
Conclusion The Mother of All Ponzi Schemes ...319
Index ...331