Thursday, January 21, 2010

The mother of all Ponzi schemes

Is the modern Western welfare system.

The Mises Institute have a tragic/comic article about how today's welfare systems, social security, government backed pensions, medicare etc are completely out of hand and about as financially sound as Bernie Madoff's investments.

The money collected in taxes will simply never come close to covering the future liabilities in the form of pensions, medical coverage and government services.

And the article makes a very good point. That like all Ponzi schemes, the winners are the people who get in early. It presents this lucky lady, the first recipient of a social security cheque, as the prime example:

Social Security was a sure thing in its infancy. Just think of Ida May Fuller (1874–1975), a nonexempt legal secretary from Ludlow, Vermont. Ms. Fuller exemplifies the advantages of getting in early and getting out early. She paid a whopping $24.75 to participate in Social Security. Her first monthly Social Security check was issued January 31, 1940, for $22.54. Within three months, Ms. Fuller's investment was in the black. Over the ensuing 35 years, she would collect $22,888.92 in Social Security payments.