A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.
Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.
In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.
With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue.
Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.
And there you have it.
Social Security as explained by the SEC.
I'll admit it.
I didn't read the entire page about Ponzi Schemes at the SEC site.
Feeling quite satisfied with myself, I quit reading where the post ended.
My friend Terry, anal puppy that he is, read every word and came up with the following.
What are some Ponzi scheme �red flags�?
Many Ponzi schemes share common characteristics. Look for these warning signs:
High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk.
Be highly suspicious of any �guaranteed� investment opportunity.
Thanks to Terry for a very nice pickup.
"The hard fact is that every dime of the $2.5 trillion in surplus Social Security revenue, generated by the 1983 payroll tax hike, has been spent on wars and other government programs.
Every month, for the past 25 years, the total receipts from the payroll tax have been split two ways.
First, benefits for current retirees are paid from the Social Security revenue.
Then, all remaining Social Security revenue, not needed to pay that month’s benefits, are deposited into the general fund and become indistinguishable from other general fund revenue."
Can you say Ponzi Scheme?