
A Scheme With No Off Button - robg
http://www.nytimes.com/2008/12/21/weekinreview/21rampell.html?ref=weekinreview
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mdasen
A Ponzi scheme is only doomed if you can't continually find more new
investors. As long as you can continually find people to put money in, you
have no problem and can continue infinitely. They aren't inherently
mathematically doomed.

For example, the Social Security system in the US is nothing more than a Ponzi
scheme. We all pay for the previous generation(s). In fact, the original
beneficiaries didn't have to pay in at all. It isn't a system where the
government takes money we pay in at 25 and saves it in an interest bearing
account for when we retire. No, they use our money at 25 to pay for the
retirement of someone who is currently retired.

Of course, this has also shown cracks - as we moved past the baby boomer
generation, there are fewer people paying in and more people taking out which
has gotten us into our current mess. That's where a Ponzi scheme breaks. In
fact, that's why the US government will have to do something (either charging
young people more money or reducing benefits to old people) because the Ponzi
nature of it doesn't work with the reduction of inflows and increase of
outflows that we're seeing.

Likewise, a similar scheme was instituted by many of the auto manufacturers.
They took on obligations with the assumption that future workers/sales could
pay for it as their market share ever increased and they would have ever
increasing profits. It works, unless the ever increasingness stops.

Heck, if you wanted to successfully run an investment scheme, make it a
retirement scheme. The problem with a Ponzi scheme is that people can
withdraw. Offer a retirement scheme to people 30 and under and you can just
pocket the money for long enough to get away.

Heck, stick the money in a few index funds which average 10% per year and
charge a 1-2% management fee each year on the total account value. Oh, wait.
That's legal and widely done.

~~~
ars
People keep calling social security a ponzi scheme, but it's not. For the
simple reason that it's not trying to make a profit - it's trying to give back
to people the same amount of money they put in.

It's more of a forced investment than anything else, with the variation of
having the money skip a generation.

The difference is that if all you do is give people the exact same amount of
money they put in, you can run forever. All you need is a buffer of some kind.

~~~
byrneseyeview
_For the simple reason that it's not trying to make a profit - it's trying to
give back to people the same amount of money they put in._

If Charles Ponzi wanted to live modestly, but donate huge sums to charity so
everybody would love the big-shot Ponzi, it wouldn't have been a Ponzi scheme?
If he'd wanted to buy votes, would it have been less of a Ponzi scheem?

 _It's more of a forced investment than anything else, with the variation of
having the money skip a generation._

Well, no. It's forced redistribution. The money is not invested; it's spent.

 _The difference is that if all you do is give people the exact same amount of
money they put in, you can run forever. All you need is a buffer of some
kind._

But SS was designed with the assumption that either demographics wouldn't
change, or that they'd change so slowly that nobody would suffer politically
for having invented Social Security.

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ramchip
..am I the only one who expected an article about embedded Scheme?

