Anyone who gets remotely close to national news has heard about Bernard Madoff’s recent arrest for pulling off a $50 billion ponzi scheme. Being the current events dork and newfound Austrian economics fanatic that I am I just had to bring one thing up.
One of the definitions of a ponzi scheme is: When the organizers of the scheme use the assets of new investors to make profit payments to the old investors. The scheme typically has no other source of revenue other than from the new investors.
My question is: Isn’t this pretty much the definition of fractional reserve lending? If so, shouldn’t everyone in the US fed and treasury be put in jail right along side this guy?
No, it’s more like the definition of Social Security, which, BTW, is a joke that Leno made last night.
As I was watching his monologue he started talking about Madoff, and I was thinking, “Too bad he’ll never make the comparison to SS.” Then, he did. I wonder how many people really understood it.
As for people understanding it’s definitely few and far between. I like to think I’ve got a fairly intelligent group of friends but any time I bring up the topics of government and/or economy they all glaze over. It’s really quite brilliant what The State did to us when you think of it. They took very simple concepts and made them seem so extremely complicated that any mention of them induces instantaneous feelings of complete apathy while at the same time giving a bunch of useless hacks otherwise known as politicians something to do for a living.
You have got to be kidding. I thought that there are really are 500 warehouses in the Wasington area storing all the gold purchased to pay for the social security system.