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2010-12-31

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The following is a KSCO commentary.  Here is Kay Zwerling:
          This is called “Bernie Madoff and Social Security”.   It was sent to me by Carol Terry, and kudos to you, Carol.  It is so simple, a caveman could understand it.  
          Why did Bernie Madoff go to prison?   To make it simple, he talked people into investing with him.  The trouble was, he did not invest their money.  As time rolled on, he simply took the money from the new investors to pay off the old investors.  Finally, there were too many old investors and not enough money from new investors coming in to keep the payments going.   The next thing you know, Madoff is one of the most hated men in America, and he is off to jail.  Some of you know this, but not enough of you.  
          Madoff did to his investors what the government has been doing to us for over 70 years with Social Security.    There is no meaningful difference between the two schemes except that one was operated by the private individual who is now in jail, and the other is operated by politicians who enjoy perks, privileges, and status in spite of their actions.   Do you need a side-by-side comparison here?   Well, here is a nifty little chart: 
BERNIE MADOFF  –  SOCIAL SECURITY
          Bernie Madoff takes money from investors with the promise that the money will be invested and made available to them later.
          Social Security takes money from wage earners with the promise that the money will be invested in a Trust Fund and made available later.
          Instead of investing the money, Madoff spends it on new homes in the Hamptons, and yachts. 
Instead of depositing money in a Trust Fund, the politicians use it for general spending and vote buying.  
When the time comes to pay the investors back, Madoff simply uses some of the new funds from newer investors to payback the older investors. 
When benefits for older investors become due, the politicians pay them with money taken from younger and newer wage earners to pay the geezers.
When Madoff scheme is discovered, all Hell breaks loose.   New investors will not give him anymore money. 
When Social Security runs out of money, they simply force the taxpayers to send them some more.  
Bernie Madoff is in jail.
Politicians remain in Washington.
The taxpayer – “That is someone who works for the federal government, but does not have to take the Civil Service examination” – that was from Ronald Reagan). 
Here is another quote, “If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand.” – that was from Milton Friedman.
Isn’t this an excellent analogy?
For KSCO, this is Kay Zwerling.
© copyright 2010

 

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