Current Topics
Is it too soon to be talking 2020?
by pondering_it_all
Today at 07:39 AM
The Debate: Is America’s future capitalist or socialist?
by rporter314
Yesterday at 06:24 PM
Takeover
by chunkstyle
Yesterday at 03:11 PM
Political Correctness run amok
by pondering_it_all
Yesterday at 05:58 AM
The Green New Deal, explained
by pondering_it_all
Yesterday at 05:44 AM
The NYC/Amazon Deal
by pondering_it_all
Yesterday at 05:19 AM
RoundTable for February 2019
by pdx rick
02/18/19 03:40 AM
Great white sharks likely pushed the massive megalodon to extinction
by Jeffery J. Haas
02/17/19 08:30 PM
The Passing Parade: Obituaries: 2019
by Golem
02/16/19 10:22 PM
Trump's New Toy - NATIONAL EMERGENCY
by NW Ponderer
02/16/19 01:42 AM
Middle East Conference
by jgw
02/15/19 05:35 PM
Justice is coming
by pondering_it_all
02/15/19 04:23 AM
Epitaphs
by logtroll
02/15/19 01:48 AM
The Twilight Zone - All Openings (1959 - 2002)
by Ken Condon
02/14/19 10:45 PM
Why are Republicans So Afraid of AOC and Omar?
by rporter314
02/14/19 09:05 PM
SMR (Small modular reactor)
by Greger
02/13/19 08:37 PM
A possible run on America?
by jgw
02/13/19 06:54 PM
the guy who used to own starbucks
by jgw
02/13/19 06:47 PM
Healthcare
by jgw
02/13/19 06:43 PM
It can never happen here!
by Greger
02/12/19 10:16 PM
Forum Stats
6248 Members
58 Forums
16495 Topics
284420 Posts

Max Online: 294 @ 12/06/17 12:57 AM
Google Adsense
Page 1 of 2 1 2 >
Topic Options
#293498 - 10/05/16 02:27 AM Social Security
logtroll Offline
veteran

Registered: 04/26/10
Posts: 8942
Loc: New Mexico (not old Mexico)
Inquiring minds are curious... is Social Security a Ponzi scheme?
_________________________
"You can't fix a problem until you understand what the problem is." Logtroll

Top
#293500 - 10/05/16 03:03 AM Re: Social Security [Re: logtroll]
pondering_it_all Offline
veteran

Registered: 02/27/06
Posts: 8242
Loc: North San Diego County
Sort of a Ponzi scheme without Ponzi taking away any of the money. And that is what makes a Ponzi scheme a Ponzi scheme. At some optimal point, the guy who started it skips town with all the current assets.

Just like tontines, which have a bad name, but done without the rip-off are actually fine. (There's even a TIAA fund that acts like a tontine in that survivors get more money as the other participants die.)

SS is a pretty finely-tuned old age annuity plan. It is all well balanced so the average "take" is equal to the average "put" with the average amount of interest on T-bills taken into account. They use the actuarial life tables, interest rates over the years, etc. to deliver a very useful retirement benefit to almost everybody. Some people live a lot longer than average, so they collect a lot more than their share. Some people die early and collect less, but so what? They are dead so why would anybody think they care?

Rich people don't really care, because their assets are so much larger than their SS income. About the only people who DO care are those who want to leave a lot of money to their heirs, and I couldn't care less about their desires.

The way I look at it, is that SS is the most conservative fix-income-with-COLA investment in your portfolio. It doesn't last past your spouse's death, so you get more money while you are alive. It is EXACTLY what most non-rich people should have as the basis of their retirement portfolio.

Top
#293514 - 10/05/16 10:35 AM Re: Social Security [Re: logtroll]
Ezekiel Offline
old hand

Registered: 08/06/05
Posts: 6387
Loc: New York
All insurance is a form of "Ponzi scheme" inasmuch as it depends on an ever-growing influx of premiums in order to survive. Social Security, however, has a pre-determined date to begin its payout and an uncertain end date. The pay-in time is, on average, greater than the pay out time. The money is invested in VERY conservative ways, (or at least should be) and, thus, the cost of maintaining the system can be an issue. The whole argument that there are more people receiving SS is crap, the more people paying in the better. Also, it doesn't need to compete with other plans so faulty underwriting is not an issue. So, barring a drastic increase in the cost of managing the system, there should not be a problem with its survival.
The fact that people are living longer only means that there needs to be an adjustment to the actuarial model such that the return on assets must increase, and if you have more people contributing (hence, a larger pot), that is easily attained.
_________________________
"The liberals can understand everything but people who don't understand them."
Lenny Bruce

"The cleverest of all, in my opinion, is the man who calls himself a fool at least once a month."
Dostoevsky




Top
#293520 - 10/05/16 12:08 PM Re: Social Security [Re: Ezekiel]
logtroll Offline
veteran

Registered: 04/26/10
Posts: 8942
Loc: New Mexico (not old Mexico)
Originally Posted By: Ezekiel
All insurance is a form of "Ponzi scheme" inasmuch as it depends on an ever-growing influx of premiums in order to survive.

Does insurance (and SS) depend on that? I think that insurance depends on subscribers paying in more that they will ever get out, on average. The excess goes to profit for the insurance company owner.

SS is supposed to be like insurance, except that the managers of the government, at various times, use it much like Trump uses his foundation - as a slush fund for unrelated expenditures.

There is no profit motive. The 'excess' should be going back into the fund.

Another way SS varies from insurance is that the contributions from the subscribers are viewed as a 'tax' (defined by some ideologies as always a bad thing), and some in government do not see any association between purchasing services and paying for services, if the payment is made via taxes.

A Ponzi scheme is a well-defined scam that is designed from the beginning to benefit only early 'subscribers' and is known to be unsustainable (it can be shown mathematically).

SS was designed to, well, provide a measure of social security, which it has been doing for a very long time. It's problems are not innate, they are the result of mismanagement and ideology (always lower taxes, never mind the consequences). The fix for what ails SS is not Ponzi related, it is merely an act of prudent fiscal management (paying the bills).
_________________________
"You can't fix a problem until you understand what the problem is." Logtroll

Top
#293522 - 10/05/16 12:52 PM Re: Social Security [Re: logtroll]
Ezekiel Offline
old hand

Registered: 08/06/05
Posts: 6387
Loc: New York
Yes they both do. If the Ponzi scheme has a constantly growing number of subscribers it can go on indefinitely. Madoff functioned for years. The difference is that, usually the pool of rubes runs out quickly or else, some extreme event forces mass redemption. Hence, I said a "form" of Ponzi scheme.
Another obvious difference is that the Ponzi scheme is voluntary, SS is not. So, theoretically, "everyone" must contribute. That is why the management and the actuarial model are so important. If people are skimming the funds, of course there will be a problem. It adds to the cost without corresponding increase to intake.
The solution to SS is simply better management. And no unnecessary (read illegal) cost.
_________________________
"The liberals can understand everything but people who don't understand them."
Lenny Bruce

"The cleverest of all, in my opinion, is the man who calls himself a fool at least once a month."
Dostoevsky




Top
#293524 - 10/05/16 01:05 PM Re: Social Security [Re: Ezekiel]
logtroll Offline
veteran

Registered: 04/26/10
Posts: 8942
Loc: New Mexico (not old Mexico)
Originally Posted By: Ezekiel
Yes they both do. If the Ponzi scheme has a constantly growing number of subscribers it can go on indefinitely. Madoff functioned for years. The difference is that, usually the pool of rubes runs out quickly or else, some extreme event forces mass redemption.

The potential number of subscribers in a Ponzi scheme isn't destined to run out at some predictable point? It doesn't even have to run out, since its pyramid form demands that the pool of subscribers must grow at a nonlinear rate.

The key issue of interest to me is simply that a Ponzi scheme is designed to bilk most of its participants for the benefit of a few con artists. SS was designed to benefit all of its participants in a socialist way.

The reason I started this thread is because I read a derisive comment elsewhere that SS is a Ponzi scheme. The person who made the comment may choose to become involved in this discussion.
_________________________
"You can't fix a problem until you understand what the problem is." Logtroll

Top
#293525 - 10/05/16 01:12 PM Re: Social Security [Re: logtroll]
Ezekiel Offline
old hand

Registered: 08/06/05
Posts: 6387
Loc: New York
No, if you can keep taking from Peter to pay Paul it can go on indefinitely, as long as you don't run out of Peters (pun intended). SS is not a Ponzi scheme, in the sense that it was not created to enrich a few at the cost of many, but the underlying dynamics are SIMILAR (not the same). That is why management is the key. Technically, in SS, you should never run out of Peters, and their number should, in fact, grow with time.
But, SS as an institution is NOT a Ponzi scheme.
_________________________
"The liberals can understand everything but people who don't understand them."
Lenny Bruce

"The cleverest of all, in my opinion, is the man who calls himself a fool at least once a month."
Dostoevsky




Top
#293526 - 10/05/16 01:14 PM Re: Social Security [Re: logtroll]
logtroll Offline
veteran

Registered: 04/26/10
Posts: 8942
Loc: New Mexico (not old Mexico)
I was equating a Ponzi scheme with a pyramid scheme - they have similarities but are not identical:

Wikipedia

Quote:
A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. However, several characteristics distinguish these schemes from Ponzi schemes:
In a Ponzi scheme, the schemer acts as a "hub" for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly. (In fact, failure to recruit typically means no investment return.)
A Ponzi scheme claims to rely on some esoteric investment approach and often attracts well-to-do investors, whereas pyramid schemes explicitly claim that new money will be the source of payout for the initial investments.
A pyramid scheme typically collapses much faster because it requires exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by persuading most existing participants to reinvest their money, with a relatively small number of new participants. (emphasis mine)

In any case, there is little similarity to SS.
_________________________
"You can't fix a problem until you understand what the problem is." Logtroll

Top
#293542 - 10/05/16 07:24 PM Re: Social Security [Re: logtroll]
pondering_it_all Offline
veteran

Registered: 02/27/06
Posts: 8242
Loc: North San Diego County
Quote:
SS is supposed to be like insurance, except that the managers of the government, at various times, use it much like Trump uses his foundation - as a slush fund for unrelated expenditures.


This is an eternal conservative meme, but it HAS NEVER HAPPENED. What SS has done is to invest in US T-Bills, which are the safest investment in the world. (Other governments even invest a lot of their money in them!) When you buy a T-Bill, the money goes in the general fund and the government spends it on lots of stuff. BUT THEY STILL HAVE THE T-BILL! Which SS can cash in anytime they need the money. (These are special T-Bills for SS only, with the same interest rates but the ability to cash in anytime.) You can actually go to the Washington, D.C. office of SS and see the T-Bills they keep in a vault.

It is an annuity rather than insurance, but operated as a non-profit. Commercial annuities are very much profit-oriented, which is the huge complaint about them. But there is nothing fundamentally wrong with them. In fact, most pensions operate in exactly the same way.

Right now, the "payin" and "payout" amounts are unbalanced because both are political hot potatoes. Nobody wants to fix it, because they might not get reelected. That's why all the predictions of insolvency. But all we really need to do is adjust a few things. Like keep the tax rate constant with no cutoff for the rich, or raise the full retirement age a few years.

Top
#293544 - 10/05/16 07:36 PM Re: Social Security [Re: Ezekiel]
Bored Member Offline
stranger

Registered: 03/09/10
Posts: 191
Originally Posted By: Ezekiel
All insurance is a form of "Ponzi scheme" inasmuch as it depends on an ever-growing influx of premiums in order to survive.


That's a bit of a stretch. Insurance has a purpose of protecting people and businesses against uncertainty which is necessary for investment. The increase in premium cost is a result of changes in legal liability and in many cases, the increased costs of construction, healthcare and/or products used in the repair/reconstruction of buildings, machinery or other property including automobiles. Other increases are a result of changes in risk. Such as in the change in risk to healthcare insurers due to legislation, think ACAs pre-existing condition clause.

I don't see any comparison to a Ponzi scheme that seeks a singular purpose of defrauding people out of their money.
That it is an aleatory contract and a contract of unequal exchange is no question but, the purpose is to pool large numbers of similar risks so that there is money to pay for losses incurred. Some insureds may collect more or less than they paid in premiums but they are really just purchasing certainty or peace of mind.

Another consideration is that insurers cannot raise rates willy nilly, they must prove to the DOI (Dept. of Ins.) that an increase is necessary for the risks they assume. Insurers must provide quarterly balance sheets to prove their solvency. They also must vie for customers in a very competitive market.


Edited by Bored Member (10/05/16 07:38 PM)

Top
Page 1 of 2 1 2 >

Who's Online
0 registered (), 40 Guests and 1 Spider online.
Key: Admin, Global Mod, Mod
Newest Members
TrentonP, Nosf50, erumonej, Jensen Breck, Albertapkr
6248 Registered Users
A2