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Why are ponzi schemes illegal?

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posted on Jul, 14 2010 @ 10:02 AM
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First off, what is a "ponzi scheme" ?


A fraudulent investing scam that promises high rates of return at little risk to investors. The scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors.


www.investopedia.com...

So, basically, a person first gains the initial investors, promising great returns. Then, they gain more investors to payoff the initial group, and so on.....(ie. the biggest case we hear about = Madoff)

How can this be illegal when this is the FUNDAMENTAL principle involved in ALL banking that we are involved in on this planet??

The U.S. of A. has been doing this successfully for over 200 years I might add!

So, how can this be illegal?





posted on Jul, 14 2010 @ 10:11 AM
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It's illegal because the they never tell you that they are simply taking money from new guys to pay off the old guys. They lie, tell you that they are using some cryptic mathematical wizardy to best the market or some other nonsense. There are laws in place to help less savvy investors avoid being fleeced. These scams break these laws.

Now, given all that, your question as to why the banking system is allowed is a bit off. The bank holds your money and pays you interest on it. If you want your money back, by law, they have to give it to you. On the spot. Not in a day or a week. In theory, they have all depositors money sitting in the vault. Obviously, this is not necessarily the case, which is why a run on a bank can, at times, cause a bank to fail but, again, in theory, they are supposed to have that money on hand.

A bigger question is about Social Security. That is the single largest, longest running Ponzi I can think of. Your money is taken from you, you get no statements showing it's worth, no reporting as to how it is invested. You are simply told that, upon retirement, you will receive XX amount each month. With more retirees than contributors, that money will run out and the last in shall be fleeced.



posted on Jul, 14 2010 @ 10:14 AM
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You are mistaken.

Social Security is perfectly legal.

Hell, it's enforced at gun point.



posted on Jul, 14 2010 @ 10:45 AM
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The mathematics of a ponzi scheme are such that it can never sustain itself. Eventually you run out of new investors to support the old layers of investors and that happens pretty quickly, because the system requires geometric growth: 2 investors to support 1, 4 to support 2, 8 to support 16. At that rate of needed growth, you very soon get to the total population of the world needed to support those who've gone before in the scheme, and obviously the thing will collapse before you get anywhere near that, even.

As for Social Security, right now it is like a ponzi scheme, but it wasn't intended to be when first set up. When it was first created, the average life-expectancy was BELOW the age at which benefits start, so more people were paying into the system than where receiving benefits. But now, average life expectancy is a almost 10 years longer than the age at which one receives benefits, so they system can't be sustained. The way to make it work is to raise the retirement age to something like 75...hard part is finding support for something like that in congress.



posted on Jul, 14 2010 @ 10:50 AM
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Ponzi is Fraud
Banking is Fraud
Our collective western civlization is a Fraud

Welcome to the 21st Century Fellow debt slaves. Well I dont have any debt, i dont have any money either, but I have no debt, and am on the way to claim my freeman status!

PS.. what kind of question is why is Ponzi Scheme illegal? Does it seem legit to lie and steal from people?



posted on Jul, 14 2010 @ 10:57 AM
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Originally posted by Le Colonel
PS.. what kind of question is why is Ponzi Scheme illegal? Does it seem legit to lie and steal from people?


No, of course it isn't right to lie and steal from people. The question is posed to provoke thought...which hopefully it has...you already understand it.

It's all one big ponzi scheme!

Only those in power get to choose which ones are "legal" and "illegal".



posted on Jul, 14 2010 @ 11:00 AM
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Originally posted by LifeInDeath
The mathematics of a ponzi scheme are such that it can never sustain itself.


Precisely!


So, our current financial system must, by definition, fail. The only question is when? .



posted on Jul, 14 2010 @ 11:02 AM
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Originally posted by Signals

Originally posted by Le Colonel
PS.. what kind of question is why is Ponzi Scheme illegal? Does it seem legit to lie and steal from people?


No, of course it isn't right to lie and steal from people. The question is posed to provoke thought...which hopefully it has...you already understand it.

It's all one big ponzi scheme!

Only those in power get to choose which ones are "legal" and "illegal".



yeah rereading how I wrote that, It was kinda "harsh" the way i directed it. Thanks for answering diplomatically. Ive been bitter lately about people around me, Im still human, and I can react quickly sometimes before thinking out what I really want to say..

I do not consent to be governed by the Canadian Government. They have proven that they cannot do the job. I dont know how to fix this problem, but hopefully through discussion like this some ideas may fly out..




posted on Jul, 14 2010 @ 11:06 AM
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reply to post by Le Colonel
 

If you are from the US, can we make note of this should you ever try to get disablility or retirement income from Social Security?

I've seen lots of people say what you do, but end up with their hand out when they can.



posted on Jul, 14 2010 @ 11:18 AM
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Originally posted by Crakeur
A bigger question is about Social Security.


I know you know, but have to answer anyway. It's allowed because to disallow it at this point will necessitate an unacceptable political risk. No one's going to rectify that mess. It'll continue until it crumbles. Then, whoever happens to be standing in front of it will use the "not my fault" excuse.

Whatever finger pointing it takes to get through the next election cycle. Gerrymandering assures the vast preponderance of incumbents get reelected, certainly the overwhelming majority of the incumbent party candidates in any individual district. You don't even get to play the game until you've gone through the party gauntlet to have your principles beaten out of you.

Want to make a change? You have to win. Want to win? Here's what it takes... [List various and sundry unpalatable, for any reasonably prudent ethical person, requirements]

Is it fixable? Sure, but not with the mindset that brought us to this point. Which means, don't count on it.

As an ATS Staff Member, I will not moderate in threads such as this where I have participated as a member.



posted on Jul, 14 2010 @ 11:42 AM
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For the same reason we have most laws. People are stupid enough to fall for it and so they want a law passed to free them of the consequences of their stupidity. If it was up to me I would let them reap what they sow.



posted on Jul, 14 2010 @ 11:47 AM
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Originally posted by yeahright
Is it fixable? Sure, but not with the mindset that brought us to this point. Which means, don't count on it.


I am adding you as a friend for that one statement. This is the one statement that sums up the entire world condition right now.



posted on Jul, 14 2010 @ 11:57 AM
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reply to post by Crakeur
 

Actually you do get statements showing what you have and it is even broken down by place of work and years. All you have to do is go to your local Social Security office and fill out the paperwork. I did that years ago and I get a statement once a year. Now you could probably do it online.



posted on Jul, 14 2010 @ 12:05 PM
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reply to post by Signals
 


That's why our congress belongs in jail. Social Security is a ponzi scheme, as they have already spent, and not invested, the money. How do they get away with it? Simple. They changed the contribution to a "tax." Semantics. Lock them up.



posted on Jul, 14 2010 @ 12:13 PM
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reply to post by CaptGizmo
 


no, what the SSA sends out is a statement of contributions and a projected monthly payment upon reaching certain ages. What they don't tell you is how much you actually have. For example, if you had the option to self direct your social security, you'd get a statement that indicated the actual balance in the account, not just the amounts deposited.

If you went to your bank and asked for a statement and they printed out something that only showed how much you've put in, not how much you've earned, you'd be concerned, no? I've contributed quite of bit of cabbage to the Social Security pool in my 20+ years of working. I'd like to know how much I actually have amassed, including interest and/or dividends. I can't get that figure because they pool the money and distribute payments to folks who started investing in the ponzi before me.



posted on Jul, 14 2010 @ 12:20 PM
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What should be noted though that most participants in the schemes choose not to do their due dilegence in getting the info needed to ensure the investment(s) were legit and viable.

Each state has a Securities and/or Insurance/Banking Department that can look at proposals and the peddlers behind them and can spot these things but.... again, hoping for a larger profit than normally expected they circumvent the established laws (that are there to protect them from this type of activity)-thus opening themselves up to the sharks!



posted on Jul, 14 2010 @ 12:22 PM
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reply to post by anon72
 


True but I think you're missing the point.

Why are some ponzi schemes illegal but others aren't?



posted on Jul, 14 2010 @ 12:23 PM
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reply to post by stars15k
 


there is a balance between the two that i would like to reach. I still pay my taxes, but as far as if the powers that be will let me ever get that money in 40 years, is another topic all together. The money will probably not be there, so i need to fend for myself, hence the freeman status..

oh, and thank god im not in the US. Im in Canada, dans la belle province



[edit on 14-7-2010 by Le Colonel]



posted on Jul, 14 2010 @ 12:30 PM
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reply to post by Signals
 


they're all illegal. the banking system, social security etc are not ponzis, even if they resemble them. (ok, social security probably is)



posted on Jul, 14 2010 @ 12:41 PM
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The following is my opinion as a member participating in this discussion.

A rhetorical question? Legal vs illegal is a subjective call made by the government. If all 3 branches agree it's legal, then it's legal. Until it's declared illegal by a court, and probably multiple courts, after appeals.

Sort of like balls and strikes. An unhit pitch is neither until the umpire makes the call.

Of course, the big difference is that federal programs mutate. They tend to become something other than that for which they were originally designed. Circumstances for which they were originally established change.

Theoretically, the legislature will make the modifications necessary to ensure compliance with the law, along with changes logical to address updated conditions.

In reality, you have a big pile of cash everybody gets googly over. Hence, Gore's proposed hypothetical "lock box".

It's all psychodrama. Strap in and embrace the horror.


As an ATS Staff Member, I will not moderate in threads such as this where I have participated as a member.



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