Saturday, December 13, 2008

If only he'd worked for the government...

The news is awash with the story of Bernard Madoff, who swindled $50 billion from investors.

Federal agents arrested Madoff at his apartment on Thursday after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "basically, a giant Ponzi scheme."

A Ponzi scheme is an illegal investment vehicle that pays off old investors with money from new ones, and is dependent on a constant stream of new investment. Because the invested capital is not earning a sufficient return on its own, such schemes eventually collapse under their own weight.

So my question is this - other than the fact that it is smaller and not likely to bankrupt an entire nation, how is this any different than Social Security, or Medicare?

1 comment:

  1. It's different because the government didn't think of it or do it.