Social Security is a massive Ponzi scheme

Published 12:00 am Sunday, March 27, 2011

Unlike a 401k or private sector retirement fund, Social Security is a Ponzi scheme.

Contributions of today’s workers are disbursed to today’s retirees. Contributions have historically exceeded disbursements, and the excess contributions were deposited in a trust fund administered by the United States Treasury.

However, disbursements will soon begin to exceed contributions and the shortfall will be paid from the trust fund. Each year the shortfall increases because the number of retirees grows faster than the number of contributors. In 2040, the trust fund will be depleted and the shortfall will have reached 30 percent.

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Since the trust fund can no longer pay the shortfall, retiree benefits must be reduced proportionally. But there has never been any money in the trust fund; the Treasury borrows it. There is only a book value which is guaranteed by the Treasury.

Until the book value is repaid, the shortfall must be funded by the Treasury; and since the Treasury is broke, the money will be borrowed from China.

Chet Barber