explaining financial terminology.

With all this talk of “Ponzi schemes” and confusing financial terms being thrown around in the news today, I thought it might be helpful to explain some of those terms to the interested layperson.

When a private citizen accepts investment money from people, and uses the cash from subsequent investors to pay out promised gains to the early investors, we call that a “Ponzi scheme” (although that term is likely to be replaced by “Madoff scheme” in the near future.)

When the government accepts investment money from people, and uses the cash from subsequent investors to pay out promised gains to the early investors, we call that “Social Security”.

The difference between the two is that investing with the private citizen is optional.

5 thoughts on “explaining financial terminology.

  1. Wow, over simplistic definition of social security. I sense Conservative hostility toward anyone less fortunate……. what a huge surprise.

  2. Don’t forget that the very earliest recipients of SS largesse probably didn’t ‘invest’ any money at all.

  3. Antibubba says:

    Even now, there are thousands of dismayed Nigerians who wonder how they will ever top Bernie Madoff.

  4. Reed says:

    The earliest recipients did “invest” in Social Security… and BOY did that pay off for them. If my memory serves me, the first recipient “invested” 5 cents and got back over 20 dollars.

  5. Marko says:

    futiledemocracy,

    1.) I’m not a Conservative.
    2.) Being “fortunate” has nothing to do with retirement savings, or Social Security.
    3.) How much of your monthly income after taxes do you spend on aid for those you term “less fortunate”? How much profit do you allow yourself for your work?

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