Skip to main content

What is a Ponzi scheme?

Texas Governor Rick Perry caused some controversy in recent Republican Presidential Debat by referring to the US social security system as a Ponzi scheme. Here's what he was alluding to:

A Ponzi or pyramid scheme attracts investors by offering very high and consistent profits. In reality these 'profits' do not exist - early investors are paid with the money contributed by later ones.

The original Charles Ponzi (1882 -1949) was not the first to run a pyramid scheme, but the collapse of his Boston-based financial fund in 1921 became an international scandal.

All Ponzi schemes are eventually destroyed by the thing that sustains them: confidence. While the scheme is successful there does not appear to be a problem. The infamous Madoff fund prospered for decades until the financial crisis of 2008. It was when investors tried to withdraw their capital that the fraud was revealed.

The use of the term Ponzi Scheme is no longer restricted to describing direct financial fraud. Nassim Taleb in 'Black Swan' argues:

Only Ponzi schemes should depend on confidence. Governments should never need to "restore confidence". 

Perry's argument is that US social security is a Ponzi scheme because those paying now cannot realistically hope to collect on their investment  in the future. 

Ponzi's Scheme: The True Story of a Financial Legend
No One Would Listen: A True Financial Thriller
Too Good to Be True: The Rise and Fall of Bernie Madoff
The Black Swan: Second Edition: The Impact of the Highly Improbable:


Popular posts from this blog

What are the most quoted lines of poetry?

Why is English not the official language of England?

58 countries list English as an official language - but not the UK. The world's lingua franca or second language is not, technically, the 'official' language of its birthplace. The de factoofficiallanguage of the United Kingdom is English,[3][4] which is spoken by approximately 59.8 million residents, or 98% of the population, over the age of three.[1][2][10][11][12] An estimated 700,000 people speak Welsh in the UK,[13] an official language in Wales

Which countries do not have an official language?

According Henry Hitchings Language Wars (2011) these nations do not currently have an official primary language: UK see hereUSAthough 20 states now have an official language — see hereAustralia 80% speak English but not officialPakistan Urdu became official language in 2015 but  only spoken by 8% of population.EthiopiaAmharic is official language but most spoken is OromoSomaliaEritrea Costa Rica Why these countries?Read extended transcript on Medium 

About the English Language - Teaching Packonly £2.99