A Ponzi scheme, according to Wikipedia, is a fraudulent investment operation that pays returns to investors (aka “taxpayers”) from their own money or money paid by subsequent investors (aka “young taxpayers”) rather than from any actual profit earned.  

The system collapses when new suckers (aka “taxpayers”, “depositors” and “policy holders”) cannot be found because they have figured out the scam:  that the promised returns and benefits are at great risk and are being paid with their own money or someone else’s new money. 

Think about what is going on right now in the economy with the government helping save the banking and insurance industries. 

1. The government is saving (called a “benefit”) our financial system by borrowing trillions of dollars to help failing banks and insurance companies survive incompetent and, in some cases, corrupt management and policies. 

New younger taxpayers, probably not the older generation, will be paying most of that debt later. The system fails if they cannot pay. 

2. The banking system takes our deposits, pays us little or nothing, and then multiplies our          money by lending it to supposedly viable businesses and credit-worthy people or investing in “safe”  conservative instruments, like something called “toxic assets”. 

Then, when banks fail due to some either dumb or unethical decisions, we do not let them fail because they’re too big.

The market cannot correct on its own. So, the government helps destroy the American free-enterprise by supposedly fixing the problem with bailouts and stimulus packages.  Taxpayers save the banks. Maybe … .

 3. And, the insurance companies — we pay them huge sums of money to insure and protect ourselves against significant and/or catastrophic loss until we actually experience a loss. 

Then, many of them then do everything they can to minimize or avoid paying the loss, or raise the rates to astronomical levels so they can be sure to make a profit, or better yet cancel the policies that are in a high risk area. 

Somehow, the European banks and financiers insured by AIG did get paid $30-40 billion with taxpayer money, as did the AIG managers who had valid contracts calling for bonuses.

The reader can decide if these are Ponzi schemes.  Whether the federal government, banking and the insurance industry can be called Ponzi scams is irrelevant. 

They all entice us with “benefits” that must ultimately be paid for by, you guessed it, us and our children and our children’s children, ad infinitum.

At some point, somebody needs to understand that we may not be able to afford these “benefits”.  

I hope that President Obama, his administration and the U.S. Congress know more about economics than I do. 

My belief is that production must always be equal to or greater than consumption in the long-run. 

Borrowing and increasing debt works for a little while, but sooner or later the “benefits” must be paid for. 

Sincerely, 

A. J. Benintende

Gulf Shores, Ala.