Ponzi Schemes

A Ponzi scheme is an investment that promises large returns on investment, and accomplishes this by paying current investors using the money of subsequent investors. The perpetuation of a Ponzi scheme depends on a constantly expanding set of new investors. For this reason, all Ponzi schemes are destined to fail as the ever increasing amounts of money needed to maintain the scheme outstrip the ability of the scheme to attract new investors.

Since the money in such a scheme is used to pay previous investors, it is never invested in monetary vehicles that expand the money pool. For this reason, growth in the funds can only be executed by growth in the pool of investors. That is exactly how the Social Security system functions. The money that is in the Social Security trust fund must by law be invested in Treasuries. For this reason, there is no money in the Social Security Trust fund, just a file cabinet filled with government bonds. Trillions of dollars in IOUs. 

This works well until the incoming "investors" begin to inevitably be outnumbered by the recipients that need to be paid. The only reason that the Social Security system has lasted as long as it has is simply due to scale, but even this has run out. For the first time since its inception, Social Security is being paid out in greater amounts than it is taking in. The collapse of this Ponzi scheme, as with all such schemes, is inevitable, and in this case, imminent.

Simply stuffing these funds into a figurative mattress by loaning the money to ourselves, and then spending it on social projects makes as much sense as a man standing in a bucket and attempting to lift himself off the ground by feverishly tugging on the handle.