Ponzi Schemes are for Suckers

by Don Boudreaux on January 1, 2009

in Social Security

Bernard Madoff and Ponzi schemes.

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{ 50 comments }

vidyohs January 1, 2009 at 11:53 am

Careful Don, you are edging very close to denying St. Franklin's greatest heritage.

You might find yourself in trouble with the Demoquisition, post 12/23/09. Be prepared to repent, the rack is particularly painful once one gets beyond age twenty.

Vito DiPaola January 1, 2009 at 11:57 am

Of course, one difference between the Madoff Ponzi scheme and Social Security is that at least investors with Madoff were involved voluntarily.

I am pretty sure none of those investors had guns to their heads when they signed up with Madoff, but when they began earning income they were coerced into contributing to the Social Security Ponzi scheme.

dg lesvic January 1, 2009 at 12:41 pm

Prof Boudreaux,

That's a good piece, but not up to your usual standard. You failed to mention the alarmingly diminished ratio of producers to recipients.

dg lesvic January 1, 2009 at 1:07 pm

I didn't word that very well. Rather than "ratio of producers to recipients," I should have said ratio of contributors to recipients, payers to payees.

tw January 1, 2009 at 1:29 pm

Had the same thought when the Madoff scandal broke. Excellent letter & hope somebody in the gvmt/media makes the comparison when Madoff gets dragged before Congress.

John David Galt January 1, 2009 at 4:56 pm

The only case where I'd call the victims 'suckers' is when they buy into a pyramid scheme KNOWING that it's a pyramid scheme (as in the rash of "airplane games" around 1980).

Madoff's operation was disguised as a legitimate brokerage and advice service, and as I understand it, it wasn't easy for even the police to penetrate that disguise.

How about some discussion/advice about how an ordinary person can check out a brokerage or mutual fund he is considering investing in, and find out whether it's real or phony?

If there's no way to tell, then perhaps even libertarians should call for some regulation (possibly by a private insurer rather than a government agency).

LowcountryJoe January 1, 2009 at 6:37 pm

Martin Brock will be by any time now to defend the system. IIRC, he believes that we have a moral resonsibility, as a society, to provide for our parents at their old age and that the Social Security system is a feasible way to do it.

LowcountryJoe January 1, 2009 at 6:42 pm

JDG,

When one purchases any asset, the purchaser has to beware. When one hires a money manager to pick the assets, one has to be especially aware and perform due dilligence and do so frequently. Sad but true — no legislation/regulation that could or would ever be concieved of cannot prevent crooked people from engaging in crooked behavior. Therefore, one can only atempt to minimize their exposure to being defrauded by crooks by doing their homework.

Bill Stepp January 1, 2009 at 9:03 pm

Good letter, Don, but you better check the address of The Grey Lady, as she has moved to 8th Avenue, south of 42nd Street, a couple blocks from the W. 43rd Street address you have listed.

Laffe R. Curve January 1, 2009 at 9:29 pm

As noted in a comment by Vito Dipaola above, Madoff did not force anyone to "invest" in his ponzi scheme under the force of law. Social security, in contrast, uses the force of law to steal 12.4% of your income and "invests" in the largest ponzi scheme ever conceived. It WILL go broke. There is no more a regressive and unjust tax than social security.

Social security was done by FDR in response to the great depression. I guess FDR really "shock doctrined" us.

dg lesvic January 2, 2009 at 3:38 am

For John David Gault, asking for investment advice, this from the Wall Street Journal a few days ago:

Common Sense

The Lessons to be Learned from the Maddof Scandal by James B Stewart

If you had the good fortune never to have invested in what may end up being the biggest Ponzi scheme in history ( after Social Security DGL), count your blessings. An alleged fraud like this could have happened to any of us, as it did to some of the worlds most sophisticated investors (even the venerable Henry Kauffman, as reported in the journal this morning DGL) .

There are lessons here, though not necessarily the ones that have been touted by much of the media.

Now that some of the dust is settling around the Bernard Madoff scandal, there has been a growing tendency in some quarters to blame the victims, at least in part. According to these theories, they should have recognized that annual returns of around 10% in both good times and bad were too good to be true. They should have been suspicious of Mr Madoff's vague explanations of how he arrived at those results. And the extent he described his strategy, which involved the simultaneous purchase of stock and sale of option contracts, they should have noticed that there wasn't sufficient volume in those options trades to account for the reported gains.

(There was another interesting explanation of Madoff's lure, that his firm was so big and accounted for such a large percentage of the market that he had a two hour lead time over rivals in seeing which way the wind was blowing. DGL)

The lessons from such criticisms, I suppose, is that we should all turn ourselves into forensic accountants. I find that preposterous, not to mention distasteful, given that some of these people have lost their life savings. After all, consistent returns in good and bad markets are the selling point for nearly every hedge fund. There are plenty that have reported much larger annual returns without raising eyebrows. Indeed, Mr Madoff's returns were good, but not so spectacular as to raise undue suspicion. As for his vague explanations, they were no vaguer than those of many other hedge-fund managers and even mutual-fund managers.

True, some potential investors examined Mr Madoff's operation and declined to invest. The same could be said of nearly every other hedge fund. In 2006, one potential investor actually branded it a Ponzi scheme and took his suspicions to the Securites and Exchange Commission. (Actually, that was a rival fund manager DGL) The SEC investigated and gave Mr Madoff a clean bill of health after he corrected some minor issues. How could that have happened remains one of the big unanswered questions of this affair. Nonetheless, Mr Madoff's victims can surely be forgiven for relying on what is supposed to be a watchdog agency.

Still, there were some red flags and lessons that we should all take to heart.

Mr Madoff's books were audited by a virtually unknown accounting firm. So the simple but vital lesson here is never to invest in anything — hedge fund, partnership, mutual fund — whose books aren't audited by a recognized accounting firm with a strong reputation and numerous clients, preferably one of the Big Four. Check your investments for the name of the firm that audits it. If you don't recognize it, research it on the Internet.

Diversify. This is obvious, but bears repeating given the many stories of people and institutions who tied up almost all of their assets with Mr Madoff. While it's especially hard to reduce an asset that seems to be doing so well, it's the essence of rebalancing and diversification. After all, it doesn't take a fraud to expose the folly of concentrating too many assets in one place. (Don't put all your eggs in one basket Mother Goose) A sharp maket correction can have the same damaging effect.

Don't believe anyone who tells you that you can earn higher returns while assuming a lower risk. If you're realizing high returns, then you're also accepting increased risk.

Don't rely on middlemen. Many Madoff investors were steered into their investments by advisors. With the proliferation of hedge funds and other alternative investment opportunities, such middlemen have grown increasingly popular. Many people don't want to have to think about their investments, but you can't abdicate all responsibility.

At the same time, don't lose faith in human nature…The vast majority of money managers are honest….

DGL here again. LowcountryJoe, I think you're exactly right.

Gamut January 2, 2009 at 7:47 am

I think an even more poignant difference between Madoff's fund and Social Security is that the latter is believed to be sustainable (by some) precisely because it is a Ponzi scheme.

Madoff never mentioned this safety feature to his clients — as they might have put their money elsewhere. Meanwhile, with Social Security, the justification for the forced 'investment' is actually that the whole thing would otherwise implode for lack of new investors.

The issue is one of population dynamics, not the nature of the scheme — it will go bust, we just have to wait until forced seizure can't compensate for the absence of children (maybe they'll fix that too).

Gamut January 2, 2009 at 7:49 am

Or, maybe, immigration law will be abolished in a fit of panic, "for the sustainability of our social support structure". I both hope to live to see the day, out of curiosity, and worry what it might produce.

Randy January 2, 2009 at 8:29 am

John David Galt,

"If there's no way to tell, then perhaps even libertarians should call for some regulation…"

I say, not more, but less regulation. Why? Because what is happening right now, with investment bubbles of all kinds bursting all around us, is a good thing. It will teach people not to trust blindly. Following Lesvic, this doesn't mean that we all have to become forensic accountants, but we do have to exercise caution. "Let the buyer beware", far from being obsolete political thinking, is actually just plain common sense.

Gamut January 2, 2009 at 8:57 am

"If there's no way to tell, then perhaps even libertarians should call for some regulation (possibly by a private insurer rather than a government agency)."

Yeah, that's pretty funny. Like an agency that determines which investment funds are profitable? Great idea.

LowcountryJoe January 2, 2009 at 9:59 am

Thanks for the kind words, DGL.

Hey, I don't know if you know it or not but you are able to format a post so that some of it — an article, for instance — is indented both left and right to set it off in blockquotes like you see just below:

blockquote effect

It can help another reader follow along better and aid him/her in distinguishing what is your contribution and what is being quoted from another source.

The html code to make that happen is: [blockquote]INSERTED TEXT WOULD GO HERE[/blockquote]. However you'll have to use an < in place of the [ and a > in place of the ]. If I were to actually type it as it's supposed to be, the effect would have been activated; so I used the brackets instead.

dg lesvic January 2, 2009 at 1:14 pm

Joe,

At my age, I'm happy just to be breathing.

David Johnson January 2, 2009 at 4:12 pm

It's fun to call Social Security a "Ponzi Scheme", but in truth it isn't. Instead it is a scheme to redistribute income from current workers to current retirees. As such it is not much different than any other welfare scheme.

There are, of course, a lot of blatant lies about Social Security that the government continues to utter, but it falls far short of being a true Ponzi Scheme.

Mesa Econoguy January 2, 2009 at 7:50 pm

Socialist Security is very close to a Ponzi scheme.

The technical definition of a Ponzi scheme is using cash from recent investors to pay off existing ones, or in the case of Socialist Security, stealing part of my paycheck (now) to pay my parents (who did pay in some, now). I do not expect to ever receive any benefit from this program, and am planning accordingly.

Social Security fits the definition quite well, and employs the exact same mechanism to stay funded, with the notable exception being the pool of people paying in is finite but involuntary (and unpredictable), and has no guarantee of matching the pool of withdrawals, which makes it an incredibly stupid idea. Further, the average return earned by this asset pool is a meager 2-3% (optimistically), while I can average 10-15% per year, though obviously not last year. The government relegates me to subpar performance because my “peers” in the electorate are too ignorant to recognize the con job, and cannot handle their own investments.

Madoff’s supposed investment “strategy” was based primarily in OEX options, and would have vastly outsized the market had he actually engaged in said strategy. Any amateur trader would have caught this. It is likely that Madoff engaged at least partially in this strategy for a time, but it became easier to falsify his records, restrict access, and maintain the returns.

Gil January 3, 2009 at 1:01 am

So do LCJ, dgl, & co. believe that the 'fraud' part of 'force&fraud' is nigh on impossible to enforce? Are 'caveat emptor' and 'due diligence' wild cards to prevent fraudsters from facing any charges?

On the other hand, is having many children another Ponzi retirement schemes used by many poor people around the world?

Martin Brock January 3, 2009 at 2:27 am

Martin Brock will be by any time now to defend the system. IIRC, he believes that we have a moral resonsibility, as a society, to provide for our parents at their old age and that the Social Security system is a feasible way to do it.

You're a very deliberate liar. I have never defended the Social Security system. I have never suggested any "moral responsibility, as a society" to provide for "our parents" or that Social Security is a feasible way to do it.

I have advocated proper obligations of individual children to support individual parents who supported them. That you can't distinguish this obligation from "moral responsibility, as a society" to "our parents" suggests your collectivism, not mine. Social Security clearly is not an obligation to parents at all. It is an obligation to a statutory collective regardless of any support of children, and I have opposed it as such for decades.

LowcountryJoe January 3, 2009 at 2:37 am

So do LCJ, dgl, & co. believe that the 'fraud' part of 'force&fraud' is nigh on impossible to enforce?

Impossible to enforce? Seriously, is that your question?

Here's an answer for you…please pay attention to it because it will probably be what the "and company" share as an opinion and any similar question regarding this should be laughed off as you not paying proper attention or just being stuck in an unproductive mindset.

Fruadulent activity can and should be enforced. But [and this is key], the fraudulent activity cannot be punished until after it is committed/performed/carried out. Thus the previous wording: "Sad but true — no legislation/regulation that could or would ever be concieved of cannot prevent crooked people from engaging in crooked behavior."

You did get that, correct? And you'll start reading to comprehend going forward, yes?

Martin Brock January 3, 2009 at 3:15 am

Further, the average return earned by this asset pool is a meager 2-3% (optimistically), while I can average 10-15% per year, though obviously not last year. The government relegates me to subpar performance because my “peers” in the electorate are too ignorant to recognize the con job, and cannot handle their own investments.

This analysis of the system is absurd, because Social Security is not now and has never been a statutory substitute for "retirement saving". It is a statutory substitute for the support of aging parents by their children. It is a very inequitable substitute, from the point of view of parents and most children, precisely because it is modeled on a nominally "Capitalist" Ponzi scheme of the Madoff variety.

You don't have any investment strategy averaging a 10-15% return annually. These "strategies" are always retrospective, and this thinking is precisely what leads men like Madoff to con their investors, typically after first conning themselves. Market efficiency ensures that a rational expectation of a market return is lower than your 10-15%. That individuals exceed 10-15% doesn't contradict this assertion, even if you turn out to be one of the individuals.

Regardless, comparing your "return" on payroll taxes to any genuine investment return is nonsense for other reasons. You might as well analyze the "return" on your mortgage payment. Despite the con, your payroll taxes are far more like your return on other investments in you than the taxes are like your investments. You are the fruit of your parents' investment, and the state taxes the yield of this investment to finance its schemes. The investors screwed by this scheme are your parents, not you. You are not likely to be the principal investor in your own productivity.

No, I don't say that you're the fruit of our parents' investment. I say you're the fruit of your parents' investment, assuming that your parents supported you properly. Obviously, I don't know you personally. Maybe your parents didn't support you. If they didn't, I don't suppose you should owe them anything.

Furthermore, much of your payroll tax finances disability insurance and similar insurance schemes. Comparing an insurance premium to an investment is also nonsense.

Mesa Econoguy January 3, 2009 at 4:23 am

Dear Café Brock,

Please consult muirgeo for my response(s).

Thank you.

Gil January 3, 2009 at 5:50 am

And I thought I was a grumpy fatalist LCJ! Oh well you can't prevent fraud so just roll with punches and try again (or maybe not).

But are you sure you can't prevent fraud then LCJ? Lopping off the perp's hands, feets or heads won't act as a detterent to those who would contemplate further fraud? Or do you suggest that if a l'il bit of homework can detect something amiss then it's hard to detect what actually is fraud versus just plain dopey blind greed?

Randy January 3, 2009 at 6:14 am

Martin,

"Maybe your parents didn't support you. If they didn't, I don't suppose you should owe them anything."

So what say we just leave the state out of it and let families decide?

LowcountryJoe January 3, 2009 at 10:57 am

Martin Brock,

Please forgive me for mischaraterizing your position on the Ponzi scheme known as Social Security. Clearly you do not spend time defending Social Security from criticism ["I support some sort of institutionalized parental support, because people need to prepare systematically for the obligation" ~ Posted by: Martin Brock | Feb 5, 2008 12:09:31 PM]. It must have been the 16 comments you left in that permalink where you seemingly argue with me and others who would wish to reform the system that led me to recall incorrectly. Or it could be your twisted idea of what property rights really are (found in that same thread) that caused confusion on my part. Or it could be your support for some form of socialized medicine that I'm getting this mixed up with.

David Johnson January 3, 2009 at 1:52 pm

Mesa Econoguy,

Social Security is not a Ponzi scheme because it is not an investment. Stop believing the government propaganda and look at the actual thing. There are no accounts. Period. No one can choose to contribute more to their account.

It's not a Ponzi scheme, it's a taxation and welfare scheme.

Martin Brock January 3, 2009 at 4:17 pm

So what say we just leave the state out of it and let families decide?

What say we leave the state out and let me decide whether I'll pay for a house you've built after I move in?

I'm completely content to let families decide what support, if any, children will provide their parents, but I'd let families decide as follows. If your parents support you, you owe them support in kind. Your parents then may forgive the debt. The family decides, but the decision is your parent's, not yours.

The difference between my proposal and yours is that you would "let families decide" by leaving the decision to yourself rather than your parents. Why is that?

For that matter, you're free to ask your parents to return your payroll taxes now, assuming they're collecting, and you're free to refund your children's payroll taxes from your own Social Security check, assuming you have children. Will you?

Martin Brock January 3, 2009 at 4:20 pm

Please consult muirgeo for my response(s).

Muirgeo's position is not mine. You simply offer no response.

Martin Brock January 3, 2009 at 4:34 pm

Please forgive me for mischaraterizing your position on the Ponzi scheme known as Social Security. Clearly you do not spend time defending Social Security from criticism ["I support some sort of institutionalized parental support, because people need to prepare systematically for the obligation" ~ Posted by: Martin Brock | Feb 5, 2008 12:09:31 PM].

You're right. I don't. The statement you quote is not a defense of Social Security, quite the opposite. I wrote this decades ago, and it's not at all a defense of Social Security. You simply ignore it, because it rejects assumptions of the system of forcible propriety that you prefer.

It must have been the 16 comments you left in that permalink where you seemingly argue with me and others who would wish to reform the system that led me to recall incorrectly.

Of course, I wish to reform the system, and by "reform", I mean "repeal it and replace it with something else".

Or it could be your twisted idea of what property rights really are (found in that same thread) that caused confusion on my part.

Your state worshiping idea of what's proper doesn't always coincide with mine. That's true enough.

Or it could be your support for some form of socialized medicine that I'm getting this mixed up with.

You're lying again. I've never suggested any form of socialized medicine. I advocate an obligation to carry health insurance. "Socialized medicine" describes centralized organization of means of providing health care, a different notion altogether. Medicine could be completely socialized without any obligation to carry health insurance, and health insurance can be an obligation without any socialization of medicine, just as automobile liability insurance is obligatory but not socialized.

Martin Brock January 3, 2009 at 4:51 pm

It's not a Ponzi scheme, it's a taxation and welfare scheme.

I don't dispute this assertion, but the system is unsound actuarially, so it is like a Ponzi scheme.

On the other hand, the unfunded liability of the old age pension scheme (without Medicare) is three trillion or so over the next century, depending on who you ask. Now that the Bushniks have handed Henry Paulson seven trillion to dole out to his banking buddies over a few months, it'll be next to impossible to argue that so few trillions over a century is perilous.

By the time the "trust fund" runs out, we'll already be financing 25% of Social Security benefits from income taxes, since the "trust fund" is nothing but a promise to raise more taxes, and the day after the last "trust fund" dollar is spent, we'll just go right on financing the same benefits the same way.

That's no defense of the system. I want the system repealed in favor of something like this, but what I favor is not what I expect.

Sam Grove January 3, 2009 at 6:32 pm

Social Security is not a Ponzi scheme because it is not an investment.

A Ponzi scheme is not an investment either.
It is presented as such, and so, frequently, is Social Security.

Randy January 3, 2009 at 9:14 pm

Martin Brock,

"The difference between my proposal and yours is that you would "let families decide" by leaving the decision to yourself rather than your parents. Why is that?"

Because that was the historical precedent from a time when parents exercised tyranny over their children. Social Security is just the same tyranny writ large.

Randy January 3, 2009 at 9:16 pm

Clarification; your proposed method is the historical precedent.

Anonymous January 3, 2009 at 10:04 pm

Because that was the historical precedent from a time when parents exercised tyranny over their children.

I don't recall any time when parents exercised tyranny over their children, and I strongly doubt that such a time exists. I instead observe a time, the present, in which states substitute themselves for parents on the dubious pretext that they protect children from their parents, rather like they protect us from weapons of mass destruction in Iraq. I'm convinced that my parents would forgive my debt to them if they could, because nature designs them so, and I'm equally convinced that hardly any Social Security beneficiary would.

Social Security is just the same tyranny writ large.

No. It's not at all the same. I discuss the very substantial differences here, and you're free to acknowledge these differences, if you will. In reality, Social Security is a statist effort to replace your obligation to your parents with obligations to holders of state entitlements, along the lines of the "capitalist" entitlements you presumably prefer.

Martin Brock January 3, 2009 at 10:12 pm

Clarification; your proposed method is the historical precedent.

It isn't precedented precisely, but it is more like the tradition that Social Security replaced than Social Security itself. I have no problem with that. Social Security is not an improvement. Abrogating your obligation to parents who supported you isn't an improvement either, any more than abrogating your obligation to people who built your house is an improvement. Ignore the propriety of the obligation all you like. Ignorance is bliss. That's why socialism is so attractive to so many.

Randy January 3, 2009 at 11:51 pm

Martin,

You should read Marx. He tells stories of parents hiring out children for factory work. Roman parents could legally sell their children into slavery. Or the Bible, for that matter – stories of patriarchy. And the tradition of patriarchy is still very strong in many parts of the world – and still was in America until very recently. It was against that tradition that the child labor laws were intended, and it is that tradition that you call upon in your belief that children have a default debt to their parents. Maybe you may want to go back to that, but I don't.

Martin Brock January 4, 2009 at 12:56 am

Maybe you may want to go back to that, but I don't.

I suggest that you support parents who supported you, and you start talking about selling children into slavery, but when I talk about moving into a house you've built without paying you for it, you don't imagine my obligation to pay as enslavement. Why is that?

You're happy to take something for nothing or at least to enjoy the illusion of it, but you're not so happy to give something for nothing. That's perfectly understandable. You'll ever be free of the statesmen's con games, because they're designed just for you.

Martin Brock January 4, 2009 at 7:40 am

To be very explicit and to avoid any accusation of duplicity, I do want to go back to the tradition in which parents had a property right in their children, in the modern, economic sense of "property". I want this right limited, as I want all property rights limited. I propose a limited right above, an entitlement to ten percent of income.

This limited right could be negotiable and probably should be. A negotiable right serves the child's interests, because it permits a parent to transfer all or part of the right to some other person potentially valuable to the child and interested in the child's development, as in an apprenticeship.

To be clear, I don't associate the ten percent with the cost of a child's education (as in an apprenticeship). Education is an additional cost in modernity. The idea that public education is "free" (in the sense of "without cost") to students is laughable. We pay taxes to finance it, and the taxes meaningfully pay for our own education, not someone else's education.

In a more traditional sense, children never ceased to be property of their parents, because "property" traditionally describes proper obligations as much as, if not more than, proper rights, and parents are still properly responsible for their children. "Slavery" suggests an entitlement to 100% of income, and this entitlement actually does exist during a child's minority. To this day, a minor child's income typically is the property of parents, and I have no fundamental problem with this standard. Parents are also obliged to support their child, and I have no problem with this standard either. Minor children are still slaves of their parents in this sense.

Anonymous January 4, 2009 at 7:42 am

Modern "slavery" suggests an entitlement to 100% of income. The word's earlier usage was different, since monetary "income" was largely nonexistent.

Randy January 4, 2009 at 7:51 am

Certainly I am indulging in a bit of hyperbole, Martin, but then so are you, when you assume that if the state doesn't force everyone to care for their parents that… what exactly? …something terrible I'm sure.

It seems to me that you've bought into the idea that the state can and must solve all "problems". Or perhaps you've just taken some mystic's moral code so seriously that you feel justified in applying it to everyone. Probably elements of both.

Martin Brock January 4, 2009 at 9:10 am

… if the state doesn't force everyone to care for their parents that… what exactly? …something terrible I'm sure.

If the state doesn't force people to pay their mortgage, what terrible thing happens? If liberty requires my freedom to choose not to support parents who supported me, why doesn't liberty require my freedom to stop paying my mortgage? I don't understand this distinction.

Terrible consequences aren't the point particularly. Propriety is the point. I don't expect much enforcement of an obligation of children to support parents who supported them, because the familial bond and a sense of reciprocal obligation both are natural. I expect more enforcement of other, less natural proprieties.

Because a child's period of dependency is separated in time from his parents' period of dependency by many decades, the reciprocal support requires considerable foresight and preparation, like retirement planning, and this preparation is much less natural. I don't object to systematic organization of it, and and state involvement is more about this systematic organization than about enforcement; however, insofar as a few people object to the obligation, this objection doesn't bother me.

I'm not an anarchist, and I consider the obligation proper, just as my obligation to exchange fruits of my labor for fruits of a home builder's labor is proper. Why expect a free ride on your daddy's shoulders? This free ride is just what paternalistic socialist swindlers promise to extend throughout your life.

Martin Brock January 4, 2009 at 9:26 am

It seems to me that you've bought into the idea that the state can and must solve all "problems".

Hardly. I repeatedly ask you to address a question, and you repeatedly ignore the question. How does this obligation differ from your obligation to pay your mortgage? Why is your obligation to support your parents "buying into the idea that the state can and must solve all 'problems'" while my obligation to pay for a house you've built is not? Why is that? Why is that? Why is that? I can ask the question as often as you ignore it.

Or perhaps you've just taken some mystic's moral code so seriously that you feel justified in applying it to everyone. Probably elements of both.

Incredible nonsense. What mystic's moral code makes you feel justified in forcibly evicting me from a house you've built when I stop repaying the credit you've extended? Your selective assertion of propriety is laughably self-serving. The plain fact is that you simply don't want an obligation to return the value your parents invest in you, but you do want my obligation to return value you invest in the house. The reason is laughably obvious. Your "libertarianism" is a childish double standard.

You think you have this free ride now, because the Social Security scam creates this illusion for you, and you like the illusion. You want Big Brother to stop making you support your parents and instead convert your payments to them into your own entitlement to demand the produce of others when you're as old as they are. That's just the incredible delusion that Social Security is supposed to create, and truly libertarian opponents of the system objected to it for precisely this reason when it was enacted.

Martin Brock January 4, 2009 at 9:30 am

"We are now trying, for obvious reasons, to get away from the system under which children must support their parents in old age. In a system [like Social Security] we would merely defer the support of the aged from children to grandchildren and charge interest on the period of deferment. Such a result would be exceedingly hard to justify."

Murray Latimer, Committee on Economic Security, Senate hearings on the Social Security Act, 1935

That's a real libertarian argument, not a "libertarian" politician's bullshit.

Martin Brock January 4, 2009 at 9:39 am

Now we're the grandchildren, and we still prefer the "libertarian" politician's bullshit to facing reality.

Randy January 4, 2009 at 2:29 pm

Martin,

As far as I'm concerned, the relationship between parents and their children is not now, never has been, and never will be any of the state's business. The fact that the state chooses to interfere is just that – interference.

Martin Brock January 5, 2009 at 3:37 pm

The relationship has always been a matter of law and still is. Parents must support their children, properly so, and children must still support their parents through the Social Security system, but the obligation is dressed up to look like "saving for retirement", so we can disrespect our children by denying the fact that they support us. We pretend to be like the "noble" lords who "free" their children of the obligations by threatening to shoot other children who will not pay their rents. The system is incredibly inequitable for this reason.

The whole problem is that a relatively shrinking group of children must support a relatively growing group of elderly. If children only support their own parents, this problem disappears, because people with few or no children receive less, and that's more and more people all the time. These people can well afford to invest for retirement otherwise, precisely because they support few or no children.

As far as you're concerned, the relationship between you and the occupant of some house you've built, or even some land you rent, is the state's business. Why is that? Why does the propriety of this obligation trump the propriety of an obligation to your parents? I don't get it. Did some mystic tell you that, or was it some "noble" statesman?

I don't believe in mystics. That leaves the statesman.

Randy January 5, 2009 at 11:08 pm

Martin,

"The relationship has always been a matter of law and still is."

So what? The state doesn't respect me and I don't respect the state. That's what happens when people interfere in things that are none of their business.

Martin Brock January 7, 2009 at 9:15 am

I'll ask the question again. Is my refusal to repay credit you've extended on a house you've built the business of the state or not? Repeatedly ignoring a question doesn't remove it from the record.

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