9/23/2004

Who is Charles Ponzi?

This is an interesting story from NPR that explains what is the story of Charles Ponzi. In my home country a Ponzi scheeme is called this "Piramidación" to make financial piramids using other people's money. That is what basically Ponzi did in the 1930's and made himself famous for that. To add an interesting twist to the story Ponzi died in Rio de Janeiro in South America, why did he went there? Listening to the story I could not stop thinking how many state institutions behave like a Ponzi scheme. Social security is the most close example. The government makes everybody pitch in, so when you are old you get in return a pension to sustain yourself. Now the problem is that as the population grows older the payments start kicking in and that is when you have a problem. Since the money that is collected was not enough to cover future desimbursements it turns out that the only way to support it is you either increase the contribution on the younger ones, break your promise of paying x amount to the older ones or start running deficits and wait until congress or the President try to salvage it so the people don't loose their savings. Why a Ponzi scheme is a crime if the government does that everyday? Check also this webpage to learn more about Ponzi


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