What’s a “Ponzi Scheme”?

All the talk in the news this week has been about the largest ponzi scheme in history.  Since I was not exactly sure what a ponzi scheme was (maybe that shows how ignorant I am), I looked it up.  Here is one of the definitions that I found:

a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from the profit from any real business.

If that is what a ponzi scheme is then this latest case is certainly not the largest ponzi scheme in U.S. history.  No, I pay a portion of my paycheck into the largest ponzi scheme ever: Social Security.  Read the definition again.  What is the difference between that definition and Social Security?

Advertisements