Monday, December 22, 2008

Max Keiser on Madoff case

Max Keiser comments on the Madoff case and compares it to the U.S. social security system.

In both cases, there is a Ponzi or pyramid scheme in which there is no "fund" involved, but dividends were payed by people currently paying into the system. Madoff's empire broke down because the financial crisis impaired the ability of new members to pay sufficient funds to keep the scheme going. Keiser thinks that the economic crisis could last long enough to threaten the multi-trillion Social Security system, which is also unfunded and relies on current workers to pay for current benefits. High and sustained unemployment could dry up the funds bankrupting the Social Security administration.

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