I think it actually fits quite well.
A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
Meanwhile, the current pension system in most countries depend on a growing population to spread out the payments for pensioners over multiple workers.
Ponzi schemes collapse when there aren’t enough investors to sustain the dividends to be paid to the existing investors. Most countries’ pensions rely on an increasing amount of working age inhabitants to pay retirees and are now having issues paying out pensions due to the shift in demographics, that’s why many countries have been increasing the retirement age recently.
There are 2 solutions to this.
- Increasing birth rates, this option is not sustainable in the long term but is commonly preferred for reasons mentioned below.
- Migration. There are currently plenty of countries with a large working-age population and a weak economy. Letting those migrate would solve the demographic issue, but is political suicide.
This is a fundamental misunderstanding of how these funds work.
The goal is not to pay people with the money from new people paying into the pot. They invest the money and then the pot grows and that money is used to pay out. When the pot is not growing enough - whether because investments aren’t doing well enough, or you designed a you designed an bad system where people can withdraw from it for too long, or any other many possible issues - then yes you functionally end up dipping into the money given by new people, but this is not how it was designed to be used.
You are acting like this is a one-to-one system where you just put money in, then you get money out later, and all of the money given out is 100% the money that people put in in the first place with no intention of growing that money or finding a sustainable way of disseminating it long-term.
Mismanagement/poorly built systems are not the same as Ponzi schemes. Unless you think, I don’t know, US Social Security is also a Ponzi scheme?
Of course I understand that the money that is put in is invested, but that doesn’t mean the problem goes away when the system relies on the “pot” growing at a certain rate.
EDIT:
Mismanagement/poorly built systems are not the same as Ponzi schemes. Unless you think, I don’t know, US Social Security is also a Ponzi scheme?
I’m not implying that it’s the same, just that the comparison fits better than you might expect.
