Ponzi Schemes are a common problem with these opportunities so I want you all to understand how these work and how to identify them.
Basically the most recent people who get into the opportunity are having their money used to pay returns to those who have already been in the opportunity. There really is no business model or product or service that is provided to the investors. They just give their money up and hope they get as good of a return as the previous investors. These plans are completely illegal in the United States and are prosecuted harshly by the federal government. Just as Bernie Madoff. He is the most recent person to get caught running an investment that ended up being a ponzi scheme. The key to keeping a ponzi scheme going is you always have to have more people putting money in all the time. If the money stops going in the system falls apart.
These plans have been around for a very long time. Now I did say that these are illegal plans yet I have to qualify that statement and say they are illegal if the government does not sanction it. Yes there are "ponzi schemes" that the government does endorse. Take a minute and follow me now.
Social Security is a plan created from the depression that was used to help the people have some sort of government sponsored retirement. What would happen is all workers would put a little money into a trust fund and the government would take that money and hand it to current retirees. This was never meant as a government savings plan. The money you put in pays the benefits of the current retirees.
When this plan was put in place there were more workers than retirees. As time progressed and the baby boomers came along there was a lot more workers than retirees. now as the baby boomers retire there are more retirees than workers. During the Clinton administration the GAO (Government Accounting Office) stated that social security could now sustain itself for much longer. Recently the government has admitted that by around 2030 social security will not be able to pay out money any more.
I know it is a very simplified understanding of it yet I hope it helps you understand that taking control of your own finances is a good thing.
If you are looking forward to having Social Security to help you pay your bills when you retire you may want to think again since it probably won't be around much longer. I would recommend reading Robert's Book Conspiracy of the rich to learn more about how not to lose it all as the government figures out more ways to print and spend money. Click on the links and check it out.
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