The Public Pension System: A socially tolerated Ponzi scheme

The public pension system and Madofff

In one of the last articles published in the blog we talked about Bernie Madoff, the Wizard of Lies. In el, Eloy Fernández BretonesHe explained to us how this so-called finance guru managed to scam tens of billions through a pyramid scheme. In this article you will explain a real example of a pyramid scam or Ponzi scheme that affects us all, the Public Pension System in Spain.

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A socially tolerated Ponzi scheme

After knowing how the magician of lies acted, any person with a minimum of empathy and common sense will conclude that the Bernie Madoff scam is an unacceptable "bitch" and that its architects had to be punished with the full weight of the Law. But If we ask those same people, within an ethical and moral approach, about the Public Pension System, things change. Except worthy and thank God more and more exceptions, the majority of people will positively value the effort that ordinary citizens make today to maintain this system, and will place the sacrosanct state as a guarantor and safeguard of citizens' savings.

This is how the Public Pension System works

The public pension system works exactly like the scam perpetrated by Madoff. It attracts participants (or rather, forces them), to contribute money with which to pay former participants. The scheme is a clock when by some means the base becomes wide and the top narrows, but it becomes unsustainable when the system is no longer capable of incorporating new participants in order to pay the old ones.

Evolution of the population pyramid in Spain

Evolution of the population pyramid in Spain

For example, in the case of public pensions, a dynamic demographic, with high birth rates and a low life expectancy will make the system, beyond ethical approaches, sustainable. But when the situation is the opposite and people begin to contribute later and earlier and receive earlier and earlier with an increasingly reduced mortality, failure is assured.

What is the difference between the Madoff scam and the Social Security scam?

Mainly, that the Social Security is a visible scam, but from which it is impossible to escape. Instead, Madoff's is a scam that was very difficult to detect or imagine, but which was entered voluntarily. You put your money in what was assumed to be a great investment vehicle and did not suspect that it was all tramoya and props. In other words, there were a multitude of scammers at Madoff, including modest savers, entrepreneurs, banks and investment firms from around the world. This is tragic, but we are all involved in the Public Pension System scam, there is no choice, there is no opportunity to avoid deception. It is a deception from the start and we all participate.

Some are aware of the seriousness of how the mechanism that makes the system “work” is articulated, others simply oblivious or even complacent, but we are all part of it whether we want to or not. But there is still a more noticeable difference and in my opinion determining: the Public Pension System is a socially accepted scam. If it weren't, politicians, who are vote buyers, would have already overthrown the system. At least they would have modified it substantially.

The Public Pension System, a Ponzi scheme imposed by Law

The Public Pension System, neither more nor less, is a pyramid scheme like any other, but sponsored by the state and therefore made and conceived for the “common good”.

As a last piece of information in this regard, say that the Madoff fraud amounted to 55.000 million dollars. The Spanish state will spend 140.000 million euros on pensions this year, 3,1% more than last year. This turns Spain into one of the countries that allocate the highest percentage of its GDP to pensions. It is a figure and a percentage that has not stopped growing and that everything indicates that it will continue to do so in the coming years. Furthermore, the population of contributing age is reduced and the beneficiaries, and the life expectancy as a consequence of the well-being and progress that the market offers us, increase.

Judge for yourselves.