Calling Social Security a ponzischeme is not right!
Ponzi and Madoff acually had to convince their victims to invest in them and do all the work to keep up appearances. The gov't just points guns and extorts the money from you but i guess the politicians do a good job at selling that crap to the public. With a ponzischeme you can choose to participate, with SS you can't.
so once Ponzi scheme started, it cannot end it? so no exit strategies? does that means if you wanna start ponzi scheme you will have to continue the scheme secretly till you die or get caught. what a life just to make yourself rich.
BTW, can ponzi scheme modify a bit to work like "fixed term saving", i.e. signing a contract that you cannot get your returns let say 3 years time, if so you can only get the original money that you put in?
Every year I get a newsletter from the SS Administration showing my payment history and how much I can expect to make when I retire. There's just one catch. SSI is based on money actually set aside for retirement purposes. We all know this doesn't happen. What the SSA really does is takes the money they receive then send checks to current retirees. SS still keeps sending me those annual newsletters telling me lies about what I can expect to receive when I retire. AFAIK this IS a Ponzi scheme.
@kxmode I don't know how it works in the US,but here in Brazil the Law predicts that, if there's more money going out than coming in social Security, money from specifical taxes must be redirected to cover the "hole"
@conyo985 I don't play the stock market and I'm too dumb to understand commodities trading, the FOREX, and other non-stock trading markets... so I put my money in a Morningstar 5-star rated mutual fund. I'll let the manager handle all that crap for me. :)
Social Security is a Ponzi Scheme you are forced to pay into if you work. You get a periodic statement showing that "your" money doubles every year (because your employer pays a matching amount), but in reality, all that's in the "lock-box" are non-negotiable IOUs. If you die before you cash out, you can't leave "your" money to your children, and if you live long enough to deplete the available "pot" of money, why, the government pays you from current "investors." Medicare is even worse. Fraud!
@OperationThor Yeah, fractional banking is sort of like this. The difference is banks use your money to make loans, the interest on these loans is the bank's profit. So, the bank's assets always equal their liabilities and still make money. Bank runs (where everyone tries to withdraw their money all at once) are very nasty, but they don't happen very often nowadays because governments insure bank deposits.
@42streetsdown yea but there is only around 800 billion paper dollars in circulation so if there is a HUGE nationwide bank run and the government is forced to insure bank deposits they have 2 options, give you cash by printing or giving you numbers on a computer screen. And in a bank run everyone wants cash, so if they dont print cash is going to surge in value, if they do print its going to drop tremendously in value. If confidence is lost in the system... gameover.
Larry---Larry---Remember me? Yer old old buddy from the; "Both Hands & Both Feet" (at the same time)---in the Corporate Lunch Box---before the bosses had all gone home and before we were even ten minutes into the shift???
I been waitin' fer yer e-mail---or for ya' to answer the phone--I missed you at my Farewell Party---I had requested that you play "MY" version---which was a pretty good parody on Gene Watson's --HIT!" Gimmee a buzz---Txx JK
Yeah, I've heard it before. Just today in the news when they quoted Paul Ryan as saying Social Security is a ponzi scheme, when he was chiming in to the ever-so-brilliant Perry.
AND they're quoted as saying "That's how those ponzi schemes work." Meaning, I guess, the way Social Security operates.
@vickiormindyb it was rick perry that was saying "social security is a ponzi scheme" but I wouldn't expect him to understand social security since he barely passed his economics and government classes to get his ~2.4 gpa in animal science... lol
Bernie Madoff actually LOOKS like someone who works in financial services. My friend, Robb, doesn't even remotely look like the stereotypical entrepreneur.
He's too good-looking, and physically fit, w/ lots of hair. The stereotype of a banker or entrepreneur in MY mind looks like Bernie Madoff not Robb.
My daughter says he's ripped, and I didn't even know what that meant until she explained it.
I never heard the term Ponzi schemes until I met my friend Robb, and that was just a few months ago.
I heard it in connection w/ Bernie Madoff, but I didn't know how you spelled the name until just now.
Of course I don't see how I could have been looking at him like he's Bernie Madoff when I never heard of the guy until he mentioned him, but we won't dwell on that.
I listened to Robert Kiyosaki's advice on silver: "I believe this is the biggest investment anyone can make in the next 100yrs" I did my research and found an opportunity that has changed my life in 12 months. Take a look like i did.... Visit: goldsave.co/
As far as I see, if your investments only show up on paper, you could very well be in a Ponzi scheme. Buy tangible investments: precious metals, rare coins, rare books, artwork, etc. Don't trust paper.
The longest lasting and largest ponzi scheme of all time that we have yet to discover- is that we give actual value away in return for empty promises and notices of debt, and have been doing this for endless generations at the cost of human dignity for all.
Your missing the illegitimacy with a Ponzi scheme. Just because they have analogous elements does not make them the same. Its the difference between a pyramid scheme (which is similar to a Ponzi) and network marketing. In a pyramid, you sell the product of selling the product. People buy the right to sell the rights to sell the rights. Its annoyingly recursive to try and explain. In network marketing you actually sell something. Stocks are investments.
In one respect your correct. today the the stock market and banks works under new rules. no more Steagall act, credit default swaps they work like ponzi's, you set up a fake insurance company to cover the swap. but the insurance company has no cash or real asset's. then the seller finds a buyer to cover his short sell. waits for awhile to rise. then the stock falls like mad. the short seller gets his cash. but never had any money in the game to start with. Prof Kumar of SMU wrote about it.
@shadfurman Let's look at ponzi scheme from this view: pyramid works as long as new money is coming. The stock grows as long as new money is coming. Once you try to sell the stock in big volumes the price will go down, That's one of the reasons why crash may happen. It's like a game 'who takes the last chair'.
Also, the stock market is a great accumulator of money that could inflate economy otherwise.
@toto20091 A stock MAY grow if money is coming in, but it is not the only thing that makes a stock valuable. Stocks have the value that people PUT on them. Also some stocks pay dividends. There is a VALUE behind a stock, which is more than we can even say for the U.S. dollar. It can be worth more or less than the value in the company, because it is not the money that gives a stock value.
@shadfurman Maybe you are right but as long as these shares are between, let's say, 3 people - owners of the company when they divide profit. When it is thousand investors, it is more illusion that they all will get profit. Someone has to lose in order for the rest to get profit finally. As long as most shareholders are kept under the illusion that the stock will grow indefinitely, it will look nice. It is impossible to grow indefinitely, so someone will have to lose. How come is it not ponzi?
@toto20091 its true, it is very easy to loose money in stocks. However a smart diversified portfolio will put the probability of your portfolio being worthless nearly impossible. I have no highschool education (though I've FINALLY started going to collage, YAY!) I bought a couple books on stock from good will and trade 90% on intuition and my porfolio has never made less than 9%. The average over the last 7 years is 14%. Its quite simple, buy low, sell high in stable companies.
@shadfurman Why do we have so many FREE seminars on how to trade stocks? How is it not lulling people into become a meal for someone who needs to get profit?
Something is wrong with this concept nowadays. Maybe too many banks are 'solvent' and you can still buy/sell their shares for some value. Either public would refuse to lend to them at 0% interest (given to them to trade their way out of 'solvency' while someone is losing) or they will get public lose eventually. What about HFT trading?
@toto20091 People are responsible to educate themselves. Trading stocks is not hard (it does take patience which many people find hard nowdays) All you've gotta do is follow a few simple rules. My rules are:
Never trade money I don't have (or need)
Only buy in companies that make money, in the +
Only buy in companies that are near their 52wk low
Only buy in companies I'd likely make at least 12% on (based on trend)
Always sell at a the amount I predetermined to sell at (based on trend)
@shadfurman The economy build on debt is another ponzi scheme. The economy grows as long as new debt is coming, Once nobody lends money to US, the US economy will be screwed.
The stock market is one big Ponzi yes, you can use margins, go long or short, speculators, credit default swaps, derivatives, you name it.
Here is a good example, The Fed gives money to the central banks at Zero Interest to loan to other banks, under the bailout bill. but the central banks don't loan it out, instead they buy oil futures stock, on the the stock market. drive the price up cause they have hugh amounts of your money now to use. then about Thursday they cash out. they made 100M
Then the price falls back on Friday, lets say to $65 a barrel. then on Monday they do it all over again. the price is back up to $79 a barrel. Thats how its being done now days and they use your money, which we are paying interest on to the Fed for borrowing it. but the banks use it to enrich their own pockets, and you pay the bill over the next 20 or 30 years at 4% interest.
@MrPlender No offense, sincerely, but I don't take seriously comments from faceless persons on the internet. I enjoy the banter that occurs, especially when intelligent. Though, your comment does seem to reflect the attitude of many people. I'm a fairly adamant apologist for the American economy and the free-market; in-spite of its flaws. Its one of my favorite subjects of passion.
wow!!! this makes so much sense! all the media broadcasted was that a panzi scheme was some horrible financial strategy, but they probably didn't know how to explain it themselves!!!
@Zalzal019 HAHA! That might be more accurate to the point. But then, I'm not a huge fan of the social security system. Though at has been a help to disabled friends and family, I can only imagine it would be more beneficial if the money was left if the pockets of citizens.
Yet again, an excellent video. I have a question though. Recently, I have heard comparisons that the recent financial/mortgage crisis can be likened to a Ponzi scheme. Would this be a fair generalization/assessment, and if so to what extent is it like or not like a Ponzi scheme? Thanks again Khan, and btw I've used your videos on physics to help me out on my physics I midterms. Good stuff.
Thank you, please do more videos on economics and history. They are the most delicious. By the way please make a video on how you make videos. That is what tools do you use to make videos. I have WACOM pen and I believe I can make similar videos in my language but I don't know how to do this. Thank you once again.
when i was in colleague, i wanted to start my own business with small capital. my friend gave me a reference to a company, where they had investor their small saving so i go there. where they give me their presentation it was 3-4 hour long . and when we all friend come out. they all were like. deepak, do you like it. i said BULLSHIT. they were staring at me whats wrong. but i glad i denied that sched. now i know how they were making money out of nothing..
@ViraIVideos Banks don't just have a pile of cash sitting around. Commercial banks are businesses that loan money out and generate revenue from interest. Ponzi schemes have no investments or activities that back up their rates, so it is fraudulent. Banks are investments, but unlike Ponzi schemes, you are aware of the risks involved and usually some of the activities that are done to generate income. For obvious reasons, investors almost never know what's going on in a Ponzi scheme (nothing).
Social Security is practically a ponzi scheme. They sure as hell don't have the funds to pay everyone. It depends on new people paying in, and it is financially unsustainable, so those new people paying in are likely to not receive anything out of it.
@xXdaveXsuperstarXx On the contrary, mutual savings bank deposits are investments that pay dividends instead of interest. The difference is that A) you know what's going on, and B) there is something going on in the first place.
On the contrary. The perceived amount ( as seen in the video) of money is the money you put in the bank (or a very small amount more) When someone withdraws there money, they virtually lose no money. It is a Ponzi scheme, but much more stable.
@xXdaveXsuperstarXx From Investopedia: "A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors..." Banks do not do that. In investment, there are tradeoffs between potential return and risk. The business of banks is mainly composed of transaction fees and interest. I do not understand what you mean when you say that someone does not lose money when he or she withdraws money.
@xXdaveXsuperstarXx Fractional reserve banking is more legitimate than a Ponzi scheme as long as the loans are good investments, which is why we have credit bureaus and processes for obtaining credit. Obviously, Ponzi schemes have no investments at all, so they are easily differentiable from bank systems. Ponzi schemes are guaranteed to eventually default, so they are unstable. However, savers and borrowers are aware of the risks of credit, so it is not a case of fraud.
@KrispyKangaroo Fractional reserve banking is the process of creating money out of thin air and devaluing our currency.
How is that legitimate? The only people who can devalue our currency is the Government, who is accountable to us, not private banks.
Fractional reserve banking is the most corrupt idea in banking today. If you try to do fractional reserve banking, with a team of friends, that's known as a criminal operation.
You can not give a loan, with fake money, created from thin air.
They indeed make new money but this money assures new production. If you double the money mass and triple the amount of good and services you trade for this money -> you actually have deflation.
@comecra85 Deflation?! If that's deflation, then it's one I don't like. After all, the individual who got the loan has to pay it back PLUS interest, but that interest logically cannot come from the existing moneysupply, so how to get it? Either he or someone else has to get a new loan to pay back the original, and whoever fails to pay one of those back, gets his real resources confiscated. No sir, I don't like it. There are better solutions.
Yes. In order to pay interest he must sell resulting product for more money than he borrowed to create it. But if there are people who are willing to buy the resulting product with their money than (revenue - cost of sales =gross margin ) will be divided into two parts. One will go to lender and one to entrepreneur.That is it is merely a redistribution of wealth from customer to producer.
@JewTubeUsername Here is one more example. Imagine there is goods buried under the surface. In order to dugg them out one need 1 dollar of credit for 50%. You lend him dollar, he increases supply with all these new goods. Let's he makes 100 dollars of income that is there are people willing to buy all these goods. What is the result. Money supply grows for 50 cents (50 % of a dollar ) and goods mass grows 100 dollars. Deflation.
@KrispyKangaroo Ponzi scheme can also be investing money, the key point is that the stated returns are higher than their actual returns. They say they are better than average, but are actually just average, and so will eventually default. Money printing is not a ponzi, its just inflationary, because you dont owe anything, they owe you but the money supply increases. Hence house prices can rise if you're willing to lend more money - house price inflation.
@ViraIVideos though banks are giving you interest on the money you keep with them, they aren't claiming to "double" your money without any backing. they are making interest from people who take out loans. to make a profit, the bank has to earn more interest than they give out. the problem is that getting back the money from these loans takes time, and sometimes people can't pay back their loans if they are in debt. the problem, at the moment, is the number of people in debt.
@colorsendinginurple I didn't mention the interest because that's not the issue. The issue with why i thought banks were ponzi schemes was because they never carry 100% of the deposits they are given.
Also, contrary to what you might think you know, banks don't loan out our money, that's in a deposit. If that were the case, people would be unable to take out cash at will, or be denied a withdrawal.
Please research fractional reserve banking, in essence the bank prints money out of thin air.
@ViraIVideos i'm just a stupid college kid, so i'm not an expert on the matter, but from what i hear, banks actually DO loan out money! people are able to take out their own money because most people leave their money in the bank for long periods of time and never take it all out at once. the bank is a business offering the public a service which, when pulled off right, results in deflation. i suggest you redirect your frustration to the government. THEY print the money, not the banks.
The question then becomes, where do they get that money. We know that banks are not venture capitalist firms, so they do not have wild amounts of money laying around to invest, so then where is the money coming from?
The key, as you see from this video, is from our deposits. But how can they loan money from our deposits if it isn't their money? They feel they have the right to do that, which is unjust and inflates our money.
@ViraIVideos@ViraIVideos What makes a Ponzi scheme a Ponzi scheme is that the guy perpertrating it doesn't do ANYTHING with the money. He doesn't invest it, he doesn't lend it with interest, he doesn't hedge it, he doesn't do anything with it that could generate any kind of returns in any way. He just spends it
@ViraIVideos a bank is a business trying to make a profit. the way that a bank makes money is by investing YOUR MONEY on OTHER PEOPLE's projects in the form of loans. when you put money in the bank, you get PAID interest for trusting them that they will invest your money responsibly. the people that borrowed your money PAY the bank back that money when they earn money from their project. Just because seven people thumbbed-up your comment doesn't mean it's right. watch sal's basic banking vids.
For thousands of years, Bankers left the money of depositors alone, and it's only recently that bankers thought they owned the money people deposited with them.
Also that interest you keep talking about, no one puts their money in the bank because of interest. CD's are at much higher interest rates, and so are Money market accounts. Bank accounts are for depositing money, nothing more, nothing less.
@ViraIVideos Money market accounts usually require you to keep a certain amount in the account and CD's are not very liquid. Banks provide a variety of financial services, and they charge you money for many of them, which is how they function as a business.
Calling Social Security a ponzischeme is not right!
Ponzi and Madoff acually had to convince their victims to invest in them and do all the work to keep up appearances. The gov't just points guns and extorts the money from you but i guess the politicians do a good job at selling that crap to the public. With a ponzischeme you can choose to participate, with SS you can't.
Bjornlovesjazz 2 days ago
so once Ponzi scheme started, it cannot end it? so no exit strategies? does that means if you wanna start ponzi scheme you will have to continue the scheme secretly till you die or get caught. what a life just to make yourself rich.
BTW, can ponzi scheme modify a bit to work like "fixed term saving", i.e. signing a contract that you cannot get your returns let say 3 years time, if so you can only get the original money that you put in?
Guesswhokk 5 days ago
@Guesswhokk if you prefer, you can simply run away with everybody's money, before they discover you're running a Ponzi Scheme
jdasilvacosta 4 days ago
That is how banks, the American government, and credit agencies work. It shouldn't be illegal. Its ingenious.
420HoLLyWooD420 5 days ago
what if the investor wants the $20,000 after one year, what's the Ponzi schemer gonna do?
senoner90 2 weeks ago
@senoner90 He's screwed.
falubii 5 days ago
real business can be built around that actualy is built
marciukas23 3 weeks ago
Trollfinancing!
iskaksen 1 month ago
Bernie made off with all the money :D lol
34531396 1 month ago
Comment removed
AdvocatusDiabolii 1 month ago
This has been flagged as spam show
Every year I get a newsletter from the SS Administration showing my payment history and how much I can expect to make when I retire. There's just one catch. SSI is based on money actually set aside for retirement purposes. We all know this doesn't happen. What the SSA really does is takes the money they receive then send checks to current retirees. SS still keeps sending me those annual newsletters telling me lies about what I can expect to receive when I retire. AFAIK this IS a Ponzi scheme.
kxmode 2 months ago
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kxmode 2 months ago
And that's how banks work.
Imagine how good their scheme is, their returns look realistic and that it is still going!
TrollingGr 2 months ago 12
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goatman257 2 months ago
Social Security is a ponzi scheme. It has all the same ingredients.
kxmode 2 months ago
@kxmode Took the words out of my mouth.
nitronick389 2 months ago
@kxmode I don't know how it works in the US,but here in Brazil the Law predicts that, if there's more money going out than coming in social Security, money from specifical taxes must be redirected to cover the "hole"
jdasilvacosta 2 months ago
@kxmode in a Ponzi Scheme, you don't have the State to warrant your return
jdasilvacosta 2 months ago
The lesson here is don't be fooled by statements. As an investor you have to be smart and know how you're money is being used.
conyo985 2 months ago
@conyo985 I guess Kevin Bacon should have thought about that before he went and turned a town into dancers.
iconicbrand5 2 months ago
@conyo985 I don't play the stock market and I'm too dumb to understand commodities trading, the FOREX, and other non-stock trading markets... so I put my money in a Morningstar 5-star rated mutual fund. I'll let the manager handle all that crap for me. :)
kxmode 2 months ago
Hey People who wants to make 10 000Bucks in one year ? :D
Message me :D
NOyaPara 3 months ago 15
@NOyaPara I don't have a property large enough to hold 10,000 bucks.
kxmode 2 months ago
@NOyaPara lol
BorderlinePimp 4 days ago
great vid but I suggest you to return using the arrow, it allows you to express more and point on things, its just great
thanks
TheAhmedMAhmed 3 months ago
Let's not forget George Bluth!
brkfstburritox56 3 months ago
Social Security is a Ponzi Scheme you are forced to pay into if you work. You get a periodic statement showing that "your" money doubles every year (because your employer pays a matching amount), but in reality, all that's in the "lock-box" are non-negotiable IOUs. If you die before you cash out, you can't leave "your" money to your children, and if you live long enough to deplete the available "pot" of money, why, the government pays you from current "investors." Medicare is even worse. Fraud!
ExZonie 3 months ago
@ExZonie OH hai, Rick Perry
42streetsdown 3 months ago
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RedDragonSmaug 3 months ago
WWWWWOOOOOOOOOOOWWWWWW. Im only 17 years old and learning that was enjoyable. I need to watch more of your videos.
jasonsarkoyan9 3 months ago
How was Madoff caught? By mass withdrawals?
RoyceRK 3 months ago
1:14 Ahm. Gentlemen.
limsae 3 months ago
Isn't this what banks do? They wouldn't be able to give all our money back if we all wanted to take it out.
OperationThor 4 months ago
@OperationThor Yeah, fractional banking is sort of like this. The difference is banks use your money to make loans, the interest on these loans is the bank's profit. So, the bank's assets always equal their liabilities and still make money. Bank runs (where everyone tries to withdraw their money all at once) are very nasty, but they don't happen very often nowadays because governments insure bank deposits.
42streetsdown 3 months ago
@42streetsdown yea but there is only around 800 billion paper dollars in circulation so if there is a HUGE nationwide bank run and the government is forced to insure bank deposits they have 2 options, give you cash by printing or giving you numbers on a computer screen. And in a bank run everyone wants cash, so if they dont print cash is going to surge in value, if they do print its going to drop tremendously in value. If confidence is lost in the system... gameover.
jjunit207 2 months ago
@42streetsdown fractional banking may turn out to be the biggest ponzi scheme yet. And this is coming from a guy who is a fan of fractional banking.
jjunit207 2 months ago
You'd have to be pretty dumb to not check up on what you put your money into
yjakez 4 months ago
@yjakez Yet it worked
MrVaddiReddy 4 months ago
Larry---Larry---Remember me? Yer old old buddy from the; "Both Hands & Both Feet" (at the same time)---in the Corporate Lunch Box---before the bosses had all gone home and before we were even ten minutes into the shift???
I been waitin' fer yer e-mail---or for ya' to answer the phone--I missed you at my Farewell Party---I had requested that you play "MY" version---which was a pretty good parody on Gene Watson's --HIT!" Gimmee a buzz---Txx JK
GOATPSYCHOLOGY 4 months ago
how was ENRON not mentioned?
centercity1 4 months ago
i'm gonna be rich!!
americanGTA 5 months ago
Yeah, I've heard it before. Just today in the news when they quoted Paul Ryan as saying Social Security is a ponzi scheme, when he was chiming in to the ever-so-brilliant Perry.
AND they're quoted as saying "That's how those ponzi schemes work." Meaning, I guess, the way Social Security operates.
vickiormindyb 5 months ago
@vickiormindyb it was rick perry that was saying "social security is a ponzi scheme" but I wouldn't expect him to understand social security since he barely passed his economics and government classes to get his ~2.4 gpa in animal science... lol
stevenholland 5 months ago
Hyman Minsky is a MUST read.
fuckooo 9 months ago
good music
paulceltics 10 months ago
There is a longer lasting and larger one Sal, social security.
theporksicle 11 months ago
Bernie Madoff actually LOOKS like someone who works in financial services. My friend, Robb, doesn't even remotely look like the stereotypical entrepreneur.
He's too good-looking, and physically fit, w/ lots of hair. The stereotype of a banker or entrepreneur in MY mind looks like Bernie Madoff not Robb.
My daughter says he's ripped, and I didn't even know what that meant until she explained it.
vickiormindyb 1 year ago
I never heard the term Ponzi schemes until I met my friend Robb, and that was just a few months ago.
I heard it in connection w/ Bernie Madoff, but I didn't know how you spelled the name until just now.
Of course I don't see how I could have been looking at him like he's Bernie Madoff when I never heard of the guy until he mentioned him, but we won't dwell on that.
vickiormindyb 1 year ago
This has been flagged as spam show
I listened to Robert Kiyosaki's advice on silver: "I believe this is the biggest investment anyone can make in the next 100yrs" I did my research and found an opportunity that has changed my life in 12 months. Take a look like i did.... Visit: goldsave.co/
ManufactureBelief 1 year ago
As far as I see, if your investments only show up on paper, you could very well be in a Ponzi scheme. Buy tangible investments: precious metals, rare coins, rare books, artwork, etc. Don't trust paper.
FortNikitaBullion 1 year ago
The longest lasting and largest ponzi scheme of all time that we have yet to discover- is that we give actual value away in return for empty promises and notices of debt, and have been doing this for endless generations at the cost of human dignity for all.
JosephKou1 1 year ago
for once the little guy wins. yay.
thomasbthomas 1 year ago
learn something everyday
Ritzoid 1 year ago
NO! BANKS AND STOCKS ARE NOT PONZI SCHEMES!
Your missing the illegitimacy with a Ponzi scheme. Just because they have analogous elements does not make them the same. Its the difference between a pyramid scheme (which is similar to a Ponzi) and network marketing. In a pyramid, you sell the product of selling the product. People buy the right to sell the rights to sell the rights. Its annoyingly recursive to try and explain. In network marketing you actually sell something. Stocks are investments.
shadfurman 1 year ago
In one respect your correct. today the the stock market and banks works under new rules. no more Steagall act, credit default swaps they work like ponzi's, you set up a fake insurance company to cover the swap. but the insurance company has no cash or real asset's. then the seller finds a buyer to cover his short sell. waits for awhile to rise. then the stock falls like mad. the short seller gets his cash. but never had any money in the game to start with. Prof Kumar of SMU wrote about it.
WizzRacing 1 year ago
@shadfurman Let's look at ponzi scheme from this view: pyramid works as long as new money is coming. The stock grows as long as new money is coming. Once you try to sell the stock in big volumes the price will go down, That's one of the reasons why crash may happen. It's like a game 'who takes the last chair'.
Also, the stock market is a great accumulator of money that could inflate economy otherwise.
toto20091 1 year ago
@toto20091 A stock MAY grow if money is coming in, but it is not the only thing that makes a stock valuable. Stocks have the value that people PUT on them. Also some stocks pay dividends. There is a VALUE behind a stock, which is more than we can even say for the U.S. dollar. It can be worth more or less than the value in the company, because it is not the money that gives a stock value.
shadfurman 1 year ago
@shadfurman Maybe you are right but as long as these shares are between, let's say, 3 people - owners of the company when they divide profit. When it is thousand investors, it is more illusion that they all will get profit. Someone has to lose in order for the rest to get profit finally. As long as most shareholders are kept under the illusion that the stock will grow indefinitely, it will look nice. It is impossible to grow indefinitely, so someone will have to lose. How come is it not ponzi?
toto20091 1 year ago
@toto20091 its true, it is very easy to loose money in stocks. However a smart diversified portfolio will put the probability of your portfolio being worthless nearly impossible. I have no highschool education (though I've FINALLY started going to collage, YAY!) I bought a couple books on stock from good will and trade 90% on intuition and my porfolio has never made less than 9%. The average over the last 7 years is 14%. Its quite simple, buy low, sell high in stable companies.
shadfurman 1 year ago
@shadfurman Why do we have so many FREE seminars on how to trade stocks? How is it not lulling people into become a meal for someone who needs to get profit?
Something is wrong with this concept nowadays. Maybe too many banks are 'solvent' and you can still buy/sell their shares for some value. Either public would refuse to lend to them at 0% interest (given to them to trade their way out of 'solvency' while someone is losing) or they will get public lose eventually. What about HFT trading?
toto20091 1 year ago
@toto20091 People are responsible to educate themselves. Trading stocks is not hard (it does take patience which many people find hard nowdays) All you've gotta do is follow a few simple rules. My rules are:
Never trade money I don't have (or need)
Only buy in companies that make money, in the +
Only buy in companies that are near their 52wk low
Only buy in companies I'd likely make at least 12% on (based on trend)
Always sell at a the amount I predetermined to sell at (based on trend)
Diversify
shadfurman 1 year ago
@shadfurman The economy build on debt is another ponzi scheme. The economy grows as long as new debt is coming, Once nobody lends money to US, the US economy will be screwed.
toto20091 1 year ago
"The Boiler Room", great movie! Vin Diesel and Giovanni Ribisi.
shadfurman 1 year ago
The stock market is one big Ponzi yes, you can use margins, go long or short, speculators, credit default swaps, derivatives, you name it.
Here is a good example, The Fed gives money to the central banks at Zero Interest to loan to other banks, under the bailout bill. but the central banks don't loan it out, instead they buy oil futures stock, on the the stock market. drive the price up cause they have hugh amounts of your money now to use. then about Thursday they cash out. they made 100M
WizzRacing 1 year ago
Then the price falls back on Friday, lets say to $65 a barrel. then on Monday they do it all over again. the price is back up to $79 a barrel. Thats how its being done now days and they use your money, which we are paying interest on to the Fed for borrowing it. but the banks use it to enrich their own pockets, and you pay the bill over the next 20 or 30 years at 4% interest.
You have a nice day now.
WizzRacing 1 year ago
Great! Thanks for this. Very helpful in explaining this whole grimy business ;) Excellent work. Thanks for posting this video. Regards. Smith
doNOTvoteCAMPAIGN 1 year ago
so it seems to me that if you are the first guy to get fooled by a ponzi scheme it actually works out quite well for you lol
OntologicalQuandary 1 year ago
@OntologicalQuandary Hah, so true! Ponzi schemes are just like the stock market - got to be first in and first out!
MrPlender 1 year ago
@MrPlender Sad to see so many people with such a view. No wonder our economy sucks.
shadfurman 1 year ago
@shadfurman I'm just having a dig. Please don't take me so seriously.
MrPlender 1 year ago
@MrPlender No offense, sincerely, but I don't take seriously comments from faceless persons on the internet. I enjoy the banter that occurs, especially when intelligent. Though, your comment does seem to reflect the attitude of many people. I'm a fairly adamant apologist for the American economy and the free-market; in-spite of its flaws. Its one of my favorite subjects of passion.
Peace to you, my faceless comment friend :-)
shadfurman 1 year ago
@OntologicalQuandary Only if you don't reinvest your earnings.
KrispyKangaroo 1 year ago
@OntologicalQuandary Yes. This is why there has been such a big push from the right-wingers to get pension funds into the stock market.
That gives them a sucker of last resort they can fleece.
ThatIsNotDeadWhich 1 year ago
Very good video!
Keep these coming please, I'm learning more with your videos than at college.
Nexmofo 1 year ago
wow!!! this makes so much sense! all the media broadcasted was that a panzi scheme was some horrible financial strategy, but they probably didn't know how to explain it themselves!!!
Heyu7her3 1 year ago
Cool! Now I know how social security works!
Zalzal019 1 year ago
@Zalzal019 HAHA! That might be more accurate to the point. But then, I'm not a huge fan of the social security system. Though at has been a help to disabled friends and family, I can only imagine it would be more beneficial if the money was left if the pockets of citizens.
shadfurman 1 year ago
Yet again, an excellent video. I have a question though. Recently, I have heard comparisons that the recent financial/mortgage crisis can be likened to a Ponzi scheme. Would this be a fair generalization/assessment, and if so to what extent is it like or not like a Ponzi scheme? Thanks again Khan, and btw I've used your videos on physics to help me out on my physics I midterms. Good stuff.
humanaesthetic 1 year ago
Cool I'm trying this next week!
TheJunkieBox 1 year ago
What are schemes like Shoemoney called?
Nashy119 1 year ago
Im so glad your doing financial vids again. Much appreciated.
chaseef 1 year ago
Great! I learned something, and got some lulz :)
Ormaaj 1 year ago
I wish I was an earlier investor in Madoff''s scheme then I could double my money. Hey Sal! Do you know of any current Ponzi scheme's? lol
pongman 1 year ago
@pongman same thought crossed my mind! super duper risky, but...odddly tempting....lol
colorsendinginurple 1 year ago
Those are no gentlemen, good sir.
Parabol0086 1 year ago
Thank you, please do more videos on economics and history. They are the most delicious. By the way please make a video on how you make videos. That is what tools do you use to make videos. I have WACOM pen and I believe I can make similar videos in my language but I don't know how to do this. Thank you once again.
comecra85 1 year ago
Brilliant video! Thank you very much!
TopGearrules 1 year ago
I liked the video. The pointer doesn't show, and I couldn't follow you at times.
siggyboss 1 year ago 3
@siggyboss Yeah I realized that after the video. I did this with a new version of the software. Need to make sure it shows up for the next video.
khanacademy 1 year ago
when i was in colleague, i wanted to start my own business with small capital. my friend gave me a reference to a company, where they had investor their small saving so i go there. where they give me their presentation it was 3-4 hour long . and when we all friend come out. they all were like. deepak, do you like it. i said BULLSHIT. they were staring at me whats wrong. but i glad i denied that sched. now i know how they were making money out of nothing..
deepakjindal070 1 year ago
This is very similar to our Social Security System in the US
motogpslider 1 year ago
The biggest Ponzi scheme is the U.S. Social Security scam.
ScottcNehrer 1 year ago
ponzi is my calculus teachers name
madb1205 1 year ago
Great! Gonna try it out with the other kids at school.
Thanks sal!
MultiRayKing 1 year ago 2
so the people who took their money out early are actually taking the other investors money without knowing it?
did they have to end up paying some back when madoff was caught?
drumacat 1 year ago
this was a very fun video!
Owner46 1 year ago
what software do you use for your tutorials, Mr. Khan?
part2themovie 1 year ago
@part2themovie He uses paint
BearsFan054 1 year ago
@ViraIVideos Banks don't just have a pile of cash sitting around. Commercial banks are businesses that loan money out and generate revenue from interest. Ponzi schemes have no investments or activities that back up their rates, so it is fraudulent. Banks are investments, but unlike Ponzi schemes, you are aware of the risks involved and usually some of the activities that are done to generate income. For obvious reasons, investors almost never know what's going on in a Ponzi scheme (nothing).
KrispyKangaroo 1 year ago 2
Social Security is practically a ponzi scheme. They sure as hell don't have the funds to pay everyone. It depends on new people paying in, and it is financially unsustainable, so those new people paying in are likely to not receive anything out of it.
cilution 1 year ago
Aren't all banks ponzi schemes then sal?
By that I mean because all banks never keep the full amount of deposits secured, and they usually use the extra money to loan out.
That's why we have the problem of runs on the bank.
So yea again sal, then wouldn't all banks just be ponzi schemes that only work because of Central bank's backing?
ViraIVideos 1 year ago 13
@ViraIVideos
banks aren't meant as something you invest on.
xXdaveXsuperstarXx 1 year ago
@xXdaveXsuperstarXx On the contrary, mutual savings bank deposits are investments that pay dividends instead of interest. The difference is that A) you know what's going on, and B) there is something going on in the first place.
KrispyKangaroo 1 year ago
@KrispyKangaroo
On the contrary. The perceived amount ( as seen in the video) of money is the money you put in the bank (or a very small amount more) When someone withdraws there money, they virtually lose no money. It is a Ponzi scheme, but much more stable.
xXdaveXsuperstarXx 1 year ago
@xXdaveXsuperstarXx From Investopedia: "A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors..." Banks do not do that. In investment, there are tradeoffs between potential return and risk. The business of banks is mainly composed of transaction fees and interest. I do not understand what you mean when you say that someone does not lose money when he or she withdraws money.
KrispyKangaroo 1 year ago
@xXdaveXsuperstarXx Fractional reserve banking is more legitimate than a Ponzi scheme as long as the loans are good investments, which is why we have credit bureaus and processes for obtaining credit. Obviously, Ponzi schemes have no investments at all, so they are easily differentiable from bank systems. Ponzi schemes are guaranteed to eventually default, so they are unstable. However, savers and borrowers are aware of the risks of credit, so it is not a case of fraud.
KrispyKangaroo 1 year ago
@KrispyKangaroo Fractional reserve banking is the process of creating money out of thin air and devaluing our currency.
How is that legitimate? The only people who can devalue our currency is the Government, who is accountable to us, not private banks.
Fractional reserve banking is the most corrupt idea in banking today. If you try to do fractional reserve banking, with a team of friends, that's known as a criminal operation.
You can not give a loan, with fake money, created from thin air.
ViraIVideos 1 year ago
@ViraIVideos
They indeed make new money but this money assures new production. If you double the money mass and triple the amount of good and services you trade for this money -> you actually have deflation.
comecra85 1 year ago
@comecra85 Deflation?! If that's deflation, then it's one I don't like. After all, the individual who got the loan has to pay it back PLUS interest, but that interest logically cannot come from the existing moneysupply, so how to get it? Either he or someone else has to get a new loan to pay back the original, and whoever fails to pay one of those back, gets his real resources confiscated. No sir, I don't like it. There are better solutions.
JewTubeUsername 1 year ago
Yes. In order to pay interest he must sell resulting product for more money than he borrowed to create it. But if there are people who are willing to buy the resulting product with their money than (revenue - cost of sales =gross margin ) will be divided into two parts. One will go to lender and one to entrepreneur.That is it is merely a redistribution of wealth from customer to producer.
comecra85 1 year ago
@JewTubeUsername Here is one more example. Imagine there is goods buried under the surface. In order to dugg them out one need 1 dollar of credit for 50%. You lend him dollar, he increases supply with all these new goods. Let's he makes 100 dollars of income that is there are people willing to buy all these goods. What is the result. Money supply grows for 50 cents (50 % of a dollar ) and goods mass grows 100 dollars. Deflation.
comecra85 1 year ago
@KrispyKangaroo Ponzi scheme can also be investing money, the key point is that the stated returns are higher than their actual returns. They say they are better than average, but are actually just average, and so will eventually default. Money printing is not a ponzi, its just inflationary, because you dont owe anything, they owe you but the money supply increases. Hence house prices can rise if you're willing to lend more money - house price inflation.
dfjpr 1 year ago
@ViraIVideos though banks are giving you interest on the money you keep with them, they aren't claiming to "double" your money without any backing. they are making interest from people who take out loans. to make a profit, the bank has to earn more interest than they give out. the problem is that getting back the money from these loans takes time, and sometimes people can't pay back their loans if they are in debt. the problem, at the moment, is the number of people in debt.
colorsendinginurple 1 year ago
@colorsendinginurple I didn't mention the interest because that's not the issue. The issue with why i thought banks were ponzi schemes was because they never carry 100% of the deposits they are given.
Also, contrary to what you might think you know, banks don't loan out our money, that's in a deposit. If that were the case, people would be unable to take out cash at will, or be denied a withdrawal.
Please research fractional reserve banking, in essence the bank prints money out of thin air.
ViraIVideos 1 year ago
@ViraIVideos i'm just a stupid college kid, so i'm not an expert on the matter, but from what i hear, banks actually DO loan out money! people are able to take out their own money because most people leave their money in the bank for long periods of time and never take it all out at once. the bank is a business offering the public a service which, when pulled off right, results in deflation. i suggest you redirect your frustration to the government. THEY print the money, not the banks.
colorsendinginurple 1 year ago
@colorsendinginurple We're talking about banks loaning out money.
The question then becomes, where do they get that money. We know that banks are not venture capitalist firms, so they do not have wild amounts of money laying around to invest, so then where is the money coming from?
The key, as you see from this video, is from our deposits. But how can they loan money from our deposits if it isn't their money? They feel they have the right to do that, which is unjust and inflates our money.
ViraIVideos 1 year ago
@ViraIVideos @ViraIVideos What makes a Ponzi scheme a Ponzi scheme is that the guy perpertrating it doesn't do ANYTHING with the money. He doesn't invest it, he doesn't lend it with interest, he doesn't hedge it, he doesn't do anything with it that could generate any kind of returns in any way. He just spends it
MistaFrista 1 year ago
@ViraIVideos a bank is a business trying to make a profit. the way that a bank makes money is by investing YOUR MONEY on OTHER PEOPLE's projects in the form of loans. when you put money in the bank, you get PAID interest for trusting them that they will invest your money responsibly. the people that borrowed your money PAY the bank back that money when they earn money from their project. Just because seven people thumbbed-up your comment doesn't mean it's right. watch sal's basic banking vids.
colorsendinginurple 1 year ago
@colorsendinginurple lol. Have you ever read into the history of banks?
For thousands of years, Bankers left the money of depositors alone, and it's only recently that bankers thought they owned the money people deposited with them.
Also that interest you keep talking about, no one puts their money in the bank because of interest. CD's are at much higher interest rates, and so are Money market accounts. Bank accounts are for depositing money, nothing more, nothing less.
ViraIVideos 1 year ago
@ViraIVideos
correct, you sound smart. A libertarian perhaps?
OntologicalQuandary 1 year ago
@ViraIVideos Money market accounts usually require you to keep a certain amount in the account and CD's are not very liquid. Banks provide a variety of financial services, and they charge you money for many of them, which is how they function as a business.
KrispyKangaroo 1 year ago
@ViraIVideos my god i hope you're trolling now
colorsendinginurple 1 year ago
@colorsendinginurple
no hes not, you just have much to unlearn my friend
OntologicalQuandary 1 year ago
@OntologicalQuandary lol apparently. Lesson 1 from ViralVideos: banks print money. WHO KNEW?
colorsendinginurple 1 year ago
This has been flagged as spam show
@ViraIVideos "Aren't all banks ponzi schemes then sal?"
I don't think so. In ponzi schemes, the person providing the scheme doesn't really have the money. In banks, they do have the assets as loan.
dalcde 1 year ago
khan! great explanation!! but how is this ponzi scheme different from the way banks in general work??
tetiraelian 1 year ago
AWESOEM!
owen7770210 1 year ago
1st!!!!
InvisibleYogurt 1 year ago