Declining Populations Put Additional Pressure On Social Insurance Systems (International Insurance Society)

Declining Populations Put Additional Pressure On Social Insurance Systems

  Friday, April 21st, 2023 Source: International Insurance Society

Netflix recently aired a limited series about Bernard Madoff who fashioned the largest Ponzi scheme to date. Some estimate that the fraud amounted to approximately USD 65 billion of investor monies while others quote a much lower figure of USD 10 -- 17 billion.

It is very difficult to arrive at the correct figure as records were fabricated and some investors were too embarrassed to admit that they had been swindled. Regardless of which number is used, it has been called the largest Ponzi scheme to date.

When asked if she knew about the Ponzi scheme, Madoff’s wife Ruth was quoted as saying that she did not know what a Ponzi scheme was. This type of scheme is named after Charles Ponzi who was born in Italy in 1882. He emigrated to the US in the early 1890s to pursue a better life. After a short stay in Canada and a few prison terms, he ended up in Boston in 1919. It was there that he discovered the International Revenue Coupon (IRC) which was basically pre-paid return postage on an international letter.

Ponzi quickly realized that he could arbitrage exchange-rate differences and make a tidy sum. But, instead of limiting this to his own money, he raised funds from investors and his scheme took root.

Ponzi promised incredible short-term gains to investors and paid those investors with money raised from new investors. He began to invest in real estate, stocks and bonds instead of IRCs. The large payouts to older investors actually caused them to re-invest funds perpetuating the fraud. By mid-1920, the media and authorities caught onto the scheme making Charles Ponzi forever infamous.

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