The current generation of Americans are being convinced to buy into outdated realities with the promise that they will later benefit from their investments. In actuality, the future returns that most people are expecting will never come to fruition. While the following examples may not technically be considered official Ponzi schemes by the full definition, the comparisons are still well warranted. The US is currently operating on borrowed time and money.
Higher Education System
The higher education system is actually more of a Pyramid scheme. Universities are collecting an ever increasing amount of tuition dollars from an increasing number of students, and then funneling that that money up to the top administration. American universities especially like undergraduate foreign students who do not qualify for financial aid and thus must pay the full ticket price. They also love foreign graduate students who can be exploited for cheap labor due to having their residency visas tied to their work at the university.
Instead of hiring their teaching staff for full time positions and providing them with healthcare, tuition and endowment money is often instead spent on non-educational campus enhancements, such as new sports stadiums and dining halls. These fancy additions are used to lure in more customers/students, many of whom will end up not actually investing in an education but just blowing their parent’s and own future wages on a fun ‘college experience.’
And if you dream of becoming a professor and thus part of this system, then I wish you luck. Be ready to be content with earning McDonald’s wages for the better part of a decade, as you go through graduate school, to a postdoc position, to an adjunct professorship, all in the hopes of eventually receiving one of an ever decreasing amount of tenured positions.
To add insult to injury, if you end up taking additional unforgivable government loans for graduate school, the US government will make a profit from the interest that you pay on them during your years of indentured servitude.
The total student loan debt in the nation has crossed the 1 trillion dollars mark, the majority of which being held by the federal government. Even though student loan debt can never be forgiven, roughly 40% of borrowers are currently in either deferment, forbearance or default. Thus student loans are likely the next bubble that is going to pop and send shock waves through the economy. Unlike with the 2008 housing crisis, this time there are not even any tangible assets which can be repossessed. No one is going to try to vacuum the so called ‘education’ you received back out of your head.
Social Security System
Currently the Social Security System is running a surplus since the working Baby Boom generation is bringing in more money than is being paid out to their retired parent’s generation. This surplus is given to the US Treasury in return for U.S. government securities, which are deposited into trust funds. Thus the surplus becomes part of the general federal budget and can be spent on whatever the government wants. Once the trust fund starts running a deficit, these securities will be redeemed to close the deficit and fund retirees’ benefits.
This intra-governmental loaning of money between departments would not be such a big deal if the overall national debt was not already so high. When the Baby Boom generation starts to retire, and money from the trust fund starts to be pulled out, the government will need to buy back the securities by borrowing more external money and thus further increasing the national debt.
As the national debt increases and interest rates rise due to a stronger economy, so does the amount of yearly interest on the national debt that the government must pay. At current rates, the total yearly interest payments will soon grow even larger than the current military budget! To balance the overall budget, the government will then likely cut future social security and medicare benefits for the generation who are now currently paying into the system.
Thus the younger generation of people working today are paying into a system which will likely provide them with much less benefits in the future than it does now for current retirees. Given a big enough budget crisis, there is a change the whole system may even become privatized.
30 Year Home Mortgage
Owning a home is a quintessential part of the American Dream. The US government through interest deductions and loans makes it easy for a person to qualify for a home mortgage that they can’t really afford.
The goal of the banks is to extract as much interest money from you as possible. So as soon as you start to make any significant progress to paying off your home, they will try to get you to refinance at a lower interest rate. While having a little extra cash in your pocket at the end of each month sounds nice, the total amount of interest that you will pay in the long run will be much higher.
Assuming that you successfully make it to the end of your 30 year loan, and you don’t move and lose money due to reselling the house, then you will likely come close to paying twice what the house was originally worth. Not to mention paying for all the additional upkeep that needed to be done during those three decades. There is also no guarantee that the value of your home will even appreciate greater on average than the rate of inflation. You will also be stuck continuously paying property taxes each year even after fully owning the home.