Issue 14

By David Thomas Graves

The Most Successful Ponzi Scheme in American History

You’ve been told Social Security is a public good. A retirement guarantee. A sacred legacy. But what if it’s not just broken, but structurally fraudulent?

In this article, we’ll walk through how Social Security mimics every characteristic of a Ponzi scheme, and then go even deeper. We’ll break down how your contributions are used to fund a chain of dependency, how the system funnels your money into government debt, how the Federal Reserve uses that debt to expand the money supply, and how all of that directly contributes to the inflation that's crushing your paycheck.

This isn’t about opinion. It’s about mechanisms. And once you understand how the gears turn, you’ll never see Social Security, or the dollar in your wallet, the same way again.

Let’s Drop the Act.

It’s time to stop calling Social Security a “safety net.”

It’s time to stop pretending it’s a retirement plan.

And it’s definitely time to stop defending a system that takes your money, spends it, leaves you nothing to show for it, and dares to call that dignity.

Social Security isn’t just broken. It’s a legalized Ponzi scheme, backed by the U.S. Treasury, protected by politics, and quietly accelerating the destruction of your purchasing power.

The difference between this and the Bernie Madoff scandal? Madoff went to prison. Washington gets reelected.

What Is a Ponzi Scheme - and Why This Fits the Mold

Let’s start with the basics.

A Ponzi scheme is a fraud where money from new participants is used to pay returns to earlier ones. There’s no real investment. No profit generation. Just a loop of ever-growing contributions that eventually collapses when new money dries up.

Here’s the structure:

● Promise a return.

● Collect money from new entrants.

● Use that money to pay older participants.

● Repeat, while hiding the fact that there’s no actual value creation happening.

● Hope nobody notices until the system implodes.

Now look at Social Security:

● Promise: Pay in your whole life, and the government will take care of you in retirement.

● Collection: Every worker pays 12.4% of their income (6.2% from their check + 6.2% from the employer).

● Payouts: That money is used immediately—not saved, not invested—to pay today’s retirees.

● No investment returns. No ownership. No actual “account.”

● System stability requires a constant inflow of new workers.

It meets every criteria Except one.

It’s mandatory.

That’s what makes it so durable. You can’t opt out. You can’t call your broker and move your account. You’re locked in. And because it’s codified into law, backed by the IRS, and draped in political patriotism, you’re never supposed to question it. But it gets worse.

Where Your Money Actually Goes

When you contribute to Social Security, your money doesn’t go into an account with your name on it. It’s not pooled into a fund like a pension. It doesn’t even earn interest. It’s spent immediately. Today’s tax revenue pays for today’s retirees. But what happens when there’s a surplus?

Enter the so-called “trust fund.”

This isn’t a savings account. It’s not cash in a vault. It’s a stack of U.S. Treasury bonds - IOUs issued by the federal government to itself.

The process works like this:

1) Social Security taxes are collected.

2) That money is used to pay current beneficiaries.

3) Any excess is used to buy non-marketable Treasury bonds, special securities that can only be redeemed by the federal government.

4) The government then spends the proceeds from those bonds on general budget items, wars, interest payments, bureaucracy, bailouts.

So your retirement contributions are:

● Used to fund someone else’s benefits.

● Then recycled to buy government debt.

● Then spent on things completely unrelated to retirement.

That’s not a retirement system. That’s a shell game.

The Treasury Bond Feedback Loop

This is where things get more corrupt, and more dangerous.

When Social Security buys Treasury bonds, it’s not “investing.” It’s loaning money to the federal government so it can keep spending beyond its means. And those bonds? They’re not real assets in the sense of ownership or growth. They’re just promises.

Now here’s where it gets even more tangled:

To pay back those bonds, the government either:

● Uses current tax revenue (from you and your kids), or

● Issues new debt to cover the old debt - kicking the can further down the road.

And who steps in to “support” that debt market when it gets too top-heavy?

The Federal Reserve.

The Federal Reserve’s Role in the Scam

Let’s talk about the Fed.

Before 1971, the dollar was tethered to gold. That meant the money supply was limited. You couldn’t just print dollars to pay off bonds. If the government borrowed too much, it had to either raise taxes or cut spending.

But in 1971, President Richard Nixon took the U.S. off the gold standard.

And everything changed.

Now, the government could issue bonds without restraint, and the Federal Reserve could print dollars out of thin air to buy those bonds - injecting cash into the economy without any real constraint or accountability. Social Security became a key part of this mechanism.

Think about it:

1) Workers pay Social Security tax.

2) Excess is used to buy Treasury bonds.

3) Government spends the bond proceeds.

4) Fed buys bonds when needed - expanding M2 (the broad money supply).

5) Inflation rises as the money supply outpaces economic growth.

Your forced contributions are directly fueling federal overspending and monetary inflation. Social Security is no longer just a broken retirement system. It’s a tool to accelerate the expansion of government debt and enable artificial money printing. And that printing? That’s what’s killing your paycheck.

The Treasury Bond Feedback Loop

When most Americans think of taxes, they think of the obvious - income tax, property tax, sales tax. But the most corrosive tax of all isn’t listed on your pay stub in bold red ink.

It’s inflation, and Social Security, ironically, helps fuel it.

Let’s break this down in plain English.

Every year, 1.3 trillion dollars in Social Security taxes are collected. The portion not immediately paid out to retirees is used to buy government debt. That debt is spent. But to sustain the illusion of solvency, the Federal Reserve must often step in to backstop the Treasury bond market, by injecting freshly printed money.

And what happens when new money floods the economy without new productivity?

The value of every dollar in your pocket drops.

This is called currency debasement, and it hits the working class the hardest. It’s a stealth tax, pulled straight from the bottom of your wallet, disguised as “cost of living.” And here's the trick - while your wages stay flat, the things you actually need, housing, food, gas, education, healthcare, skyrocket.

You’re not just being taxed when you earn. You’re being taxed every day you spend.

COLA Increases

The Government’s Annual Gaslight

Supporters of Social Security like to talk about COLAs - Cost of Living Adjustments - as proof that the system is working.

But COLAs are not a real fix. They’re a smokescreen.

Why?

Because COLAs are tied to the Consumer Price Index (CPI) - a manipulated, outdated metric that understates inflation by excluding or underweighting things like housing, energy, and healthcare. So when your Social Security benefits go up 2.5% - but your rent goes up 15%, groceries jump 20%, and your gas bill doubles - what you’re really getting is a government-issued participation trophy.

It’s not a raise.

It’s a rigged apology.

And the real punch in the gut? That COLA bump is taxed, too.

Yes, your Social Security check - funded with your own earnings - is taxed on the way in and the way out. So you’re being taxed on a tax to fund a benefit that barely keeps pace with the damage the system itself is causing. This is the definition of institutional abuse.

The True Cost of Social Security

It’s Not Just 12.4% - It’s 22.4% or More

Let’s do some quick math.

12.4% of your income disappears into Social Security taxes.

Then, because of the inflation that system helps generate, you lose another 10%+ of your purchasing power every year.

That’s a 22.4% drain on your economic potential, before you pay income tax, before you cover rent, and before you even get a shot at saving for yourself.

And that 10% inflation figure? That’s conservative. Many families are experiencing real-world inflation well above that.

This is theft with a smile.

A slow-motion mugging in broad daylight.

And they expect you to thank them for it.

A System Designed to Survive by Keeping You Dependent

This is where the scam hits its final form.

You’ve been robbed of ownership.

Your purchasing power is eroded.

Your retirement dreams are deferred.

And your dependency on government support becomes permanent.

You can’t opt out.

You can’t redirect your funds.

You can’t make your own choices.

You’re locked into a system that was designed - not to help you retire, but to make sure you never stop needing it.

Because dependency is power.

The more people rely on Washington to survive, the easier it is to control the narrative. And if you dare to challenge it?

You’re painted as heartless.

You’re “attacking seniors.”

You’re “undermining a sacred institution.”

But what you’re really doing is the most patriotic act there is:

Telling the truth.

This Isn’t a System. It’s a Syndicate.

Social Security isn’t just failing. It’s succeeding exactly as designed, to transfer wealth from workers to the government, to prop up a collapsing debt economy, and to prevent you from ever building real financial independence.

It’s not a benefit. It’s not a promise. It’s not a future. It’s a tax. It’s a mechanism for inflation. It’s a tool to paper over a broken monetary system, and you’re the one footing the bill.

You’ve now seen the system for what it is:

● A tax disguised as compassion.

● A Ponzi scheme propped up by payroll deductions.

● A backdoor liquidity machine for federal spending.

● And worst of all, a driver of the very inflation that’s eroding your life.

This wasn’t an accident. It was by design. And now, you’re paying for it twice, once when you earn, and again every time your dollar buys less. So the question isn’t whether Social Security can be saved.

The question is: what do we build in its place?

This Isn’t a System Sinking - It’s Designed to Drown You

You’ve been taxed, lied to, and locked into a system that was never meant to serve you, it was meant to survive off you. Social Security isn’t broken by accident; it’s operating exactly as intended. Your labor funds someone else’s benefits. Your contributions prop up government debt. And the inflation that steals your paycheck? It’s not a side effect. It’s the point.

But now that you see it clearly, the real question is: what do we build instead?

In Part Three, we rip up the blueprint and draw a new one.

I present a full replacement plan, one that prioritizes ownership over obligation, dignity over dependency, and long-term freedom over short-term fear. It’s bold. It’s disruptive. And yes, it’s politically dangerous.

But it’s also necessary.

Because if no one in Washington has the courage to end this game, then it’s up to us to flip the board.

Part Three is the plan.

Let’s build something that actually works - for workers.

© David Thomas Graves 2025