Letter to the Editor ¦ August 9, 1999
Ponzi Rebuttal (Response to David Langer)

By Milton Evrati

David Langer's article, "Carl Ponzi Returns" (P&I, June 4), has it all backwards when it comes to Social Security privatization. He claims privatization would need new investors to "prop up" gains for the existing participants. That describes a Ponzi scheme, but not privatization.

What he describes instead is the present Social Security System. Its pay-as-you-go approach uses the contributions of existing workers to pay other participants. By contrast, a private scheme would rely on genuine investment returns to pay its participants. These, of course, would depend on the continued growth of the economy and the contributions of all people to that effort.

But to call this a Ponzi scheme, as Mr. Langer does, is to characterize the entire basis of the nation's prosperity in such terms. I find that not a little unsettling. However self-serving some of the advocates of privatization might be -- and some are, though only some -- they have less in common with Carl Ponzi than does the present Social Security Administration.

Milton Ezrati
Chief Investment Officer
Nomura Asset Management
U.S.A. Inc.
New York

Privatization and Ponzi ¦ Letter by David Langer, Pensions and Investments, August 23, 1999

Carl Ponzi Returns: The privatization of Social Security harkens back to an old scheme ¦ By David Langer, Pensions and Investments, June 14, 1999