What exactly is a "ponzi scheme?"

[genchan]

What is a ponzi scheme and how does it differ from a pyramid scheme?

[mbhunter]

There's a link here:

http://members.impulse.net/~thebob/Pyramid.html

In both cases the people who get in first win and those who get in later tend to lose. The pyramid scheme has one guy at the top who eventually gets "bumped off" of people's lists. The Ponzi scheme has a central entity throughout the whole process that redistributes the wealth to the earlier entrants (which may include the person starting the scheme) from that invested by the later entrants.

Some people have referred to the US Social Security System as a Ponzi scheme, but I don't technically think it is because it's legal.

[PrincessPerky]

That only makes it a legal Ponzi scheme. And one where the government uses a gun to get new investors so it is still here, (till we fight the gun, but who would do that and take grannys money away?) Ponzi got into trouble cause he ran out of enough new investors.

[terry1156]

Here is some more detailed information on Ponzi and how his scheme came about. It's rather interesting.

The Ponzi Sceme

[PrincessPerky]

Cool more information than I started with, and apparently the gov't used there gun to stop him and stole the idea! It was terrible he was getting away with the money and the govt wanted in on it.