What lesson can we learn from the Madoff affair? – EconomyMorning

The death of Bernard Madoff occurred in prison, since the sentence that the American justice had imposed on him amounted to 150 years of deprivation of liberty, which means until death. What had he done?

A scam, or more exactly scams forming a very large set, to the detriment of overly gullible savers. He had not invented the process, used decades earlier by Charles Ponzi, also in the United States. These “Ponzi schemes” consist in making savers believe that they can benefit from extraordinary returns by investing in financial products which are very little known, but wonderfully profitable. To provide “proof” of this strong profitability, Ponzi, Madoff and their followers – we discover some every year, men who tend to believe in Santa Claus – the scammer pays rubies out of the shadow of very comfortable interest or dividends, using part of the money from subscriptions for this.

In accordance with the proverb “you only lend to the rich”, the creator of a Ponzi scheme is leading the way, both for his pleasure and to maintain the confidence put by gogos in his marvelous abilities to do excellent business. . If his accounts are not verified by a conscientious and intelligent accountant, the scammer can delude himself for months or years., until he disappeared without leaving an address, with a jackpot representing a significant fraction of the money entrusted to him.

Pay-as-you-go pensions, the predominant form of Ponzi-Madoff systems

Along with these private systems, which fall under the law, public Ponzi-Madoff systems have been erected by the legislators themselves, which prevents their inventors and managers from suffering the fate of Bernard Madoff. These are so-called pay-as-you-go pensions, in use over a large part of our planet. Contributors indeed obtain the promise of subsequent payments, even though their contributions have been used in pay-as-you-go (as and when they are paid) to pay pensions to former contributors who have become retirees.

In both cases, the private Ponzi and the public Ponzi, the contributions deemed to give the right to interest, dividends, reimbursements or life annuities are used to keep the promises made to the contributors. There is one difference, however, and it is important: Ponzi, Madoff and their ilk do not have the backing of the public authorities, an impunity granted by the legislator, while the pay-as-you-go pension funds operate with the protection of the law. Thanks to this, the working people are forced to contribute, so that the retirees actually receive pensions.

The support provided by the legislator is decisive: not only does it oblige the working people to contribute, but it also has the power to increase the contribution rate. The working people are therefore often led to pay retirees a part of their earnings that is increasingly important over the years: this is what, for example, allowed François Mitterrand to demagogically lower the retirement age from 65 years. at 60, for the benefit of its popularity.

We must eradicate the Madoff systems, and therefore carry out an in-depth reform of our pay-as-you-go pensions

The punishment inflicted on Bernard Madoff is not unfair: scams are not tolerable. But this is only a modest scam compared to the snake that our legislators are making us swallow by making pension contributions the legal origin of pension rights. Admittedly, the legislator will not be punished, because there does not seem to be any authority having the power to sanction the errors which it commits, however enormous they. Unless ? Unless the voters decide to elect instead of the ignorant who sit in the national palaces of people who know the real operation of pensions by pay-as-you-go.

This operation is very simple in principle: adults give birth to children, maintain them, educate them, care for them, and love them, whereby, a few decades later, there are efficient workers who will devote part of their resources. to provide a good living for those who have invested in them.

This exchange between successive generations is the very essence of pay-as-you-go pensions. The legislator has not yet understood this: but let him make a little effort to deal with something other than insignificant amendments to texts prepared by the services of the executive power, and the absurdity of the current pension legislation will appear to him. He will therefore be able to finally make a really important reform: allocate pension rights in proportion to the investments made in young people.whether by raising your own children or by financing the training of the whole of the new generation.