Pyramid schemes — so simple even a child can understand them

Today, I told my children, who are 11 and 12, about pyramid schemes.  Since it’s always easiest for me to focus on people, I started my story with the first famous American pyramid schemer:  Charles Ponzi, who gave his name to the whole racket.

I explained the Ponzi scheme to the kids in the simplest of terms, using very easy math:  I told them that Ponzi promised his first investors that, if they gave him their money, he would give them double that amount back.  (I actually don’t know if he promised to double the money, but it was an easy concept for the kids to grasp.)  Excited by the prospective of money for nothing, these people readily handed their money to Ponzi.  They were the first tier of investors.

Ponzi then went out and found a larger number of investors, who also gave him their money.  These were the second tier of investors.  He took the money he received from the second tier, and gave it to the first tier.  The first tier was very happy.  Having done nothing, they nevertheless doubled their investment.  Many of them came back for more, reinvesting their money, and joining the third tier of investors.  With the money from that third tier, Ponzi paid off, big time, to the second tier.

This went on quite happily for a while, I told the kids, but then something inevitable happened:  Ponzi stopped finding a sufficient number of new investors whose fresh funds could pay off his old investors.  Since Ponzi was just moving money around — he was not providing a service or creating goods — the only thing that kept the money flowing was fresh blood.

So, I asked my attentive little audience, what happened then?  My 12 year old was quick with a reply:  “The whole system collapsed.”  Smart child.

Before I was even able to go on from them, my 11 year old, eyes suddenly widening, announced, “That’s like what the government does.  It takes money from people who work, and gives it to people who don’t work.”   Really smart child.

(By the way, I am absolutely not making this up.  That’s the story I told, and that is verbatim how my children responded, no editing, no augmenting.)

I leave you with a replay of Chris Christie, who speaks about the Day of Reckoning that will be inevitable unless we sharply turn away from the Progressive government’s giant Ponzi scheme:

Oh, I have one more “by the way,” apropos Gov. Chris Christie.  As you know, I believe lots of uninformed Americans voted for Obama, not because of his qualifications, but because they were swept away by the rapture of voting for the first black president.  I also read somewhere that a candidate in Texas is running, not on her actual qualifications for the job, but on her promise to the voters that, if they vote for her, she’ll be the first transgendered whatever it is she’s running for.

I mean, honestly, the way the media frames elections lately, the most important thing is to push the identity politics side of someone’s candidacy as the primary consideration, trumping all other matters.  So how about all of us starting a campaign for Chris Christie, promising Americans that, if he wins, he’ll be the first rotund president in the 21st Century, and the first since William Howard Taft?

After all, considering how badly people of weight are treated in America, it seems to me that Christie is already well on his way to wearing the victim moniker so beloved of the press.  The only problem, of course, is that Christie might, just might, be offended by victim/identity politics status, and might actually want to run on issues and competency.