By now we have all heard of Bernard Madoff. It is reported that his Ponzi scheme of $50+ billion dollars is the largest of all time. I've found one that may top Madoff's Ponzi scheme that may occur under the everyone's radar.
As you may know, several states in this country continue to have budget shortfalls. In a typical year, many of these local governments run a bit in the red and borrow money until tax revenues come in. Given the current state of world financial affairs, the projected tax revenue shortfall will likely bankrupt these governments. New York is facing a big shortfall, so is California.
CNBC reported today that in response to California's budget shortfall the state may be taking desperate measures to make sure it keeps running. Among those under consideration is the state simply writing I Owe You's to vendors. However, the state finance guy indicates that he is not likely to do that because it would affect the state's ability to borrow in the future. Thus, his solution is to simply delay the payments of people's tax refunds.
Does this sound a little bit like robbing Peter to pay Paul? Does this sound a little bit like the big hedge funds that have lowered the gates on redemptions? Perhaps this is so Bernard Madoff that people do not realize it. I am amazed that the world wants to send Madoff to jail, wants to demonize hedge funds for not allowing withdrawals, and wants to crucify anybody who runs a Ponzi scheme - yet when California wants to do something as preposterous as "delaying" tax refunds because of a budget shortfall, this goes unnoticed.
I am not an attorney, but this situation is akin to a clearing company utilizing clients' account assets for operating expenses. It is illegal and gets you a fine from the SEC and possibly shut down.
Thus in our great country, not only do you have to prepay your taxes and essentially pay for something ahead of time before your bill is due, you actually may have to pay for something that you don't actually owe. You pay your taxes ahead of time and then when there is no tax due, you don't get it back until it is convenient for the government. It is the taxpayers that should charge interest to the government who does this, not the other way around. It is once again the taxpayer who is bailing out the government.
Is it any wonder why people in this country try and hide their assets offshore?