I'm going to make a claim, and before I do I want to warn you that a lot of people will dismiss it before considering it as a possibility. My claim is that there are two financial structures in the United States that are accepted as good investments, but in reality they are a way of shuffling around money to appear as good investments. The two structures I am talking about are the Stock Market and Social Security.
Let's start with the Stock Market:
As I've stated in a previous post, when I buy a stock of a company, the only time that I am actually investing in the company is when I buy a share at it's IPO(Initial Public Offer) or another public offering. Even when buying at the IPO, it is a stretch to say that it's investing since the stocks are already owned by the financial institution that has agreed to lend to the company. Regardless, let's say that I buy a share of stock for $10. I have bought this stock with an optimistic outlook on the perception of the company. Whether the company actually does well financially does not influence this price, which would be the actual definition of an investment. But let's say that the trading price goes up to $15 and I decide to sell and secure my gains. In order to collect my money, there has to be a buyer that is convinced that the future of the perception of the company will remain positive. I sell to this person and benefit from a new investor joining the stock. The video below describing the definition of a Ponzi Scheme is eerily similar to the situation I have outlined above.
This is why the collapse of the stock market can be so devastating to the economy. People have bought into stocks and all of a sudden what they bought is essentially worthless, but on the other hand the money hasn't disappeared. If you bought a stock for $15, your $15 has gone to the previous investor. So from this example it can be determined that the stock market does not increase in value, it just shuffles money between investors with the only one coming out solidly ahead being the company that received the initial investment.
Social Security:
Now, the same thing can be said for social security since new "investors" pay for previous investors. When I pay for social security, I'm paying money forward to a person that is currently benefiting from the social security system with the promise that the money will be returned to me. But if that system collapses, the money that was promised to me is no longer available.
Both of these systems are solid examples of what is not investing. Unless you know how to play the system, you are unlikely to come out ahead.
