Last night, my husband and his father were in our kitchen talking about the recent Wall Street Ponzi scheme scandal. A Ponzi Scheme is "a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit." (Wikipedia)
I said that our American real estate market had also become a giant Ponzi Scheme. The government had forced banks to make loans to people who did not have to prove their income, and the interest rates were kept artificially low, so there was this buy, buy, buy mentality in the market that fueled a boom in housing prices that had people very happy about what they owned on paper. Our house here in So Cal we bought in 2000, and within 5 years it had about doubled in price. Now it is worth still more than we paid for it, and perhaps more than the amount that we re-financed at a few years later. But why did the prices drop and the housing market tank so precipitously? Because, a giant Ponzi Scheme can only go on for so long. There are only so many people available to fuel the payouts. Eventually things peter out. Then who is left holding the bag? Us. Of course. The American tax payer. Gotta bail out those banks, of course. Gotta bail out everybody. G-d forbid that business should run it's course. G-d forbid that the American car companies, who have been foisting overpriced, cr@ppy cars on the public for years, should be forced to change or die.
By the way, the Social Security system is also a Ponzi Scheme. It was designed that way. Scary, huh?
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