Dear Reader,
In Part 1 we established that there is a housing property bubble.
In Part 2 we calculated the size of this bubble.
Now, in Part 3, we will illustrated how the modern property market is similar to a Ponzi Scheme.
The US Securities and Exchange Commission defines a Ponzi Scheme as:
“... an investment fraud that involves the 1) payment of purported returns to
existing investors from funds contributed by new investors. Ponzi scheme
organizers often solicit new investors by promising to invest funds in 2)
opportunities claimed to generate high returns with little or no risk. In many
Ponzi schemes, the fraudsters focus on 3) attracting new money to make
promised payments to earlier-stage investors to create the false appearance
that investors are profiting from a legitimate business.”
1) In the real estate market, the usual justification for the disconnect between price and value is the prevailing sentiment that “the value is what you can sell it for in the future and this always goes up”…