> The way this happened is pretty simple. At Strong Towns, we call it the Growth Ponzi Scheme. Through a combination of federal incentives, state programs and private capital, cities were able to rapidly grow by expanding horizontally. This provided the local government with the immediate revenues that come from new growth -- permit fees, utility fees, property tax increases, sales tax -- and, in exchange, the city takes on the long term responsibility of servicing and maintaining all the new infrastructure. The money comes in handy in the present while the future obligation is, well....a long time in the future.

Believe me or not, this to an even bigger extend plagues China.

I think more than half of major cities in China are fully consciously running a Ponzi scheme with their own land leases, as they have really no other revenue source to sustain them long term, and this is why they are ready to go to any extremes to do this.

Effectively, private loans are financing municipalities through overpriced land leases. Everybody who ever dealt with real estate in China will tell that land auctions are rigged using every trick imaginable.