Lots of major players who really don't want the Ponzi pyramid to collapse? Yes.

But, long-term, no Ponzi pyramid can avoid collapse. Black money is not infinite, and can get skittish when the music starts fading. A central bank printing money can prop the pyramid up...for a while. But that only makes the collapse bigger, and takes more of the central bank's economy down with it when it finally does go.

Both politicians and industry leaders know it will inevitably pop at some point, but since they have short terms while they're in charge and won't be accountable for long term consequences of their actions, they just want to make sure it doesn't collapse while they're in power, so they keep kicking the can down the road as long as their short tenure last, then it's the next guy's problem, rinse and repeat.

It's a result of chasing maximized short term returns at the expense of long term consequences.

> Ponzi scheme? Yes.

How in the world are these the top comment and top reply? Commercial real estate isn't a ponzi scheme. Like, at all. In any way, shape, or form.

There are disparate actors making separate, uncoordinated decisions. There are single transactions being made delivering real value. There's no long term holdings falsely being promised under the guise of stealing short term value by adding more customers.

The commercial real estate market changed. Money is going to be lost. There are bad contracts on the books. Correlated markets are going to suffer. Leveraged losses are going to exponentiate. None of this has anything to do with a ponzi scheme.

Dishonest people will always use hyperbole when describing the world. That hyperbole is not justification for honest people to abandon technical definitions. And that is what you are proposing. Having everyone "evolve" on the definition of 'ponzi scheme' means that the current definition is erased. But the current definition is still in use!

At that point did it stop being a speculative bubble?

The reality is, reality doesn't have such distinct boundaries as you are trying to enforce.

At the end of the day, what is the point of a word's definition? To help communicate an idea to other people and society. The US financial and legal systems are intentionally designed to segregate the less educated. Confusion is their primary strategy to make more money! You can either choose to help them continue the segregation, or you can chose to liberate financial and legal concepts to everyone.

How can you help? By understanding what parts of the concept were easy to understand, what colloquial language is most used to describe it, and then realizing the gaps between the coloquial and technical definitions.

Trying to resolve those gaps with "you're using ponzi wrong" continues the segregation and confusion. Trying to resolve the gaps with "Oh.. you think a ponzi scheme is any scam using obfuscated financial instruments. Ok fair enough lets start the conversation there." you would then continue and say "A typical ponzi schema has a single power structure with a single voice and name e.g. Bernie Madoff. However, in this case it is a ponzi scheme with a distributed set of actors i.e. no one is working together, but still there is large scale issue occurring - we typically call this a speculative bubble / coordinated pump and dump - its not always easy to know what exactly is going on".

You could even continue "Realestate in general has actually been a generational pump and dump scheme. Its not that grandma's everywhere meant to harm anyone, but the common advise to 'buy a hose at any cost' is in favor of the realestate owning elderly (i.e. most of them) and as such is difficult for them to say anything else. Additionally, because its been generational, it seems to have been working for quite some time giving it even more credence. At the end of the day tho, it is a distributed ponzi scheme - if you go to withdraw your money and no one is willing to add even more money (i.e. how much you want, and the "processing fees" around it) - you will not get your money."

> reality doesn't have such distinct boundaries as you are trying to enforce.

It really does, as defined by law and consequences. A ponzi scheme necessarily involves fraud and a speculative bubble does not necessarily involve fraud. The fact that some speculative bubbles do involve dishonesty and manipulation (a pump and dump, like you mentioned) does not change that!

This is purely a crypto phenomenon. Porting crypto’s corruptions of standard financial and economic terms, from Ponzi schemes to inflation and market cap, given the benefit of hindsight, doesn’t make sense.

You sure about that?

https://www.propublica.org/article/yieldstar-rent-increase-r...

Would not completely write out the possibility of collusion, even if non-Ponzi in nature. DoJ has been sniffing around various actors that have been increasingly found to be acting in a cartel-like manner to keep rents high.

What has happened is that demand for office space has dropped dramatically.

The proper market reaction is to spend the money to convert these office spaces to some other use, perhaps residential.

Then these properties will more likely find tenants.

Because it’s credit built on credit. It’s not an intentional Ponzi scheme (maybe).

> The proper market reaction is to spend the money to convert these office spaces to some other use, perhaps residential.

It’ll be prohibitively expensive for most properties to convert them to residential. They might as well be demolished for their land value.

E.g. you can't say a failed startup is a ponzi scheme because it loses a bunch of money. A ponzi scheme is a very specific type of fraud.

Like you would think the asset buyers would have an incentive to stop holding the loans and the whole thing would collapse, but because the buyer are investing with other peoples money they are also incentivized to keep the cycle going. The people whose money is eventually going to be lost have no way to stop this because the money is either in a pension fund or they aren’t knowledgeable enough to understand the issue

This is collective behaviour. If you discover you’re in a Ponzi scheme, it’s in your interest to get your money out first.

You can either cut your losses and not get your money back (if you're an ethical operator), of you can actively or passively allow other people topit in their money so you can get yours out first. There are similarities where rational vested actors want the charade to continue for a little while longer - the more money you put in, the longer your commitment to the mirage is.

I agree this isn't a scheme, as it wasn't done out of maliciousness, but it share so much property with it (including who will have to hold the bag) that I kinda like the image.

the Ponzi in Ponzi scheme refers to a specific person, and the scheme in Ponzi scheme refers to the specific scheme that specific person executed

That would be very expensive. To be able to afford that, the prices need to crash seriously hard.

But every other vested interest is aligned with the developer handouts. Eg, construction, government for more taxes, unions, office REITs that want less competition, big finance who want the CMBS problem to go away. Even the mortgage industry would profit more from selling tons of new condos vs fewer more expensive resales.

California is the only state facing this due to Prop 13. Most jurisdictions are able to adjust real estate tax rates in response to the drop in valuations and many did so when property values dropped in the Great Recession.

An owner may walk away from a Mortage and the bank will pay the taxes. If taxes are not paid you move into tax liens that trade and may be able to get the property just for the taxes on it. In the end property taxes get paid.

A ponzi scheme is fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

Where is the nonexistent enterprise? How is money from later investors used to hoodwink the first investors by pretending there's quick returns?

I think you are looking for a different characterization of commercial real estate for it isn't a ponzi scheme.

If you’re going to copy/paste a dictionary definition, you should probably cite the dictionary you are using (Oxford, it looks like).

I think the correct term here is “speculative bubble”, but there are deep similarities between a speculative bubble and a Ponzi scheme. The similarities run deep enough that I do not think it is worth fighting over the difference between a Ponzi scheme and a speculative bubble. In both a speculative bubble and a Ponzi scheme, early investors are paid out with funds taken from later investors, for an asset which does not have enough utility to justify those payouts.

In a Ponzi scheme, it’s one person or entity running it, and in a speculative bubble, it’s just “the market”. But the market is just a bunch of people. And I don’t think the bad faith component of Ponzi schemes should be considered a necessary component.

There are deep differences, too, most obviously the one highlighted by the “scheme” in ponzi scheme.

> In both a speculative bubble and a Ponzi scheme, early investors are paid out with funds taken from later investors, for an asset which does not have enough utility to justify those payouts.

In a ponzi scheme, money is deliberately directed to early entrants to cover the conscious absence of any mechanism to produce actual value.

That's not true of speculative bubble; yes, the usual market mechanisms involve movers out of market get money from those moving in, but outside of fraud (which can make usual market action ponzi-like) its not conscious cover for an absence of a return-generating mechanism. Yes, a ponzi-operator produces deliberately a conditions similar to that which is retrospectively observed when the market misperceives value for a time, but that's the same as saying fatal accidents produce the same results as murder plots. We call them different things for good reason, and it is worth distinguishing them.

> And I don’t think the bad faith component of Ponzi schemes should be considered a necessary component.

Someone having advance and certain knowledge of the absence of return mechanism is quite relevant and distinct from a market misperception, especially when looking at a prospective bubble that hasn’t popped (so its the differences between “there is specific concrete evidence someone engineered this fraudulently” and “my perception of the future differs from the consensus”.)

Redefining terms so you can use terms that communicate greater certainty and have higher emotional valence than is warranted by what you are actually describing is bad, in much the same way as an (actual, proper definition) ponzi is bad. Its an attempt to mislead and motivate action based on misleading people.

I don’t think the “deliberate” part is particularly important. It sounds like you disagree. There’s a whole discussion to be had here about mens rea, and that discussion is important in the context of criminal justice, but I think it’s less important when discussing systemic problems because you need a different toolset (besides intent) to discuss problems with economic systems.

It’s unimportant whether commercial property owners are fraudulently or not inflating their property values? That seems incredibly important to what kind of solution is appropriate.

Though it is one of the retroactive justifications for government from non-minarchist market ideologues.

And the opposite of suicidal, the “carpe diem” idea, rather hedonist, is equivalent in that they believe in “no tomorrow”.

A lot of people suffer dissociation since Trump, which was crystallized in The Joker movie. Or perhaps it was due to social media. In any case, wanting to “see the world burn” is a recurrent idea, I’d like a study on how many people seriously adopt this attitude.

A lot of people are so disenfranchised from the wealth that the world could crash and they could care less. They are already at the bottom with nothing to lose.

Such is the inequality in America these days.

If they have access to running water and a roof over their head, this is a wildly misinformed perspective. The people at the bottom typically feel the most pain during economic wipeouts.

Dear God, English is the stupidest language ever.

No one uses "cause and effect" like "cease and desist".

Usually this sort of soft corruption is dealt with in real estate by incentives. For example the developer offers to pay your HOA fees for a year or two, or throw in some appliances, or whatever. The goal is always to artificially support a higher price through a back door discount that won’t devalue the whole building. There are commercial real estate equivalents to this like the developer paying for more customizations and improvements to the office space which are typically borne by tenants.

But my reckoning is this downturn is way too big and fundamental for those stunts to be enough. If it’s true office real estate values have not been written down then I suspect we are in for a shit show when everyone is forced to acknowledge reality.

(I am not in real estate but spoke regularly to industry folks and wrote reports during the last boom 2002-2008)

They don't have to increase rents as long as values kept increasing.

If office values go up x% per year, even if you're steeply cash-flow negative, as long as you're adequately leveraged and have low interest rates, you're still probably printing money.

It's almost as if artificially low interest rates manipulated the economy.