With a ponzi scheme, there is no underlying investment. So the pool of capital never grows.
This Korean system should work in theory. People generally don't move very frequently. As long as there's a liquid market for investments in stocks & bonds, and the housing appreciates in value over the long term, it's not a bad system.
Seems pretty favorable to the landlords too. They get $90k up front for a $100k house. Which they could invest for an 8% or so return, which, in the first year is ~$550/mo in rent, compounded each year, minus maintenance. Yield wise, $7k on a $10k investment ($100k house - $90k from renter) is fucking amazing.
The fact that is has been around for so long suggests that it works in practice too. Yeah, maybe a black swan event causes a liquidity crunch. But so long as the government steps in to provide liqudity (low interest mortgages would work), then it shouldn't hurt too bad. Worst case, foreign investors step in to buy up the real estate.
This Korean system should work in theory. People generally don't move very frequently. As long as there's a liquid market for investments in stocks & bonds, and the housing appreciates in value over the long term, it's not a bad system.
Seems pretty favorable to the landlords too. They get $90k up front for a $100k house. Which they could invest for an 8% or so return, which, in the first year is ~$550/mo in rent, compounded each year, minus maintenance. Yield wise, $7k on a $10k investment ($100k house - $90k from renter) is fucking amazing.
The fact that is has been around for so long suggests that it works in practice too. Yeah, maybe a black swan event causes a liquidity crunch. But so long as the government steps in to provide liqudity (low interest mortgages would work), then it shouldn't hurt too bad. Worst case, foreign investors step in to buy up the real estate.