According to Yale University economist Robert Shiller, author
of "Irrational Exuberance," the housing and stock market bubbles
were "naturally occurring" Ponzi schemes. Successive waves of
investors generate gains for the last wave until the bubble
bursts. "The essence of a Ponzi scheme is a story that justifies
these enthusiasms," Shiller says, whether the phenomenon is Internet
stocks or housing prices or Madoff. "The social feedback loop of
other people making money causes people to suspend disbelief."

The seductive idea that one can make money without providing a useful
product or service, by simply riding the wave of artificially
inflated value, is a reflection of a socially exploitive, pampered
style of life. The realization of profit without creating a real
increase of value, relies on an endless river of gullible investors
who assume that other gullible investors will follow them. In the
housing market, each investor was willing to indulge the previous
owner, believing that another naive buyer would indulge them. Home
buyers, real estate agents, and lenders all grabbed what they could
for themselves, indifferent to the impending fate of the "suckers"
who came late to the party.

Bernard Madoff ran a Ponzi scheme on a monumental scale. Many stock
and real estate investors ran their own small-scale versions of the
same scam.