3. Ponzi Investment. This is best exemplified by housing. A house, once built, is incapable of producing a return into GDP. Its value can only increase because someone else believes that it is of greater value than the person who originally constructed it. This is the definition of a “Ponzi Scheme” and the claims of many Realtors in fact feed it – the fear of scarcity as epitomized in the claim “they aren’t making any more land.” While Ponzi Investments have utility value in many cases, their inherent value frequently decreases over time and requires additional capital inputs to maintain (as in the example of a home needing a new roof.) This type of investment, when financed through debt, is always a net drain on GDP.
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