Like Madoff’s scheme, the house market became dependent on a steady price increase. Buyers were willing to pay high prices with the expectation that they could later sell for a profit.

Eventually, without substantial inflation, houses had to become unaffordable. House prices had reached levels that often required most of a household’s income. Subprimes were just a frantic attempt to continue this pyramid. Like every ponzi scheme, some means must be found to get more money from new “investors” to payoff old.

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