Tim O'Reilly: The Biggest Ponzi Scheme of Them All

Misread the title at first, thinking Tim O'Reilly was the biggest ponzi scheme of them all.

There are some good points here: it certainly seems the growth of derivative financial products, and the whole financial sector, has outpaced what the "concrete" economy can support. But the claim that the Earth is full? Absurd.

Clearly, we have some serious environmental limitations. CO2 emissions, rainforests, overpopulation, etc. But this Earth is wonderfully well-stocked with potential sources of energy and other resources. We haven't figured out how to use all of them yet, but over time, new inventions and discoveries tend to expose them. The same process also helps us improve the value of resources we already have, like people and (until recently :) capital.

Basically, this is the Peak Oil argument applied to the whole economy. Popular in doom-n-gloom times, unmentioned in the good times. It's a useful extreme to consider, but it is an extreme.

I like it - an OpenKarma standard for karma trading between different sites, maybe with a central exchange and a floating exchange rate. "I'll trade two HN points for one point of your reddit karma".

Oh come on now.

It's like they said in an article I read recently... the world has learned about Ponzi schemes, and now everything is a Ponzi scheme.

At these macro-economic levels, there can be no talk of "Ponzi schemes".

The economy is not an investment vehicle, it's a huge, loose, and fantastic agreement that enables all of us to get far more (in terms of technology, resources, comfort, life expectancy, health, happiness, etc) than we would if we didn't have it. It doesn't exist for its own sake, and it certainly has no need to be a mathematically correct, long-term sustainable, rigorous system designed by a computer scientist.

The capitalist system, with all its problems, is the best system that we have. Who cares that it's not sustainable indefinitely into the future? By the time we get there, things may well have changed so drastically that it becomes completely irrelevant.

A human being is not a sustainable thing either. It overspends its resources instead of maintaining itself in good working condition and eventually dies. Oh shit. We better cancel humanity. It's a Ponzi scheme!

This Ponzi trend is really, really getting ridiculous. Enough with all that crap already! This article is a fancy label placed on a collection of dodgy conclusions drawn from dubious axioms.

You could look at Yahoo in the boom years as a Ponzi scheme. They made a lot of money from advertising start ups which was funded in part because Yahoo was making a lot of money. You can say the same thing about most bubles but a true Ponzi scheme runs out of money where after a housing bubble there are a lot of houses even if there are far more than we need.

The secret to macro-economic effects is how they alter the overall efficiency of the economy. Does people overpaying for housing cause damage? Yes, because people build much better houses than they need and people who think they have a lot of money waste a lot more of it. However, the US housing bubble was still fairly minor and it's only really scary because things are still over priced and few living people know how to deal with really hard times.

PS: Money is a signal for wealth creation, but it's not wealth. Forget it and things start to break down.