"Minsky developed a theory called the ‘financial instability hypothesis,’ theorising that financial markets are not very efficient and continually misallocate substantial amounts of credit into asset markets, creating pyramid schemes or bubbles (Minsky called them Ponzi schemes, named after the fraudster Charles Ponzi).
He defined three types of finance: hedge, speculative and Ponzi. Hedge finance: income flows from an asset are sufficient to pay down both principal and interest on the debt used to finance the asset purchase, and asset prices are based upon fundamental or intrinsic value. Speculative finance: income flows cover only interest repayments, not loan principal, requiring debt to be continually rolled over from the current time period to the next. Businesses or individuals may experience financial stress, but it is not widespread and fundamentals valuations are kept largely in check. Ponzi finance: income flows cover neither principal nor interest repayments. This leaves asset owners completely reliant upon escalating capital values in order to realize substantial capital gains at sale to meet the cost of principal and interest. Prices are completely delinked from fundamental valuations at this stage, resulting in an asset bubble.
Simply put, if gross rental income pays down neither interest nor principal repayments of mortgage debt on aggregate (including other property-related costs) and is sustained over a number of years, a housing bubble exists by this definition. Even better, there is plenty of evidence to show that the residential property market is currently experiencing said bubble."
Have you really never heard anyone compare the Australian housing bubble to a Ponzi scheme?