The essence of the Ponzi scheme is not simply its statistical unsustainability. The essence of the Ponzi scheme is that it is like an addictive drug. Once someone enters into it, he finds it psychologically impossible to face the reality of the unsustainable statistics of the program. He refuses to get out in time. His participation in the scheme fundamentally changes his outlook toward reality. He is no longer capable of being persuaded that he has made a fool of himself by entering into such a scheme. This includes the founder of the scheme.The essence of the Ponzi scheme is not statistical; it is psychological. It creates belief in that which is statistically impossible, and the degree of belief is so strong that anyone who points out the statistical impossibility of the scheme risks being cut off personally by the victim. Ponzi scheme economics creates the classic attitude: shoot the messenger.
This is from Austrian economist Gary North at his website on the Ponzi Welfare State economy.
Let me add that financial bubbles are also Ponzi schemes which ultimately depends on unsustainable credit and monetary accelerated expansions that eventually backfires. This is why they are called bubble cycles.
A famous Wall Street idiom emblematic of this pathology is “left holding the empty bag”
In analyzing America’s Great Depression, dummies.com uses such phrase as description for the one of the major excruciating chapters of US economic and financial history
Many more had borrowed money from banks to buy stock, and when the stock market went belly-up, they couldn't repay their loans and the banks were left holding the empty bag.