Phantom wealth refers to financial assets that appear or disappear as if by magic as a result of accounting entries and the inflation of asset bubbles unrelated to the creation of anything of real value or utility. The high-tech-stock and housing bubbles are examples.
Phantom wealth also includes financial assets created by debt pyramids by which financial institutions engage in complex trading and lending schemes using fictitious or overvalued assets as collateral for loans in order to feed and inflate asset bubbles to create more phantom collateral to support more borrowing to further feed the bubble to justify outsized management fees.
Those engaged in creating phantom wealth collect handsome “performance” fees for their services at each step and walk away with their gains. When the bubble bursts, borrowers default on debts they cannot pay and the debt pyramid collapses, along with the bubble, in a cascade of bankruptcies.
Those who had no part in creating or profiting from the scam are then left to absorb the losses and to sort out the phantom-wealth claims still held by the perpetrators against the marketable real wealth of the larger society. It is all legal, which makes it a perfect crime.
From Agenda for a New Economy, p. 21