So why are people buying Steem? Is the system a Ponzi scheme? Steemit is not a Ponzi scheme because it creates a tangible value.'

Tangible value as in the posts? Anyone can read the posts for free. The rewards come from the speculators' pockets. Anyone who buys STEEM or SBD or does not sell all liquid rewards and power down and liquidate all SP rewards at once believes there will be another speculator in the future who will buy STEEM and SBD at a price at least as high as what they were worth when they were gained. If the above were the whole picture, your relatives would be exactly right: Steem would be nothing but an elaborate investment bubble.

But you should note that Steemit is but one interface to Steem the blockchain. Steem is already used by dozens of applications other than Steemit. Once the number of users of apps using Steem grows large enough, that crowd will begin to interest commercial actors, motivating them to buy Steem Power to gain the attention of that crowd. The attention of large numbers of people is what motivates advertisers to buy ad space from Facebook. Facebook's market cap is a thousand times larger than Steem's . Facebook has two billion users. Steem has a million accounts. Steem has potential to be much more than a platform for content creators. It also has a money transfer system that is highly efficient. And with the Smart Media Token protocol, anyone can create a token, which an be traded against STEEM on the internal market. STEEM is needed for bandwidth for performing network transactions.

So, once the user base is large enough buying pressure on STEEM can be generated by:

A) Commercial actors for buying Steem Power to attract attention

B) The use of STEEM and SBD or any Smart Media Tokens as fast, efficient, secure, and cheap international payment system.