WEBVTT - How do credit default swaps work?

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<v Speaker 1>Brought to you by the reinvented two thousand twelve Camray.

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<v Speaker 1>It's ready. Are you welcome to Stuff you should know

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<v Speaker 1>from house Stuff Works dot com? Hey, and welcome to

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<v Speaker 1>the podcast. I'm Josh Clark and guess who's with me?

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<v Speaker 1>M Ronald McDonald? Yes, I met Ronald McDonald. That my

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<v Speaker 1>cousin's ride tame birthday already? Really? Yeah, it's pretty cool. No, weird,

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<v Speaker 1>that's the first thing that came into my head. I

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<v Speaker 1>guess it means I'm hungry. I guess, so are you hungry?

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<v Speaker 1>Did you eat today? This is gonna be a fun one.

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<v Speaker 1>Shock you're talking about credit to fault swaps. I know

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<v Speaker 1>we're gonna try to make it sexy. Yes? Should I

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<v Speaker 1>go ahead and get the caveat here? If you want?

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<v Speaker 1>Go ahead? I just want folks to know we usually

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<v Speaker 1>Josh and I do a lot of prep work and

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<v Speaker 1>both have a pretty good understanding. But I'm not ashamed

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<v Speaker 1>to admit that I didn't quite understand this one, and

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<v Speaker 1>so it's pretty thick. Yeah, it might be a little

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<v Speaker 1>different today Josh is going to be teaching me along

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<v Speaker 1>with you. So, okay, are you prepared as prepared as I?

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<v Speaker 1>Can I appreciate you dressing like a little school girl

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<v Speaker 1>today to really kind of complete everything round it out? Um? Okay,

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<v Speaker 1>so well, let me give you an analogy, all right, Okay, So, Chuck,

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<v Speaker 1>Imagine if I went to your health insurance provider, right

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<v Speaker 1>and said, hey, I want to buy Chuck policy okay,

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<v Speaker 1>and they said okay, and they sold it to me,

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<v Speaker 1>and you would be in charge of that policy. I

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<v Speaker 1>would own the policy, so I'd be I'd be accepting

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<v Speaker 1>monthly payments from you. Everything would be fine. I'd be

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<v Speaker 1>probably running around trying to keep you out of accidents

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<v Speaker 1>that kind of thing. But if you did get into

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<v Speaker 1>an accident, I would be on the hook to pay

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<v Speaker 1>your medical expenses, right, you bet you would be. You

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<v Speaker 1>and I are both fully aware that I don't have

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<v Speaker 1>the money to pay your medical expenses. So basically what

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<v Speaker 1>would happen is I'd pay as much as I could

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<v Speaker 1>until I bankrupted myself, and then you'd be on the

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<v Speaker 1>hook to pay your medical expenses. Right, I get that.

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<v Speaker 1>So you'd be in trouble, it bankrupt you and we'd

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<v Speaker 1>both be up the creek, I understand. So are you

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<v Speaker 1>with me? So? Are that makes sense now? Imagine if

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<v Speaker 1>you owned two other people's life or health insurance policies

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<v Speaker 1>just like I owned yours. Okay, sure, Now let's say

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<v Speaker 1>you that accident you got into was a three car

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<v Speaker 1>pile up, just in a mind boggling coincidence with the

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<v Speaker 1>other two people whose health insurance policies you owned with you.

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<v Speaker 1>So now all of a sudden, you guys are all

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<v Speaker 1>in an accident, all need healthcare, and nobody has the

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<v Speaker 1>money to pay out. I can't pay yours, and you

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<v Speaker 1>have your own problems, so you can't pay the other

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<v Speaker 1>two peoples. So imagine if this just keeps going on

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<v Speaker 1>and on and on and on in this infinite car

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<v Speaker 1>pile up, and everybody owns everybody else's insurance policy but

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<v Speaker 1>nobody can pay. Okay, seems it does. It is awful.

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<v Speaker 1>It's kind of nightmares. Right. So the good thing is

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<v Speaker 1>that this can't happen because health insurance is a heavily

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<v Speaker 1>regulated industry. So you've got um you have federal inspectors

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<v Speaker 1>who can go to a health inst and say, let

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<v Speaker 1>me see your books. I want to make sure you

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<v Speaker 1>can cover every policy that you have. Right, did they

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<v Speaker 1>do that? Yeah? And what's more, they can't sell your

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<v Speaker 1>insurance policy to anybody, right, okay. Right, with credit default swaps,

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<v Speaker 1>all the all the good things that keep health insurance

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<v Speaker 1>from going pear shapes are not present, although they are

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<v Speaker 1>pretty much insurance policies on debt. Okay, okay, this is

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<v Speaker 1>where I start to get a little fuzzy. I understand

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<v Speaker 1>it does get a little fuzzy at this point. It's

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<v Speaker 1>a bit of an abstract. Um, it's a bit abstract

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<v Speaker 1>for me. It is, it's insane. You have to be

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<v Speaker 1>a a genuinely savvy person and possibly a bit evil

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<v Speaker 1>to be able to really accurately trade or make money

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<v Speaker 1>in credit default swaps. But you don't have to be

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<v Speaker 1>evil to describe them to people in podcast land. No, No,

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<v Speaker 1>you just have to read them, read the article several times,

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<v Speaker 1>and write it too. It doesn't hurt to write it

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<v Speaker 1>several times, and it was still a little bit maybe

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<v Speaker 1>you have to write it writing it out. Um, okay,

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<v Speaker 1>So let me give you a little bit background credit

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<v Speaker 1>default swaps for these financial instruments that came out of

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<v Speaker 1>the late nineties. Right, it's a derivative. It is a derivative,

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<v Speaker 1>and a derivative is a derivative. I do know this.

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<v Speaker 1>It's a financial instrument, UH that has a value based

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<v Speaker 1>on the value of another financial instrument. Right. So let's

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<v Speaker 1>say you're trading in oil futures, right, UM that actually

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<v Speaker 1>the value of that future is based on the value

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<v Speaker 1>of oil. It has an actual value, right. UM. With this,

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<v Speaker 1>this would be based on UH future and oil future. Right.

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<v Speaker 1>So it doesn't have its own value. Its values based

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<v Speaker 1>on the value of something else. So let's say you

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<v Speaker 1>bought a bunch of oil futures and you were worried

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<v Speaker 1>that the price of oil was going to go down, right,

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<v Speaker 1>and so you'd be getting the oil cheaper oil for

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<v Speaker 1>than what you paid for it. You would you would

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<v Speaker 1>lose money. You could I'm not sure if you could

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<v Speaker 1>or not, But let's say theoretically you could buy a

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<v Speaker 1>credit default swap to cover that eventuality. So it's like insurance.

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<v Speaker 1>That's exactly what it is. So in the nineties, UM,

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<v Speaker 1>they started issuing these things on municipal bonds, which are

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<v Speaker 1>or about as safe as it gets. UM. Almost every

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<v Speaker 1>city except for probably Detroit, has a triple a UM

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<v Speaker 1>credit rating. Right. So a municipal bond is a loan

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<v Speaker 1>made to a city to finance a project. That's why

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<v Speaker 1>it's a little more stable than your average situation. Right,

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<v Speaker 1>And the city can tax its citizens to pay off

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<v Speaker 1>its debts, which is one of the reasons why they're

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<v Speaker 1>so stable and reliable and credit worthy. Right, gotcha. So

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<v Speaker 1>the thing is, like all these banks that are issuing

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<v Speaker 1>these policies are saying, you know what, we're making just

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<v Speaker 1>tons of extra income because they're they're um selling these

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<v Speaker 1>credit default swaps to people who are loaning money to cities.

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<v Speaker 1>The cities are definitely paying it back, so there's no

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<v Speaker 1>there's no um default on the loan, and so the

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<v Speaker 1>banks are just can inect your money. So these things

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<v Speaker 1>started to take off like a rocket. Who's the day,

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<v Speaker 1>That's what I'm confused about. That's the bank they actually

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<v Speaker 1>issue these. Okay, so let's say let's say that, um,

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<v Speaker 1>I have a bunch of money and Atlanta needs to

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<v Speaker 1>repay four hundred so I buy a bunch of city bonds,

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<v Speaker 1>a bunch of municipal bonds, which are basically it's a

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<v Speaker 1>city issuing debt. I give them a bunch of money

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<v Speaker 1>and then give me a bond and return to hang

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<v Speaker 1>on too, and I'll earn like slow, steady, small interest. Right,

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<v Speaker 1>I would buy a credit default swap from a bank,

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<v Speaker 1>right to say, if this city doesn't pay me back,

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<v Speaker 1>then I can cash in this credit default swap, this

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<v Speaker 1>insurance policy against the against the the the loan I

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<v Speaker 1>gave the city, Okay, and then I'll actually make more

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<v Speaker 1>money because like a life insurance policy, it has it's

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<v Speaker 1>worth more than say the actual loan. Okay, se coming

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<v Speaker 1>into focus, Okay, is it? Is it? Okay, we should

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<v Speaker 1>we should talk together before we do these ruin everything. Yeah,

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<v Speaker 1>I guess you're right. Yeah, so um okay, so the

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<v Speaker 1>so the It made a huge source of extra income

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<v Speaker 1>for the banks that were issuing these these insurance policies

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<v Speaker 1>because no municipality was defaulting on their loans, right, Um,

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<v Speaker 1>So they started to look for other places where they

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<v Speaker 1>could sell these things or people they could sell them to,

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<v Speaker 1>of course, and essentially you can cover any debt whatsoever,

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<v Speaker 1>um with a credit default swap. Well, that's amazing to me.

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<v Speaker 1>And I think one of the reasons why it was

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<v Speaker 1>able to take to take off like this is because

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<v Speaker 1>they're unregulated. It seems like, you know, greed as always

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<v Speaker 1>kind of takes hold they're like, hey, if we do

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<v Speaker 1>it for this, we can do it for this is

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<v Speaker 1>how it worked. They're wholly and completely to this day unregulated.

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<v Speaker 1>It's amazing. So, which is why that that scenario that

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<v Speaker 1>I gave you at the beginning about your health insurance policy,

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<v Speaker 1>that's dead on with credit default swaps. So think about this.

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<v Speaker 1>Say a bank issues, um, a credit default obligation to

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<v Speaker 1>somebody who has um created debt. Right Um. That that

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<v Speaker 1>guy who loaned money to the city for that road project. Okay,

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<v Speaker 1>so he buys a credit default sat. Now there's two

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<v Speaker 1>players in this one. Really, as far as the insurance

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<v Speaker 1>policy goes. You've got the bank who has the issuers

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<v Speaker 1>side of it, and then you've got me, uh, the

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<v Speaker 1>guy who made the loan to the city, who has

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<v Speaker 1>the buyer's side of it. And you pay a premium

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<v Speaker 1>like right um, And then both of the sides of

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<v Speaker 1>this policy can be sold to anybody at any time

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<v Speaker 1>who wants to buy them, and neither side needs to

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<v Speaker 1>notify the other person. Really, what's more, because it's unregulated, Um,

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<v Speaker 1>if the bank sells it to you, right, so, now

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<v Speaker 1>you own the issuer portion of my credit default swap.

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<v Speaker 1>So I'm now making payments to you. You don't have

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<v Speaker 1>to prove to them at all whether you have the

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<v Speaker 1>money to cover it. If that, if the city defaults

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<v Speaker 1>on the loan. This sounds two things. This strikes me.

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<v Speaker 1>It sounds like la la land, and it sounds like

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<v Speaker 1>a really bad idea. It is because, Chuck, here's the problem,

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<v Speaker 1>right if you if we haven't come up with enough

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<v Speaker 1>problems yet. Um, since it's also since it's unregulated, the

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<v Speaker 1>way that a credit default swap can be called in

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<v Speaker 1>if I'm the buyer is through a credit event, and

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<v Speaker 1>there's certain credit events, one of the big ones bankruptcy.

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<v Speaker 1>One of them is if the city just says we're

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<v Speaker 1>not repaying your loan, that would be a credit event,

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<v Speaker 1>right right, and then that triggers payment problem is since

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<v Speaker 1>they're unregulated, anybody can dispute whether or not a credit

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<v Speaker 1>event actually took place, whether the event that the buyer

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<v Speaker 1>is saying, give me my money over actually was a

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<v Speaker 1>credit event. So there's mediation, there's lawsuits. Well who did

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<v Speaker 1>they dispute it to? Though, since there's nobody they take

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<v Speaker 1>the other person to course, they just start seeing each other. Yes,

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<v Speaker 1>more litigation, that's exactly what we need. Right. Um. The

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<v Speaker 1>thing is, it's it's still, like I said, to this day, unregulated.

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<v Speaker 1>There's actually an independent body of banks and investment houses

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<v Speaker 1>and other other investors uh and securities analysts I believe,

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<v Speaker 1>who have come together to form an arbitrating panel for

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<v Speaker 1>credit default swaps. That's a good thing, right, it is

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<v Speaker 1>a good thing. But again, it exists outside of the government.

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<v Speaker 1>So everybody who's involved in the credit default market had

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<v Speaker 1>to agree, Yes, we'll listen to these people. Their decision

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<v Speaker 1>is binding. But is that I mean, existing outside the government,

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<v Speaker 1>and it isn't necessarily a bad thing. No, it isn't.

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<v Speaker 1>But I think to me, it's just kind of one

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<v Speaker 1>more point, like where's the SEC. And I actually read

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<v Speaker 1>that the SEC and the Treasury Department we're encouraging this

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<v Speaker 1>panel to form, like please go handle this for us

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<v Speaker 1>because we don't have any teeth whatsoever. Um. So yeah,

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<v Speaker 1>so that's the problem with being unregulated, right, Well, it

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<v Speaker 1>sounds like it's right for a nightmare scenario to like,

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<v Speaker 1>first we're talking about let me let me set the

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<v Speaker 1>stage for you, okay, okay. In July two thousand seven,

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<v Speaker 1>you remember the good, heady days of the bubble before

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<v Speaker 1>at first, okay, the um the subprime mortgage market was

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<v Speaker 1>valued at. Uh, let's see, I think seven trillion dollars

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<v Speaker 1>in the US and them in the US. But the

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<v Speaker 1>US is I think the biggest player in the subprime

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<v Speaker 1>mortgage market, right, And this is when the subprime mortgage

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<v Speaker 1>market was still valuable. So seven trillion. Do you know

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<v Speaker 1>in July two thousand seven, what the credit default swaps

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<v Speaker 1>market was valued at? I do, but I'm gonna let

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<v Speaker 1>you say it. Are you ready? Sixty two trillion dollars?

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<v Speaker 1>That's unbelievable. Do you know what the global g d

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<v Speaker 1>P was for two thousand and eight? I do, but

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<v Speaker 1>I'm gonna let you say it. You're ready? Sixty nine

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<v Speaker 1>trillion dollars? Wow, So it's short of the globe of

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<v Speaker 1>the global GDP. So basically, if every country in the

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<v Speaker 1>entire world could suddenly sell off everything, every good in

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<v Speaker 1>service that produced any year to say some aliens, right,

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<v Speaker 1>we'd still just we'd have like five trillion dollars left

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<v Speaker 1>over for the year. It sounds like this is the

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<v Speaker 1>biggest market of anything in the world. Almost, Yes, yeah,

0:12:20.240 --> 0:12:22.160
<v Speaker 1>it's I think, So I can't I can't think of

0:12:22.160 --> 0:12:24.439
<v Speaker 1>anything that that's valued up more than that and it

0:12:24.600 --> 0:12:26.760
<v Speaker 1>just think about it. This is the the late nineties,

0:12:26.760 --> 0:12:30.880
<v Speaker 1>So in a decade, this unregulated market went from zero

0:12:31.040 --> 0:12:35.920
<v Speaker 1>to sixty two trillion. Well, what's amazing is like your

0:12:36.160 --> 0:12:40.000
<v Speaker 1>references the mortgage crisis, and that's a scenario you can

0:12:40.120 --> 0:12:42.760
<v Speaker 1>you can track it down to a house eventually, like

0:12:42.800 --> 0:12:46.240
<v Speaker 1>a physical property. But this is sort of like exist

0:12:46.320 --> 0:12:48.760
<v Speaker 1>in the ether, So where there's no end of the line,

0:12:49.440 --> 0:12:51.480
<v Speaker 1>it seems like no, there isn't um, which is why

0:12:51.520 --> 0:12:54.679
<v Speaker 1>you can say no credit credit event didn't occure, or no,

0:12:54.760 --> 0:12:56.920
<v Speaker 1>I'm not gonna pay up, or I don't have the

0:12:56.920 --> 0:12:58.960
<v Speaker 1>money to pay up. I'm sorry. I was enjoying the

0:12:59.000 --> 0:13:01.600
<v Speaker 1>monthly payments you're paying me and I really thought you

0:13:01.640 --> 0:13:05.040
<v Speaker 1>were gonna be okay. But now that you've gone under,

0:13:05.200 --> 0:13:07.800
<v Speaker 1>I can't. I can't pay you. You know, I can't

0:13:07.840 --> 0:13:11.120
<v Speaker 1>pay you um the money that I owe you, Right,

0:13:11.600 --> 0:13:14.319
<v Speaker 1>so what does this us? Well, hold on, let me

0:13:14.360 --> 0:13:17.480
<v Speaker 1>say one more thing. The whole reason this this market

0:13:17.480 --> 0:13:19.680
<v Speaker 1>blew up was because it's actually a way to bet

0:13:19.760 --> 0:13:22.760
<v Speaker 1>on the health of a company. Right, So if you

0:13:22.800 --> 0:13:26.320
<v Speaker 1>have a bunch of investors who have buyers shares of

0:13:26.600 --> 0:13:30.320
<v Speaker 1>credit default swaps. Then they're saying, uh, they think that

0:13:30.320 --> 0:13:34.040
<v Speaker 1>that company is gonna go under because they're paying monthly premiums.

0:13:34.080 --> 0:13:36.840
<v Speaker 1>But it's on the premise that you um that that

0:13:36.880 --> 0:13:38.280
<v Speaker 1>company is gonna go under, and there will be a

0:13:38.360 --> 0:13:43.720
<v Speaker 1>much bigger payout, yes, even more. Um, you can actually

0:13:43.760 --> 0:13:47.360
<v Speaker 1>short sell a company, driving its value down if you

0:13:47.520 --> 0:13:49.679
<v Speaker 1>if you own enough shares, or you can borrow enough

0:13:49.720 --> 0:13:52.880
<v Speaker 1>shares and sell them on a margin. Um. If you

0:13:52.960 --> 0:13:55.600
<v Speaker 1>have credit default swaps, it'll actually be a bigger payout

0:13:55.640 --> 0:13:57.920
<v Speaker 1>if you can drive that company into bankruptcy because you've

0:13:57.960 --> 0:14:01.320
<v Speaker 1>just created a credit event that seeing is unbelievable. Okay,

0:14:01.320 --> 0:14:03.440
<v Speaker 1>So this is where the world was teetering right now.

0:14:03.520 --> 0:14:07.720
<v Speaker 1>And in two thousand seven eight um Lehman Brothers actually

0:14:07.720 --> 0:14:12.200
<v Speaker 1>went down not because of subprime mortgage securities, but because

0:14:12.280 --> 0:14:15.480
<v Speaker 1>of all the credit default swaps. This huge domino effect

0:14:15.600 --> 0:14:18.439
<v Speaker 1>was triggered. A bunch of people had credit default swaps

0:14:18.520 --> 0:14:22.920
<v Speaker 1>on the subprime mortgage securities that they owned, right oops. Indeed,

0:14:23.520 --> 0:14:26.640
<v Speaker 1>so when the subprime mortgage securities went south, everybody turned

0:14:26.640 --> 0:14:28.640
<v Speaker 1>to their credit default swaps. I'm like, well, I'm I'm

0:14:28.640 --> 0:14:30.960
<v Speaker 1>glad I have these. Now, wait a minute, who owns

0:14:30.960 --> 0:14:33.680
<v Speaker 1>my policy? Because there's no paper trail whatsoever you have,

0:14:33.800 --> 0:14:35.600
<v Speaker 1>you track down who owns it and then hope that

0:14:35.640 --> 0:14:37.640
<v Speaker 1>they have the money to pay you. All these banks

0:14:37.640 --> 0:14:40.720
<v Speaker 1>were finding out the people that own their their um

0:14:40.880 --> 0:14:44.200
<v Speaker 1>their insurers policy, uh, didn't have the money to pay them.

0:14:44.480 --> 0:14:46.960
<v Speaker 1>The problem is is when you're writing your balance sheet.

0:14:47.000 --> 0:14:49.240
<v Speaker 1>If you have a major loss, but you have a

0:14:49.240 --> 0:14:51.600
<v Speaker 1>credit default swap that covers it and it pays out,

0:14:51.920 --> 0:14:53.680
<v Speaker 1>you're fine and you're staying in the red and you

0:14:53.760 --> 0:14:56.080
<v Speaker 1>probably actually made a little bit of money. If you

0:14:56.160 --> 0:14:59.400
<v Speaker 1>have a major loss and there's no credit default swap

0:14:59.480 --> 0:15:02.360
<v Speaker 1>to cover it can't be covered, then that's when your

0:15:02.360 --> 0:15:05.400
<v Speaker 1>balance she goes into I'm sorry, into the red, right,

0:15:06.560 --> 0:15:09.720
<v Speaker 1>which is the bad one? Right right? Yeah, I get that. Okay,

0:15:09.800 --> 0:15:12.400
<v Speaker 1>so um, that's what happened with Lehman Brothers. That's why

0:15:12.440 --> 0:15:14.600
<v Speaker 1>A I G got all of that bail out money

0:15:15.000 --> 0:15:16.920
<v Speaker 1>because they had a bunch of credit to fault swaps.

0:15:16.920 --> 0:15:20.200
<v Speaker 1>And now there's this panel that I talked about, the

0:15:20.240 --> 0:15:24.520
<v Speaker 1>independent panel that's actually gotten the value of the market

0:15:24.520 --> 0:15:29.520
<v Speaker 1>down to about twenty trillion. I wonder, however, dependent Well, yeah,

0:15:29.600 --> 0:15:32.120
<v Speaker 1>I think it's probably all revolving door and stuff like

0:15:32.160 --> 0:15:34.320
<v Speaker 1>they if they haven't held public office in the last

0:15:34.320 --> 0:15:36.840
<v Speaker 1>couple of years, they will work for Goldman Sax. I

0:15:36.840 --> 0:15:39.240
<v Speaker 1>think Goldmen Sex is a major player in that panel. Yeah,

0:15:39.360 --> 0:15:43.760
<v Speaker 1>well this sounds like I get it now, do you really? Yeah? Yeah? Yeah, alright,

0:15:43.880 --> 0:15:46.840
<v Speaker 1>so thanks for that, but thank you. Where does this lead?

0:15:47.040 --> 0:15:49.400
<v Speaker 1>I mean, is this uh, something's got to happen at

0:15:49.440 --> 0:15:51.960
<v Speaker 1>some point. It seems like or else it's setting us

0:15:52.040 --> 0:15:56.000
<v Speaker 1>up for even more failure economically, right, No, no, no, no,

0:15:56.120 --> 0:15:58.920
<v Speaker 1>most definitely. I think it's just um, it seems like

0:15:58.960 --> 0:16:02.240
<v Speaker 1>the credit of fault swaps market is being tamed. Like

0:16:02.320 --> 0:16:04.320
<v Speaker 1>I said, we've gone from sixty two trillion to twenty

0:16:04.600 --> 0:16:07.640
<v Speaker 1>trillion in just like two years. But I think it's

0:16:07.640 --> 0:16:12.200
<v Speaker 1>symptomatic of the lack of regulation and oversight that that

0:16:12.240 --> 0:16:15.640
<v Speaker 1>we've had. We have the SEC, but they don't have

0:16:15.680 --> 0:16:17.520
<v Speaker 1>any teeth in the teeth that they do have or

0:16:17.640 --> 0:16:21.640
<v Speaker 1>dole and and can basically just gum butter, you know. Um.

0:16:21.720 --> 0:16:24.080
<v Speaker 1>And then the fact that there's a whole over the

0:16:24.080 --> 0:16:27.360
<v Speaker 1>counter markets that are allowed to get this big without

0:16:27.400 --> 0:16:32.040
<v Speaker 1>any regulation whatsoever. I think it seems there seems to

0:16:32.040 --> 0:16:35.200
<v Speaker 1>be a pattern, Chuck, like the Great Depression was the

0:16:35.240 --> 0:16:39.240
<v Speaker 1>result of complete and total lack of oversight and regulation

0:16:39.640 --> 0:16:42.360
<v Speaker 1>mixed with unbridled Greek. Right, So then we come up

0:16:42.400 --> 0:16:44.760
<v Speaker 1>with things like the SEC, the FDA, all these things

0:16:44.760 --> 0:16:47.480
<v Speaker 1>that all these regulatory bodies that came out of the

0:16:47.480 --> 0:16:50.520
<v Speaker 1>Great Depression in the in the crash to prevent it

0:16:50.560 --> 0:16:53.240
<v Speaker 1>from happening again. Then we got lazy, so then this

0:16:53.320 --> 0:16:56.120
<v Speaker 1>happened again. There's going to be more regulation. The problem

0:16:56.160 --> 0:16:59.920
<v Speaker 1>is people always say, you know, pro business people always

0:17:00.040 --> 0:17:04.160
<v Speaker 1>a you know, regulation strangles business. I disagree. I think

0:17:04.200 --> 0:17:07.720
<v Speaker 1>the whole point to um capitalism is to make as

0:17:07.840 --> 0:17:10.359
<v Speaker 1>much money as you can as fast as you can write,

0:17:10.920 --> 0:17:13.640
<v Speaker 1>which means that no matter how many roadblocks the government

0:17:13.640 --> 0:17:17.600
<v Speaker 1>throws up, all it's doing is presenting challenges for very clever,

0:17:17.960 --> 0:17:21.880
<v Speaker 1>greedy people, and they'll always find a loophole always. Yeah.

0:17:22.119 --> 0:17:25.000
<v Speaker 1>So I think that's where it's leading us to more regulation.

0:17:25.080 --> 0:17:26.919
<v Speaker 1>But I don't think there's ever going to be a

0:17:26.960 --> 0:17:31.240
<v Speaker 1>saving grace where nothing like this ever happens again. Well,

0:17:31.480 --> 0:17:36.080
<v Speaker 1>when you're talking now trillion dollars, that's still such a

0:17:36.080 --> 0:17:38.359
<v Speaker 1>massive amount that it's it's kind of frightening to think

0:17:38.400 --> 0:17:41.959
<v Speaker 1>about it is, but it's doable. I think if the US, Japan,

0:17:42.000 --> 0:17:44.399
<v Speaker 1>and the UK got together and sold everything off in

0:17:44.440 --> 0:17:47.639
<v Speaker 1>a fire cell, we could cover it. Yeah all right,

0:17:47.880 --> 0:17:50.640
<v Speaker 1>well I get it. Thanks good, I'm feeling pretty good

0:17:50.640 --> 0:17:54.720
<v Speaker 1>about myself. Were default swaps? Ahoy? Yeah, this this was

0:17:54.760 --> 0:17:57.600
<v Speaker 1>sort of like some math kind of just goes so

0:17:57.720 --> 0:17:59.680
<v Speaker 1>far above my head. I can read it and read

0:17:59.680 --> 0:18:02.119
<v Speaker 1>it and read it and it still just doesn't sink in.

0:18:02.640 --> 0:18:05.879
<v Speaker 1>I'm like that with the algebra. I get geometry, but

0:18:05.920 --> 0:18:07.800
<v Speaker 1>not algebra. We should do a podcast on it and

0:18:07.800 --> 0:18:10.720
<v Speaker 1>fumble our way through that so we could. Yeah, yeah,

0:18:10.760 --> 0:18:13.520
<v Speaker 1>so there you have. It's awesome. All right, Are we

0:18:13.600 --> 0:18:16.520
<v Speaker 1>still plugging things anymore? Sure? Josh. We'll just give a

0:18:16.560 --> 0:18:19.119
<v Speaker 1>quickie plug to the blog. Alright, blog and stuff you

0:18:19.119 --> 0:18:22.080
<v Speaker 1>should know blog that we write um once a day

0:18:22.119 --> 0:18:24.560
<v Speaker 1>each and it's on the right side of the homepage.

0:18:24.880 --> 0:18:27.439
<v Speaker 1>Very nice and it's been enjoyable and that's all we

0:18:27.440 --> 0:18:30.359
<v Speaker 1>need to say. Yes, that is it? So then what

0:18:30.400 --> 0:18:32.840
<v Speaker 1>does that mean? Chuck's listener mail time? It is indeed,

0:18:35.960 --> 0:18:39.040
<v Speaker 1>And Josh, this one I'm really looking forward to reading.

0:18:39.160 --> 0:18:43.000
<v Speaker 1>Which one is it? This is the I ME incident?

0:18:43.240 --> 0:18:45.800
<v Speaker 1>We get a lot of these uh for those of you.

0:18:45.960 --> 0:18:47.920
<v Speaker 1>Obviously you don't know because you don't get a listener mail.

0:18:47.960 --> 0:18:49.600
<v Speaker 1>We have a lot of people that take us to

0:18:49.680 --> 0:18:53.199
<v Speaker 1>task on the use of I and me, Josh and I,

0:18:53.359 --> 0:18:56.000
<v Speaker 1>Josh and me and me and josh I and Josh

0:18:56.119 --> 0:18:57.679
<v Speaker 1>I seem to get it a lot more than you,

0:18:57.760 --> 0:19:00.800
<v Speaker 1>though we both do. We Yeah, So if people take

0:19:00.880 --> 0:19:03.000
<v Speaker 1>us to task and tell us that we're not being

0:19:03.040 --> 0:19:07.399
<v Speaker 1>a responsible uh with our grammar. And I got this

0:19:07.480 --> 0:19:11.159
<v Speaker 1>email from Keith and Alton, Illinois, and Keith says, I

0:19:11.200 --> 0:19:12.760
<v Speaker 1>just want to let you know that as a student

0:19:12.800 --> 0:19:15.240
<v Speaker 1>of linguistics, I'd like to tell you that in a

0:19:15.320 --> 0:19:18.800
<v Speaker 1>compound object e g. Send listener mail to Chuck and

0:19:18.960 --> 0:19:21.879
<v Speaker 1>I slash me, it is totally fine to use whichever

0:19:21.920 --> 0:19:24.399
<v Speaker 1>pronoun you think sounds better. I've read a link the

0:19:24.560 --> 0:19:28.160
<v Speaker 1>explanation that justifies the use of eye in a compound object,

0:19:28.520 --> 0:19:30.680
<v Speaker 1>but I won't bore you with it. My main point

0:19:30.720 --> 0:19:32.880
<v Speaker 1>is this talk in whatever way it sounds right to you,

0:19:33.320 --> 0:19:36.000
<v Speaker 1>while keeping in mind that certain non standard usage of

0:19:36.000 --> 0:19:41.359
<v Speaker 1>words might put off some snooty pedants. Awesome, Keith, and

0:19:41.400 --> 0:19:43.760
<v Speaker 1>he did actually send a link. I'm not gonna bore

0:19:43.800 --> 0:19:47.199
<v Speaker 1>you either. But there was a book by Steven Pinker

0:19:47.640 --> 0:19:51.680
<v Speaker 1>called The Language Instinct, and uh, I mean he sent

0:19:51.720 --> 0:19:53.840
<v Speaker 1>me a whole page where the guy basically breaks it

0:19:53.880 --> 0:19:56.080
<v Speaker 1>down and in the end, I'll just read the one

0:19:56.119 --> 0:19:59.920
<v Speaker 1>sentence Stephen Pinker. Really yeah, Ok, do you know him?

0:20:00.600 --> 0:20:02.480
<v Speaker 1>I just heard of him last night for the first time.

0:20:02.600 --> 0:20:05.960
<v Speaker 1>Really yeah, it's odd. How about that? So? Uh, The

0:20:06.000 --> 0:20:09.560
<v Speaker 1>last sentence of his thing says, by the logic of grammar,

0:20:09.680 --> 0:20:12.040
<v Speaker 1>the pronoun is free to have any case it wants.

0:20:12.400 --> 0:20:16.119
<v Speaker 1>I agree. I think the point of communication is to

0:20:16.160 --> 0:20:19.119
<v Speaker 1>get your get your idea across to somebody exactly. And

0:20:19.160 --> 0:20:22.560
<v Speaker 1>I think interchanging iron me so gets the point across. Yeah.

0:20:22.760 --> 0:20:24.480
<v Speaker 1>I think if you can get your point across with

0:20:24.520 --> 0:20:27.639
<v Speaker 1>grunts and hand gestures or if that's proper communication. Right.

0:20:27.720 --> 0:20:29.240
<v Speaker 1>And when it comes down to it, the name of

0:20:29.280 --> 0:20:31.879
<v Speaker 1>this show is not grammar. You should know, right. And

0:20:31.920 --> 0:20:33.760
<v Speaker 1>we are always the first ones to say we're not

0:20:35.119 --> 0:20:39.639
<v Speaker 1>you know, we're not perfect, so uh layoff. Yeah a

0:20:39.800 --> 0:20:41.760
<v Speaker 1>matter of fact, Keith, go ahead and send us your

0:20:42.200 --> 0:20:44.640
<v Speaker 1>your address because we're gonna send you a T shirt.

0:20:44.680 --> 0:20:47.640
<v Speaker 1>My man, that was cool, Thanks for coming to the rescue. Yeah, Keith,

0:20:47.680 --> 0:20:50.200
<v Speaker 1>shirt size and address, and well, thank you for having

0:20:50.200 --> 0:20:53.120
<v Speaker 1>our backs on this. So if you want to have

0:20:53.160 --> 0:20:55.720
<v Speaker 1>our backs, if you want to take us the task,

0:20:55.920 --> 0:21:00.800
<v Speaker 1>if you're a grammar Nazi or a well whatever, how

0:21:00.840 --> 0:21:05.320
<v Speaker 1>about we re record that part ready. So if you

0:21:05.400 --> 0:21:07.400
<v Speaker 1>want to have our backs or you want to take

0:21:07.520 --> 0:21:11.400
<v Speaker 1>us to task like the grammar Nazis that rode in Um,

0:21:11.560 --> 0:21:14.399
<v Speaker 1>just go ahead and send us an email to stuff

0:21:14.520 --> 0:21:21.080
<v Speaker 1>podcast at how stuff works dot com for more on

0:21:21.160 --> 0:21:23.639
<v Speaker 1>this and thousands of other topics. Does it how stuff

0:21:23.680 --> 0:21:28.720
<v Speaker 1>works dot com m brought to you by the reinvented

0:21:28.720 --> 0:21:31.440
<v Speaker 1>two thousand twelve camera. It's ready, are you