Speaker 1: Cool Zone Media.
Speaker 2: Welcome to it could happen here, a podcast where I
Speaker 2: explain fake money things that are actually real. To Molly Molly,
Speaker 2: thank you so much for coming back on. I am
Speaker 2: your host, Miya Long. I'm excited to learn now long
Speaker 2: ago in a galaxy far far away. And I'm saying
Speaker 2: this because I legitimately do not remember how many weeks
Speaker 2: ago we released the original one of this. But back
Speaker 2: in that episode where we explained shadow banking, I said
Speaker 2: that I had had to cut off the part of
Speaker 2: the episode that was the reason why I wrote it
Speaker 2: in the first place. It happens to me every week, Yes,
Speaker 2: so Coma. I've also kind of had to split some
Speaker 2: of this episode off. That will probably that will be
Speaker 2: another episode, probably with Edzeitron, whenever I have enough seconds
Speaker 2: in my life to pull all of that together. But
Speaker 2: today we are here to talk about the actual sort
Speaker 2: of shadow bank run. I guess you would call it
Speaker 2: financial problems that caused me to write the shadow banking
Speaker 2: episode in the first place.
Speaker 3: Oh right, why I originally asked you what shadow banking is.
Speaker 3: There's some kind of economy problem and there was like
Speaker 3: a fake run on the fake banks.
Speaker 2: Yes, and Molly, you will be extremely unhappy to note
Speaker 2: that a big part of the reason why there was
Speaker 2: the fake run on the fank banks was that the
Speaker 2: shadow banks loaned a bunch of money to a different
Speaker 2: type of shadow bank.
Speaker 3: I don't think they should have done that.
Speaker 2: And that shadow bank went under. Great things are.
Speaker 3: Happening here, but they're not FDIC insured Mia.
Speaker 2: Nope, nope, nope, nope. So okay, this gets us back
Speaker 2: to our original definition of a shadow bank, which is
Speaker 2: that it's a bank that does banking things. That's not
Speaker 2: a bank, so it's not ensured by the FDIC. They
Speaker 2: don't have to have money on hand to make sure
Speaker 2: that they can't be a bank run on them.
Speaker 3: Right, So they just said no more transactions please.
Speaker 2: Yes. So what Molly is referring to is a few
Speaker 2: weeks ago. I guess maybe like a month ago. At
Speaker 2: this point, there was actually a breakthrough into the kind
Speaker 2: of mainstream ish of some stuff that I've been brewing
Speaker 2: in the financial news for a while, and that was
Speaker 2: that a bunch of companies, Morgan stan Lee and Blackrock.
Speaker 2: I think we're kind of the two biggest ones that
Speaker 2: stopped this. Although a bunch of these sort of smaller
Speaker 2: what are called private credit firms also sort of did
Speaker 2: things like this, and.
Speaker 3: So because they're not really banks, there's no regulation that
Speaker 3: says they have to serve their customers, right, they can
Speaker 3: just say no.
Speaker 2: Okay, So this is part of what's really a shit show.
Speaker 2: I guess let's start at the beginning. So what happened?
Speaker 2: Sorry I got as derailed. Yeah, let's run back to
Speaker 2: the specific thing we're talking about. Here is a thing
Speaker 2: called private credit, and so private credit. I'm just going
Speaker 2: to read this thing from the telerwind, which is, I
Speaker 2: don't know, the telor window is actually a decently useful thing.
Speaker 2: Where the teller window is. The FED is like I'm
Speaker 2: going to explain something to normal people. Now. The problem
Speaker 2: is that this is still the Federal Reserve. So their
Speaker 2: explanation for normal people. By normal people, they mean like,
Speaker 2: I don't know, like dipshit day traders.
Speaker 3: Right, normal people don't have questions about the Federal Reserve.
Speaker 2: Yeah, So it's like this is like for people who
Speaker 2: are kind of know this stuff but are running into
Speaker 2: this like arcane subfield for the first time. So I'm
Speaker 2: just going to quote from them because I think it's
Speaker 2: an interesting place to start. Although there is no universal
Speaker 2: definition which you know things are going great when a
Speaker 2: second episode in a road talking about it, you can't
Speaker 2: all agree what's it's so good? It's so good? Although
Speaker 2: there is no universal definition, private credit generally refers to
Speaker 2: a loan that is negotiated between a borrower and a
Speaker 2: small group of non bank lenders. These non bank financial
Speaker 2: institution lenders are typically alternative asset managers, such as private
Speaker 2: equity firms, who package loans in different investment vehicles. Other
Speaker 2: non bank financial institutions like pension funds, insurance companies, and
Speaker 2: sovereign wealth funds then invest in those vehicles. So this
Speaker 2: is the stuff that we talked about from last episode,
Speaker 2: where okay, so you have multiple layers of shadow banks, right.
Speaker 2: You have on the one hand that the private credit
Speaker 2: firms are these these sort of groups that go in
Speaker 2: and sometimes they're just their own things. There's a bunch
Speaker 2: of different kinds of them. Private equities firms tend to
Speaker 2: have like one arm of the private equity firm that's
Speaker 2: there like this is our shiny private credit wing. There
Speaker 2: were also these things called business development corporations which do
Speaker 2: these There are other types of them too. But basically
Speaker 2: what those companies do is they go in and they
Speaker 2: negotiate a loan with a usually a pretty long term
Speaker 2: for repayments on the loan with a company. Now, the
Speaker 2: thing about these loans is that the terms of those
Speaker 2: loans are secret from everybody.
Speaker 3: Yeah, even the people involved.
Speaker 2: Well when I say secret, I mean the company that's
Speaker 2: taking out the loan and the bank know how they work.
Speaker 2: No one else does. And then what happens is these
Speaker 2: are usually fairly risky loans because if you weren't doing
Speaker 2: a risky loan, you would get your money through like
Speaker 2: a normal bank. Yeah, allow you to do it normal style. Right,
Speaker 2: this is not normal style. These are risky. And then
Speaker 2: they do the thing called securitization, which we talked about
Speaker 2: last episode, where you take a loan and do magic
Speaker 2: to it and turn it into something that someone else
Speaker 2: can buy.
Speaker 3: Whatever happened to products and services, neo, whatever happened to products.
Speaker 2: Well, because products and services make less money than betting
Speaker 2: on products and services. This is this is also where
Speaker 2: this is all going. So there's some real issues here
Speaker 2: with private credit.
Speaker 3: So we're buying and selling money that isn't real. And
Speaker 3: add the absence of money that isn't real. And then
Speaker 3: so what happened when there was the run on the
Speaker 3: fake bank.
Speaker 2: Well, that's kind of work.
Speaker 3: Because how can you do a run on a bank
Speaker 3: if there's no money because you're not asking to get
Speaker 3: your money back out of it because there was never
Speaker 3: any money.
Speaker 2: Well, so here's the thing. So a lot of the
Speaker 2: way that these things work sometimes like they are obviously
Speaker 2: selling the loans and packages, but a lot of the
Speaker 2: way that it works is that it does kind of
Speaker 2: work like a normal bank, which is i mean, instead
Speaker 2: of being a lender, you're like an investor, but you
Speaker 2: give them a bunch of your money and they give
Speaker 2: it to these loan things. So it is just literally
Speaker 2: a normal bank, except it's not subject to banking regulations
Speaker 2: and it's risk here, right, So like like Apollo Capital
Speaker 2: Management or whatever, it's like you give a bunch of
Speaker 2: money to Apollo Capital Management, just like Lowal Capital whatever
Speaker 2: is like apall Global Capital is one of the big
Speaker 2: firms in this thing, and then they give that money
Speaker 2: out and loans and then you're basically just supposed to
Speaker 2: wait because you know, remember last episode we talked about
Speaker 2: how in the way that normal bank works, Right, there's
Speaker 2: like a fundamental kind of gap right where you are
Speaker 2: putting your money in as like a short term thing
Speaker 2: that you can take out immediately, and then the bank
Speaker 2: is turning the short term money into a long term loan. Right.
Speaker 3: It takes time for the money to grow up.
Speaker 2: Yes, And the reason we have financial regulations is to
Speaker 2: force the banks to have money on hand so that
Speaker 2: if you need your money back, you can take it out. Now,
Speaker 2: these banks don't have this because these are shadow banks.
Speaker 2: They are the credit arms of private equity. They're fucking
Speaker 2: I don't know, they're like capital management firms.
Speaker 3: They're like, dude, Right, So, like a normal run on
Speaker 3: the bank is like, obviously the bank doesn't have one
Speaker 3: hundred percent of all I put cash in the bank.
Speaker 3: We all put cash in the bank, and everyone wants
Speaker 3: all their cash bag. The bank doesn't have one hundred
Speaker 3: percent of that cash, You get that, right, It's like
Speaker 3: they have it invested and it hasn't. Those loans haven't
Speaker 3: matured yet and things like that. But theoretically, if all
Speaker 3: those loans matured, that bank does have all of those dollars.
Speaker 3: But the shadow bank they're selling these same loans to
Speaker 3: multiple people. So even if everything matured properly, they don't
Speaker 3: have all of those dollars anymore. Yeah, the dollars don't
Speaker 3: all exist.
Speaker 2: I mean, Jimmy fair, the bank's dollars also work like
Speaker 2: that because the banks are also selling their loans off.
Speaker 3: But well, you're saying that they were using like the
Speaker 3: same mortgage to secure a bunch of different Yeah.
Speaker 2: Right, so that's like, yeah, that's like a classic shadow
Speaker 2: banking thing. We're actually going to get back to that
Speaker 2: because they're doing an even dumber version of that now.
Speaker 3: I'm just saying it seems like a run on the
Speaker 3: bank would be kind of inevitable even in a minor crisis,
Speaker 3: because they're not have most of the money they're pretending exists.
Speaker 2: Yeah. Well, but okay, so I think what I would
Speaker 2: say about that is that this is also a problem
Speaker 2: for regular banks, right, Like, I don't think this is
Speaker 2: actually a structurally different crisis, like because like the crisis
Speaker 2: here is just that the money is out in loans
Speaker 2: and they they don't have it on hands. And this
Speaker 2: is the structural crisis that the private credit people are doing,
Speaker 2: is that their money is also out on loans, so
Speaker 2: they don't have it, And a lot of these loans
Speaker 2: are like seven year loans in like very risky companies.
Speaker 2: So the money like really isn't.
Speaker 3: There, right, because that venture capital like whatever is that's
Speaker 3: an inflated valuation. So you're talking about like almost ten
Speaker 3: billion dollars, but it isn't and it never will be
Speaker 3: and it never was.
Speaker 2: Yeah. Well, and the other thing that's going on too,
Speaker 2: right is like these these are supposed to be risky loans,
Speaker 2: so they have a high rate.
Speaker 3: Of return if they return.
Speaker 2: But yes, and this is where this gets not good
Speaker 2: because so the US private credit market is one point
Speaker 2: three trillion dollars like under management. The global market is
Speaker 2: like three point five trillion dollars of assets. I'm not
Speaker 2: really going to go into the Chinese private credit market
Speaker 2: here because that's its own episode. But the way that
Speaker 2: these that these companies deal with this is that they
Speaker 2: have these funds, right, and then the fund gives out
Speaker 2: like the loans, and they have a limit to the
Speaker 2: total amount of like the percent of the value of
Speaker 2: the fund that can be taken out at one time.
Speaker 2: And that's what's been being hit. The industry standard is
Speaker 2: supposed to be about five percent of the fund can
Speaker 2: be withdrawn per quarter, and then after that they just
Speaker 2: shut down redemptions. And that's what you saw in the
Speaker 2: news because a bunch of companies, and some of these
Speaker 2: companies have higher limits, they're like almost like eight or nine,
Speaker 2: like the ten percent, they'll stop it at like nine roughly.
Speaker 3: So, more than anything, shutting down redemptions is an indicator
Speaker 3: that the market has panicked, right, that the investors are
Speaker 3: spooked and they want their money back because this risky
Speaker 3: investment is now looking like a very bad choice.
Speaker 2: Yes, but this is a real structural problem because right.
Speaker 3: But like as a measurement of something, it's just like
Speaker 3: what we're measuring is how many investors are shitting their pants.
Speaker 2: And there's a reason they're shitting their pants. And the
Speaker 2: reason they're shitting their pants is that basically, all of
Speaker 2: these firms have been eating a colossal amount of shit.
Speaker 2: And the reason they're eating a colossal amount of shit,
Speaker 2: I mean, some of it is very stupid. Some of
Speaker 2: them are eating shit because they gave money to like
Speaker 2: normal tech firms, but then now they're all scared they're
Speaker 2: gonna get out competed by AI firms. Some of them
Speaker 2: have given a bunch of money Blue Owl particularly, and
Speaker 2: this is what we're gonna get into in the episode
Speaker 2: with Ed has given a lot of money to AI firms,
Speaker 2: which is a fucking nightmare. Great investment, Yeah, incredible stuff
Speaker 2: going on.
Speaker 3: I'm sure. I'm sure that's what Ed will say. Ed
Speaker 3: will say that was a good investment.
Speaker 2: It's so fun. It's so fun. The main thing that
Speaker 2: they've been eating shit on. And this is where this
Speaker 2: kind of hit the mainstream because a whole bunch of
Speaker 2: normal banks also ate shit on this JP Morgan ate
Speaker 2: shit on this loan. So a huge amount of money
Speaker 2: was poured into this firm called Tricolor, which we touched
Speaker 2: on briefly last episode but then didn't really talk about
Speaker 2: much about what it did. So, Okay, JP Morgan has
Speaker 2: lost one hundred and seventy million dollars.
Speaker 3: Oh, no big deal.
Speaker 2: Yeah, which, and it's funny. It's funny because like the
Speaker 2: JP Morgan CEO were like, yeah, we kind of atehit
Speaker 2: on this, and also their CEO gave this quote where
Speaker 2: he was like, where there's one cockroach, there's probably more,
Speaker 2: which is like an extremely normal thing for the finance
Speaker 2: kind of saying about the market.
Speaker 3: Haven't we have an infestation of accidentally losing one hundred
Speaker 3: and seventy million dollars?
Speaker 2: Yeah, I mean it's not great. But like in the
Speaker 2: grand scheme of things, right, like JP Morgan does have
Speaker 2: four trillion or something dollars under management.
Speaker 3: Right, But if he's saying if there's one cockroach, there's more, Yeah,
Speaker 3: Usually if you have one cockroach, you have one hundred cockroaches.
Speaker 3: So if you have one hundred, one hundred and seventy
Speaker 3: million dollar fuck.
Speaker 2: Ups, yes, and that's not great, right. And like Barclays,
Speaker 2: which is the very sort of like frist just British bank,
Speaker 2: which also ate shit for doing this kind of stuff.
Speaker 2: Two two thousand and eight also lost like one hundred
Speaker 2: million pounds. What's interesting about this specific one is this firm, Tricolor,
Speaker 2: is a subprime auto loan company.
Speaker 3: Oh, that's a phenomenal business model, Molly. I. So they're
Speaker 3: responsible for the Nissan Ultima.
Speaker 2: Yeah, this is that this is what is known as
Speaker 2: an idea that could not possibly have gone right. It's
Speaker 2: very funny because when you read the stuff from Tricolor,
Speaker 2: they're all like, oh, we're trying to like help people
Speaker 2: who are like underserved in markets who need cars.
Speaker 3: Oh so, but here's the thing about a shitty auto loan,
Speaker 3: is you know, right, you are serving an underserved community.
Speaker 3: You are serving people with bad credit who might not
Speaker 3: otherwise be able to get a car, but you're serving
Speaker 3: them by fucking them. Yes, And this is the thing
Speaker 3: that you can tell.
Speaker 2: Yeah, they they know that they're lying about this, right,
Speaker 2: it's just so evil. Yeah, And like this is all
Speaker 2: downstream of you know, this is all downstream with the
Speaker 2: fact that we've built our cities around cars, right, and
Speaker 2: we built our cities around cars specifically, and this is
Speaker 2: a really fun thing. We built our cities around cars
Speaker 2: specifically because we had created so much manufacturing capacity after
Speaker 2: after World War Two that like Ford and General Motors
Speaker 2: had like pumped into that. They were like, we need
Speaker 2: a fucking way to make money off of all of this.
Speaker 2: And this is also, by the way, why we did
Speaker 2: the Marshall Plan, Like we rebuilt Europe to sell cars
Speaker 2: to them.
Speaker 3: It's this terrible snowball of like induced demand and then
Speaker 3: dealing with that and then the fallout of that, and yeah,
Speaker 3: trying to reorganize from that.
Speaker 2: Yeah, and we have destroyed the world with this.
Speaker 3: It rocks. Thank you, Henry Ford.
Speaker 2: It's so good. It's so good. We have literally like
Speaker 2: Earth is fucked because of this. This is like one
Speaker 2: of the largest engines of global climate change is the
Speaker 2: fact that we had all these fucking factories after World
Speaker 2: War Two and these companies didn't want to eat shit
Speaker 2: on them.
Speaker 3: So now so everybody needs a car, but they can't
Speaker 3: afford one. So now we have a fake bank doing
Speaker 3: fake fucking auto loans.
Speaker 2: Yep, yep. Who By the way, and I kind of
Speaker 2: emphasize this enough, right, The hole that we are in
Speaker 2: here is that there is in theory, if you're going
Speaker 2: to be running a market economy, there is like room
Speaker 2: in it for hey, this person has a long shot
Speaker 2: but good business idea and we need to get the money.
Speaker 3: Sure, Like there's nothing wrong with the idea of loans.
Speaker 2: Yeah, but if your whole.
Speaker 3: Business model is exploiting people who need loans.
Speaker 2: That yeah, well but this is you know, this is
Speaker 2: going one layer up from like this soubpar model loan company. Right.
Speaker 2: The problem that we're going to hit with all of
Speaker 2: these private credit firms is that they're giving loans to
Speaker 2: just this shit. Right. The things that they're giving high
Speaker 2: risk loans to aren't like interesting businesses. They're subprime auto
Speaker 2: loan companies, and they're like weird AI data center creation companies. Right,
Speaker 2: it's like that shit, and this is where everything goes
Speaker 2: to shit because you know, and it's something that actually
Speaker 2: wasn't really reported on very much in a lot of
Speaker 2: the coverage on these companies eating shit. But like what
Speaker 2: this company was doing was they were literally doing all
Speaker 2: of the two thousand and eight stuff, right. They give
Speaker 2: out these subprime loans, which they know like a bunch
Speaker 2: of them are going to fail. They pull them all
Speaker 2: together into these like tranches of loans, and then they
Speaker 2: sell them off doing the securitization stuff we talked about
Speaker 2: last time, and again this is literally exactly how the
Speaker 2: subprime mortgage crisis worked, except for doing it with auto loans.
Speaker 2: It seems a little bit more evil. Yeah, And they're
Speaker 2: doing this thing right. They're doing the thing that we
Speaker 2: saw with the housing loans, where the same car is
Speaker 2: collateral for multiple of these loans. And the reason they're
Speaker 2: doing this right is that this company, Tricolor, their entire
Speaker 2: business model is trying to borrow more money from banks
Speaker 2: so that they can send out more of these shitty
Speaker 2: auto loans, so they can then sell that stuff back.
Speaker 2: And so they're also like heavily leveraged, right because they're
Speaker 2: they're taking out like every single loan they can possibly do.
Speaker 2: They're doing instruments so that they're the collateral on the
Speaker 2: loans that they are taking. So they take that money
Speaker 2: and give out more of these shitty auto loans. The
Speaker 2: collateral on that is multiple of the shitty auto loans.
Speaker 3: I mean, I would say it's a house of cards,
Speaker 3: but like, yeah, it's not even it's not even that
Speaker 3: it's imaginary. It's just it's like the bottom row on
Speaker 3: this house of cards is just your imagination.
Speaker 2: Yeah, it's it's it's wildly coyote running off the cliff
Speaker 2: and he's still standing there and as long as his
Speaker 2: feet are moving, no one realizes that that like, wait,
Speaker 2: hold on, this is the this is literally the fakest
Speaker 2: thing I've ever seen. And then it goes under, and
Speaker 2: this is a shit show.
Speaker 3: That's the only possible outcome.
Speaker 2: The only possi way it could have gone under. It
Speaker 2: is like we've we've done this before. We all wash
Speaker 2: two thousand and eight.
Speaker 3: But there's not like an ideal version of this where
Speaker 3: it works. This can only not work. Yeah, it's insane.
Speaker 2: It's like, so why are we doing because there's one
Speaker 2: year where it made a billion dollars?
Speaker 3: Right, Buying Ponzi schemes are really profitable the first year.
Speaker 2: Right, right, That's like that's the thing, right.
Speaker 3: It really it works out really good for the first guy.
Speaker 2: Yeah, And like like part of what's going on here
Speaker 2: too is you know, like this is some of the
Speaker 2: stuff that caused the original bubble, but like we have
Speaker 2: this era like the the early twenty twenties and like
Speaker 2: late twenty tens that's like the zero fed inches rate era, right,
Speaker 2: where like it is basically just free to borrow money,
Speaker 2: and so there's just all of this money slashing around
Speaker 2: that there's nothing to invest into. This fuels all sorts
Speaker 2: of just like heinous shit, right because there's suddenly just
Speaker 2: like all of these pools of capital with like nothing
Speaker 2: to invest in, and so they're investing it in like
Speaker 2: defense companies and like Palenteer and shit like that.
Speaker 3: Is this why we got stuff like the juice ero.
Speaker 2: Yeah, but that's like the other thing, right, is like no,
Speaker 2: but like like like the juicearo thing is like legitimately.
Speaker 3: Venture capital was just like pouring money into stuff that
Speaker 3: was just like not fucking real. Yeah, you could juice
Speaker 3: fruit at home and.
Speaker 2: Like like this is you know, I talked about this
Speaker 2: on a different episode about venture capital, and like the
Speaker 2: way that it's done tech fascism, right, was eventually they
Speaker 2: started putting that money into like building the material basis
Speaker 2: for like a tech fascist state, and that's what they've
Speaker 2: been doing in sort of I kind.
Speaker 3: Of wish they stuck to their cocaine ideas, like juice ero.
Speaker 2: Yeah, that was a better part.
Speaker 3: It was more fun than fascist.
Speaker 2: No, No, it's more fun than like turning every single
Speaker 2: door in every single car in San Francisco into a
Speaker 2: surveillance machine and then like going in and like basically
Speaker 2: cooing governments. And yeah, but on the sort of like
Speaker 2: pure financial end of this, you get all of these
Speaker 2: companies that are just pouring all of this money into
Speaker 2: there's those layers of this too, right. We're like, you know,
Speaker 2: if you're like like JP Morgan, which is like an
Speaker 2: actual bank, right.
Speaker 3: Real one.
Speaker 2: Yeah, yeah, the real one is like pouring money into
Speaker 2: these like into these like shadow banks, right, because they're
Speaker 2: they're chasing a high rate of return. And this is
Speaker 2: like what happened in two thousand and eight was like
Speaker 2: there were everyone was like, oh, these bonds have a
Speaker 2: really high rated return. The mortgage racked securities. And now
Speaker 2: we've reached the point where I think, God where this
Speaker 2: is the most recent news from this and Molly, I'm
Speaker 2: just gonna read you the thing from Reuters quote JP Morgan, Chase,
Speaker 2: Barclays and other Wall Street banks have started trading credit
Speaker 2: default swaps linked to flagship private credit funds run by Blackstone,
Speaker 2: Apollo Global Management, and Ares Management, the Financial Times reported
Speaker 2: on Friday.
Speaker 3: And that's a good idea for them to do.
Speaker 2: Oh this is this is really fun because now what
Speaker 2: we're doing is they're now opening the markets to bet
Speaker 2: on these things to fail. Right.
Speaker 3: I just I don't understand why so much of the
Speaker 3: economy is based on these bets that bad things will happen. Yeah,
Speaker 3: it's like if everything collapses, some guys are going to
Speaker 3: get so rich. If a thousand people get their cars repossessed,
Speaker 3: one guy gets so rich. Like that's not a great
Speaker 3: way to run an economy.
Speaker 4: You know.
Speaker 2: John mayerd Kines, a guy who is I would argue
Speaker 2: responsible for this. This is his fault for like stabilizing
Speaker 2: the capitalist economies in the middle of the Great Depression.
Speaker 2: But Canes is like a welfare state guy, but he's
Speaker 2: also a capitalist. And he has this line about how
Speaker 2: like the economy shouldn't be run by a casino to win,
Speaker 2: which I would be like, okay, Canes, but.
Speaker 3: Like the economy is a casino.
Speaker 2: Yeah, it's like it's like, this is your fault for
Speaker 2: not being willing to like not have a market economy, right, Like,
Speaker 2: like we could, we could achieve the dream of not
Speaker 2: having your economy be run by a casino. This is
Speaker 2: a thing that you could do. It's just that you can't.
Speaker 3: That was a youth reason before. I don't think he
Speaker 3: realized that, like we literally do have a castell.
Speaker 2: He kind he kind of did, right, because it's not
Speaker 2: it's not an euphemism anymore.
Speaker 3: I'm going to necromance him and tell him about polymarket.
Speaker 2: Oh yeah, he he he would lose his mind about polymarket.
Speaker 2: But like, like he's watching people just like betting on stocks, right,
Speaker 2: and he's watching a bunch of people.
Speaker 3: Grab the Ouiji board and tell that bitch about college,
Speaker 3: Well this is this, this.
Speaker 2: Is like we're going back in time and showing him
Speaker 2: Calshi and he's like, oh fuck, okay, I'm like I
Speaker 2: am now against I am now against the market as
Speaker 2: an idea. We cannot let this come to pass. But
Speaker 2: like you know, this is this is this has been
Speaker 2: like a known issue with the market as a system
Speaker 2: for a long time. But it's a problem because in
Speaker 2: theory you could try to go through and like regulate
Speaker 2: this stuff, but like investment is just gambling to some extent, right,
Speaker 2: And when you talk to the people who believe in
Speaker 2: this stuff, they're like, well, no, you can't have stock
Speaker 2: markets without sort of equities markets, and you can't have
Speaker 2: these things without the ability to bet on it. And
Speaker 2: I would say, okay, well don't have it then, Like
Speaker 2: I think this is a really simple solution, but you
Speaker 2: know these people like no, no, no, no. In order to
Speaker 2: mention a capitalist economy, you must it must be possible
Speaker 2: for a bunch of people to be placing bets on
Speaker 2: the companies that give money to subprime auto loan companies.
Speaker 3: Failing, I guess that's the point where like I get
Speaker 3: off the train where you say, well, in order to
Speaker 3: maintain a capitalist economy. And I'm like, yeah, exactly, dog,
Speaker 3: I don't want to do that.
Speaker 2: And like, this is why this is a terrible idea,
Speaker 2: Like it's it's a bad idea for first principles, and
Speaker 2: we're all living in like the nightmare healthscape of this
Speaker 2: being a bad idea.
Speaker 3: Yeah, so the movie that's maybe that's why I can't it,
Speaker 3: because this does make some kind of sense to like
Speaker 3: an evil guy who wants it to be this way,
Speaker 3: but I don't want it to be this way.
Speaker 2: Yeah. Well, and I very deliberately I went and I
Speaker 2: went into when I was learning economics, when I was
Speaker 2: learning political economy, from the perspective of like, okay, how
Speaker 2: do you destroy this right?
Speaker 3: And this part, this part seems fragile.
Speaker 2: Yeah, but it's like one of these things where it's like, Okay,
Speaker 2: this is going to break on its own.
Speaker 3: But I guess the problem is is it does keep
Speaker 3: breaking on its own. It's just that we keep bailing
Speaker 3: it out and reconstructing it and propping up the house
Speaker 3: built on sand.
Speaker 2: Yeah, and that's the part where you know, like this
Speaker 2: is a thing where the intervention of masses that people
Speaker 2: onto the stage of history has to happen where if
Speaker 2: you want this to not be the way that the
Speaker 2: system works when it breaks down, you have to be
Speaker 2: organized enough to be like, no, fuck this, We're not
Speaker 2: going to sacrifice all of our lives to reopen the casino.
Speaker 2: We are going to either tear the casino down or
Speaker 2: turn the casino into like housing or whatever.
Speaker 3: So when there was this run on the fake banks
Speaker 3: and they stopped it, what happened after that? I guess
Speaker 3: because that was my original question, right, He's like, what
Speaker 3: does the run on a fake bank even look like
Speaker 3: or do?
Speaker 2: Yeah? So basically what happened is that they just like
Speaker 2: stopped their redemptions and everyone got really really pissed off.
Speaker 2: But there's not that much they can do about it, because.
Speaker 3: Because I'm sure that was in the terms and conditions
Speaker 3: whenever they signed up to do financial crimes together.
Speaker 2: Yeah. And what's been happening now though, is that this
Speaker 2: is this has been spreading kind of panic about just
Speaker 2: I don't know, they would call it like the asset
Speaker 2: class in general.
Speaker 3: Oh, like maybe it wasn't a good idea to invest
Speaker 3: all your money into this fake product.
Speaker 2: No, it was. It was in fact a terrible idea
Speaker 2: and this is this is, this is I think why.
Speaker 3: We're the've mismanaged your client's funds.
Speaker 2: Yeah, and this is I think why we're starting to
Speaker 2: get the like blackrock fucking credit default swaps right, because
Speaker 2: the market is being like, oh, hey, all these people
Speaker 2: are pissed off about the fact that we designed our
Speaker 2: unhinged private credit shadow banking system in such a way
Speaker 2: that you can't get your money out of it. What
Speaker 2: do you recapitalized on that by letting people bet on it?
Speaker 2: And that's that's good. So right now we're in this
Speaker 2: kind of limbo world and this is this is this
Speaker 2: is the entire global economy, right. Everyone is sitting here
Speaker 2: pretending like the apocalypse isn't happening. And that's the basis
Speaker 2: of the entire economy.
Speaker 3: I mean, what am I supposed to do about it?
Speaker 2: Yeah? But it's like, you know, but there's's there's a
Speaker 2: difference between you and us doing this and the people
Speaker 2: who have all of the money in the world who
Speaker 2: are sitting there pretending that like there's like some very
Speaker 2: easy way out of this war that we're that we're
Speaker 2: waging as Lebron right, And then it's not going to
Speaker 2: just keep going even though there's no good way to
Speaker 2: get a ceasefire. And you know, like no one, no
Speaker 2: one in charge of the US has any idea what
Speaker 2: they're doing. They're they're they're in some ways, they're they're
Speaker 2: doing the strategy they did in like the lockdown phase
Speaker 2: of the pandemic, where they're.
Speaker 3: Just waiting for it to burn itself out.
Speaker 2: Yeah, where they're like, Okay, well we're going to ask
Speaker 2: for a bunch of money. But when you do that
Speaker 2: with the global economy, yeah, right, And like I had
Speaker 2: a friend who described it as like the fundamental problems
Speaker 2: that these people are incentivized to just think that everything
Speaker 2: will keep going right for them because.
Speaker 3: It has because eventually it will right, They'll be fine.
Speaker 2: Yeah, But like eventually there's a point where that runs out,
Speaker 2: and when it hits there's going to be this sort
Speaker 2: of chilling discovery that like, oh yeah, the entire last
Speaker 2: like fifteen years of their sort of being an economy
Speaker 2: has been this like weird tech capitalist mirage. And once
Speaker 2: that fails, we, I guess we're already in the time
Speaker 2: of monsters.
Speaker 3: So whoo oh, I don't have any other marketable skills.
Speaker 3: We kind of can't collapse. I'm a podcaster.
Speaker 2: Yeah, well this has been it could happen here.
Speaker 3: Did I learn anything?
Speaker 2: I don't know. Honestly, this is just they're doing it
Speaker 2: all again and it's even dumber this time. God.
Speaker 3: Yeah, at least there were houses last time. Now there's
Speaker 3: not even a no.
Speaker 2: Now there's a proper shitty auto loans Mollie, where can
Speaker 2: people find your very very lovely show.
Speaker 3: You can find me wherever you get your podcast. You
Speaker 3: can subscribe to my show, Weird Little Guys. It's fun,
Speaker 3: you'll like it. Yeah, I'm in the middle of a
Speaker 3: series right now about a segregationist attorney who loved the
Speaker 3: Confederacy so much that he built a twenty five foot
Speaker 3: tall Confederate monument out of old bathtubs. It's fun, you'll
Speaker 3: love it.
Speaker 2: Does he blow up a school bus? This is fine.
Speaker 3: No, But he did go to YMCA Night YMCA Night
Speaker 3: Law School, which is a night law school through the
Speaker 3: YMCA in Nashville, so that he could get better at
Speaker 3: doing segregation. Like he wasn't the lawyer. And then in
Speaker 3: mid life he was like, I want to go to
Speaker 3: law school at night so he could do busing cases.
Speaker 3: So he could take bussing cases, so he didn't blow
Speaker 3: any buses up, but he did blow up a lot
Speaker 3: of people's lives. Correat, how about that great anyway, check
Speaker 3: out Little Guys.
Speaker 2: Yeah, and if you want to stop there from being
Speaker 2: both weird little guys and also having our economy be
Speaker 2: run on betting on funny money, go like organize a union,
Speaker 2: or like join your local affinity group, or start doing
Speaker 2: food not bombs, or do what a literal literally literally
Speaker 2: do anything.
Speaker 4: Because we do nothing, we will continue to live in
Speaker 4: the world of the segregation lawyer who builds statues out
Speaker 4: of bathtubs, and also the subprime auto loan defaults.
Speaker 3: At least go outside and take a walk.
Speaker 1: Yeah, it could Happen Here is a production of cool
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Speaker 1: on the iHeartRadio app, Apple Podcasts, or wherever you.
Speaker 3: Listen to podcasts.
Speaker 1: You can now find sources for it Could Happen here
Speaker 1: listed directly in episode descriptions. Thanks thanks for listening.