Thread by @NathanDallon

@RealVision Decided to terrify me going into this weekend.

Great interview between @vol_christopher and @profplum99

A few terrifying moments in the interview:

1/12

realvision.com/shows/mike-gre…

Mike: 'You alluded to this earlier. We saw high yield and IG CDS, are the spreads between rates and corporate credit, collapse much more quickly than we saw on the equity side...

2/12

...We obviously know the Fed played a direct role in that by stepping forward and as you pointed out, supporting it, but what are the implications of that dynamic? How does that create opportunity, or does that push us further towards the ultimate Minsky moment?"

3/12

Chris: "I think it does push us further towards the ultimate Minsky moment. I think you're very kind to active because I think, particularly to the quantitative space. I think there are people who in a state of panic, I think they were forced to buy...

4/12

...I think it's not like people, I think they had no choice. It was existential at that point, until, of course, you had a monetary backstop."

5/12

I think they are SPOT ON.

6/12

More terrifying and true sound bites:

Chris: "Well, I got to take a step back, what they did is they-- to solve a liquidity problem, they created an even bigger corporate solvency problem."

(@MetreSteven totally agrees.)

7/12

Then Mike decides to scare me out of my pants a few minutes later:

"This is my primary concern with the way that we have set up the system. I forget who it was, who was actually highlighting this and I thought it was actually a really...

8/12

...really good observation that the system has moved from one that is predicated on the idea of fractional reserve banking, where the banks are the source of leverage. Increasingly, we've moved to the shadow bank system...

9/12

@EmilKalinowski

...where repo and collateral sit at the core of the lending situation. The ability to lever a portfolio by posting collateral is the core of what allows us to expand or contract our credit at this point.

As we move from a low interest rate environment...

10/12

...to a high interest rate environment, by definition, we actually are contracting that collateral as a bond matures towards par or a bond matures toward risk of default...

11/12

...on the inability to refinance, the collateral in the system falls and the Fed is forced to intervene yet again."

These two are brilliant. Thank you @vol_christopher and @profplum99.

I am equal parts terrified and motivated to dive into this even more.

12/12

#HappyEaster