Why the Economy Hasn't Crashed Yet

So for over a year now, I think a lot of people who are pretty informed on how economies work have felt like it's pretty weird that the like other shoe has not dropped yet. We've got a government that feels kind of unpredictable. We've got tariffs, like big new tariffs. Also, those tariffs themselves feel very unpredictable. You got people who had previously had their student loans deferred no longer having them deferred. You got people who used to have government jobs no longer having those government jobs.

But as a person who is really involved in the running of a couple of small organizations, this unpredictability piece of this is like a really big deal. It's a big cost for a business, especially if you're running a small business where you can't just like call up a lobbyist and get an exemption. You can't shift production between three different continents. You can't finance a sudden inventory pile up because you're worried that the rules are going to change next Tuesday.

And so there's a big mystery here because markets are up. Jobs are not collapsing. They're like, "Okay, spending seems okay. People are still buying stuff. Online holiday spending in 2025 higher than ever." Now, the labor market has cooled. You could find plenty of stories about slowing hiring and rising uncertainty. But broadly, the story as it stands is this thing is still chugging along a lot more than people seem to have expected. So why?

And I've heard a few explanations that I think are good explanations. I also have a hypothesis that I want to run by everybody that I think is terrifying. But we're gonna first, we'll talk about the explanations I've heard that I think are pretty good. One, the AI investment boom. There's a lot of real money going into the real economy to build data centers and buy chips and power infrastructure and do the software and everything downstream of all of that. A bunch of different economic analysis has shown that this has been a big contributor to the macro situation in the US. It accounted for a lot of the private demand growth in the first half of 2025, latter half of 2025 probably. We don't have that data yet.

And there's also like an interesting fiscal tailwind right now and that is in uh tax policy. What we are doing is we are taxing people less. We've lowered taxes, especially on the wealthy, and we're financing that through deficit spending. And that can keep demand high when things would otherwise slow down. And that's especially true if a lot of the economy, the economy is propped up by wealthy households. The Wall Street Journal reported that the top 10% of earners drive about half of consumer spending because people with assets are doing quite well. If you had money in the stock market, you have a lot more money than you used to have. And you could just sell some stocks and go on vacation or sell some stocks and buy a new car. Like they have money to spend. So if stock prices are doing well, like they stay high, then high earners are able to keep spending and you get an economy that looks kind of fine in aggregate when a lot of small businesses and a lot of normal people are not feeling fine. And all that feels like it makes sense to me and it tells like a fairly coherent story.

I have an addition that I'd like to propose and this is dangerous cuz I'm just a guy and there's like a weaker version of this hypothesis that's I feel like is pretty true and I've actually heard it from other places and there's like a stronger version that if it is true I feel like is bad, like really bad. So I'm going to tell you my little guess here and then I'm going to talk to an actual economist about whether I'm totally off the mark. And spoiler, if I discover that there's nothing to this, I will not release it as I have just recorded it. But I think that you should stick around for that conversation to see what holes we poke in my ideas here.

So, let's start with a weaker claim that this is just a kind of political physics at work. The markets, we're going to talk about the markets a lot here, but these are human beings and they are broadly, we're going to talk about this a little later, but broadly fairly sympathetic to Donald Trump. They think that he's going to be good for them. And I think in part because they like understand the incentives here. And Trump, his popularity, his success is very much tied to the market not collapsing, to there not being an economic downturn. And so the markets, these people who are in charge of like buying and selling and sort of set a lot of the prices. They know that Trump will back off if the markets freak out. They know Trump won't do something. It would be very self-destructive for him to make decisions that would actually result in an economic downturn. And not just that, but that he's going to make a lot of decisions to make that not happen in whatever way he can because a lot of his power. You know, this is always true of a president, but specifically for Donald Trump who has a lot of his credibility built on him being a good businessman for whatever that's worth. I think that the markets understand that President Trump understands that if the economy turns down, it will be very bad for the amount of power that he has. He likes having power. He will do whatever he can to have the economy not have a downturn. And that includes exercising a lot of power that a normal president might not exercise, including putting a lot of pressure on the Fed, like doing a lot of things that he should not technically have the ability to do.

Basically, if the president's power depends on the economy looking good, and if markets are one of the loudest and fastest feedback mechanisms we have, then investors can rationally believe that there's a limit to how much pain the White House will tolerate. And that comes straight down to self-interest. So, the market can price in a kind of back off button. And we saw this early on last April after the administration's tariff like day that they had, Trump uh announced a 90-day pause on a lot of the tariffs. And then the S&P 500 had its biggest daily gain since 2008. So that's the basic weaker claim that Donald Trump will do whatever he can to keep the economy humming along. And also he has proven to be good at exercising a lot more power than previous presidents. And so the markets believe that this very powerful force will continue to support it.

I've heard a lot of people say that there's something happening in the direction of Donald Trump needs the economy to hold on to his power. But there is another portion of that cycle which he has a lot of power and so he knows he has to keep the economy going so he will keep the economy going and the markets understand that there's a lot of power in the administration and that it will work very hard to keep the economy going. It's a circular thing. Do you see how it goes both ways? Trump needs the economy. The economy needs Trump. And so one of the things that might be keeping the economy humming along is knowing that there is a strong man who has a great deal of power and is not afraid to use it and he will do whatever it takes to keep the economy humming along. And you see this in like little details like Trump has exemptions on electronics like smartphones and computers and semiconductors and that's uh like a lot of the big companies that are responsible for a lot of the increase in the market like in the S&P 500. So he's working hard to protect the things that at least make it look like the economy is still good. So even if tariffs and chaos and firing a bunch of government employees is bad for like the real economy, investors feel like there's a line that the administration won't cross and also that there's lots of stuff that they will do to keep supporting the economy because the Trump administration isn't going to threaten its own political power by letting the economy collapse. And that's a big buoy for the market. It lowers the perceived risk. If you feel like there is a guy who has a whole lot of power in charge of the country, he's not going to let that downturn happen. And he will bully whoever he needs to fire whoever he needs to even investigate whoever he needs to do a little bit of power that he shouldn't be wielding here and there to keep it going for his whole four years. I think as a model of incentives, especially for the kinds of people who are involved in finance, who tend to be more sort of aligned politically with Donald Trump and who do a lot of incentives-based thinking, I think that this makes sense that like this structure would result in the short term in a more stable economy than you would otherwise expect.

But that is not the strong claim that I want to make. The riskier claim that I'd like to make here is far more worrying. But first, this video is brought to you by my newsletter. It's called We're Here. You get it once a week, every Friday. It comes in and it delivers to you some of the coolest things that I found from the internet, some introductory thoughts either from me or from my brother John, and also often a little blog post from the amazing people at our world in data. It is a human curated thing that's delivered to your email inbox for you to look at or not once a week. Check it out. There's a link in the description. It doesn't cost any money and it doesn't even have any advertising. I make negative dollars from this thing, but I do want people to sign up for it because I think that it's good. All right. Thank you.

So, here's the strong claim. It's not Trump will work really hard to avoid a crash. And not even Trump will, you know, do some underhanded things to exercise his power in ways that might not technically be aligned with how the country is supposed to work according to the Constitution to keep that from happening. There are some really big companies that are responsible for a lot of the economy and they would like to be exposed to less risk and have more opportunity for cheaper. And what if the biggest companies can do relatively cheap things to signal loyalty and proximity to Trump and in return they get access to the levers of power and that access reduces their risk and increases their upside. This is not the back off button. There's a couple words for this. You could call this a patronage system. You could call it also an oligarchy. And look, is this quidd pro quo? Is this like definitely like written down and like say I'm bribing you now and then he says yes, thank you for your bribe. Here's your new more lax regulation. Like it doesn't really have to be that. It's a pattern. There's a lot of more discretionary policy. There's a lot of stuff that the administration can do or not do, enforce or not enforce, just depending on vibes. And this administration has no qualms about doing that. More or less from my perspective, depending on whether or not it seems like this organization of people has some amount of loyalty to Donald Trump. And in a world like that, very quickly the best business strategy becomes do that. Not like make a better product, not do a bunch of innovation, not compete on price, but just give a little bit of money to the administration. All you got to do is stay in favor. And for these big companies, this is why a lot of people I hear them say like, "I don't understand why none of these rich guys have any balls." Like, why aren't they pushing back against this? It's because if they don't stay in favor, their stock prices will go down. And they see their job as what their job is, which is to make the price go up for their investors. They work for their investors. They don't work for capitalism. They don't work for democracy. They don't work for ideology. They don't work for their customers. They work for the share price. And that's that that can be fine as long as making better products is the way you make more money. I don't think that this is like a paranoid fantasy. There are facts here.

So Trump's 2025 inauguration fundraising was crazy. Almost $250 million, which was corporations. It was ultra wealthy donors. Crypto firms alone gave around $18 million to the inauguration. But the inauguration just happens one time. So, how else can you absorb some some signals that people might be supportive of you and loyal to you? Maybe you want to build a $300 million ballroom, but you don't want to use taxpayer dollars for it. So, you have it be private donation funding. And maybe this isn't even public. You have major corporations. You have wealthy individuals. You have major tech guys giving money to build this thing. Why are they doing that? Why, out of the goodness of their hearts, are they funding the construction of a ballroom? Do they think like, "Yeah, no, we need a ballroom." Is that what they're thinking?

Now, I understand that some people might be thinking right now, "Okay, yeah, Hank, rich people and corporations give to political things in order to get sway. Welcome to America." But the case I'm making isn't that like people could spend money to get political capital. The case I'm making is very, very large companies that are responsible for like the majority of the S&P 500 are definitely like engaging in this. Like they were sitting behind Donald Trump at the inauguration. They bought those seats. They're doing high visibility and high dollar shows of loyalty and support, but they're super cheap compared to like competing on price, right? Or like doing a bunch of R&D to create a new product. And they know that the Trump administration has set up an environment where policy outcomes are super uncertain and discretionary and also very consequential. They can have a huge impact on your business, but whether or not something actually gets enforced. I don't know who decides that. I'm not sure. It's not clear. Sometimes it does and sometimes it doesn't. And it's different for different companies. How do we decide? How do we decide? If you're a huge company that is an incumbent, you live in that world. All you need is like a shared understanding of the incentives here. You need to believe that the president rewards loyalty and punishes disloyalty and wants power. And like once you like believe all of those things, you can relatively cheaply demonstrate your loyalty and then suddenly we have a lot of really big companies that are in a world that has more opportunities and less risk and fewer threats. And that is an economy drifting toward an oligarchy.

I somewhat famously among certain groups of people am not as critical of capitalism as you might expect. But I also understand that capitalists have no ideological allegiance to capitalism. That's not what they're doing. They're trying to make more money. A good capitalist will happily happily become an oligarch. Because if the other choice is having your competitor become the oligarch, THEN THAT'S TERRIBLE DECISION. WHY would you do that? And you can drift toward this oligarchy without like some kind of like big suitcase full of cash situation. It's not so much about the money. It's about the consolidation of power. It's about very large companies knowing that they can't cross the president and they have to demonstrate through some kind of donation that they are not going to be one of the ones who is critical of the president and the world of finance matters specifically here I think so we have seen open secrets did some good reporting on this uh described the securities and investment industry as a top donor category to Trump aligned interests and packs and stuff financial adviserss also donated way more to Trump than to Biden/Harris. If you're in finances and you think that the game, this is not everybody, but if you think the game is political power protects asset prices, then supporting political power that just becomes risk management. And this is a phenomenon that in the short term can keep markets buoyed while the underlying economy is being damaged because the big companies that are responsible for all these assets that are still flying high and then the people who have assets and then the people who have ownership of those assets can sell some stock and go on a big vacation and stay in a fivestar hotel. All that money is still getting spent, all that economy is still happening. But part of the reason is that these big companies know that they can purchase stability and opportunity and freedom from risk. And not just that, but the people in the finance industry understand that this is a thing that's happening. And when you compare that to the antagonistic stance that a lot of the Biden administration had toward big businesses, to some people maybe this just seems like a business friendly environment. And so this is the stronger claim that I'm making here that there is actually a stabilizing force on the economy through this mechanism that big incumbents who are the majority of the economy and thus the majority of the asset prices and thus the majority of the money of the wealthy who are spending the majority of the money believe that they can get protection as long as they can demonstrate loyalty to Donald Trump. That reduces the downside risk for the big firms. Big firms dominate the index. The index stays strong. Assets keep higher earnner spending. High in spending props up like the average spending and then the average spending props up all of everybody's earnings and then the earnings prop up the index. So tariffs can be a drag, the unpredictability could be a drag, everything can suck for small businesses. Everything can suck for the lower and middle class, but the market can still float up there because the market is betting that the winners will be protected and the losers will be everybody else. But the winners will be protected and they're the ones that take up so much of the economy anyway.

Now, I assume that we all understand that if we're pretty far over on the spectrum, the short-term stability in the market does not mean like long-term good outcomes. The cost of this, we've seen it in lots of different countries, is brutal. Any economy where impress the dictator beats build a better product is not a competitive economy. It's not one that generates a lot of good stuff. It stops serving consumers. It becomes purely extractive. It becomes all about rent seeking. It's all about how much can we pull out of people. And this is not unusual. It's just that we don't usually see it in such fine grain detail where we don't see that like early on it's not bad for the economy for stuff like this to happen. But it takes a while before you see the effect of the innovation slowing. It takes a while before you see the effect of upstarts not being able to break in. It takes a while before you see the effects of all this capital and talent getting wasted on the influence part of everything and not on the actual creation of of product. But eventually that place becomes not dynamic. It becomes less resilient, less capable of real growth. And there's like a reason why corruption is bad. Like it's it's not just like a a morality thing. It's bad for a society. Like there's a bunch of reasons. I just get over and over again I start to like get this sense that that we've forgotten that there's reasons why we don't like things. It's just like oh well yeah we like say that this is bad but when I like my guy's doing it's kind of okay. There's reasons why the bad things are bad. They hurt systems. They stop things from working. Corruption is the biggest kind of theft. It is the largest scale society scale theft and it is all about giving the powerful power to extract rent from the unpowerful which is what everybody says is like the terrible thing about capitalism and like yeah but that's not a symptom of a well functioning market. In a good market you move to somebody who's less extractive. That's why there are certain things like housing and healthcare that maybe shouldn't be purely market driven. And so I think this is like worth taking seriously and I'm certainly not the first person to identify that like we're sliding into an oligarchy. But the fact that it might help explain this weird phenomenon where we have a bunch of new frictions in the economy, but the economy is still doing well. I haven't seen anybody say that. And like maybe I'm wrong. Like I don't follow things that close. But even the weak version, like the back off button is already enough to distort a bunch of incentives here. The strong version, however far we are along that spectrum, the like loyalty for protection version, that's how you build a country where the market is not a competition to serve people. It is a competition to serve power and use that to suck resources out of people. And I think a lot of people do really think that that's like a normal thing to do. Like as long as you can do it, do it. That's what capitalism is. No, it's not. That's oligarchy. And you could do that in a communist system. You could do it in a capitalist system. You can give a lot of people the power to control the levers and then extract everything out of people. And what you find in that system is that it sucks. I was going to say that it sucks all the energy and competitiveness out of economy, but like let's just end it there. It sucks. Places where this happens do not have a bunch of people thriving in the middle class. But now I really have gotten to the point where I feel like I'm talking out of my ass. So, I'd like to talk to an economist, somebody who thinks a lot about the weird and messy time that we are in in America and who I enjoy uh hearing from and learning from. So, I'm going to publish this video as I just recorded it. I'm going to edit it up. I'm going to send it to Kylo Scandlin and then hopefully we're going to cut and I will be having a conversation.

Everybody, theoretically, this is Kylo Scandlin. I think you have essentially covered what a lot of the major financial outlets have been talking about. Even in the first week of February, uh Ken Griffin of Citadel came out and essentially said what you were saying where he's like, "I'm really worried that the economy is bending a knee to the Trump family. They've really enriched themselves." So the fact that somebody of that stature and somebody of that level of power is coming out and saying like, "Hey, it seems like there's some level of oligarchy going on, you're correct in your statement."

Yeah. >> I feel like the weak case is pretty clear. The Trump administration desperately wants and needs the economy or at least the stock market to keep chugging along and >> the the highest spenders and highest earners and highest wealth individuals will continue to spend and and that will keep some portion of the economy chugging along. I don't have confidence that Trump could really make the stock market go up, but I have confidence that he could make it go down because I've seen him do it. >> He does. Yeah. >> And then when that happens, he's like, "Never mind." Actually uh three three points of stock market loss is actually way too much for me. Uh let's let's keep the thing going. So I think that that's very clear. But the part where maybe the economy is benefiting or like the biggest companies in the economy like is there some portion of the finance industry that's like these companies will be fine because like they'll they have made it clear that they will bend the knee and that Trump will reward them for that. I mean, I think some of them are struggling. So, the Trump administration took a large percentage of Intel. Intel's stock went up on the news and has since suffered quite a bit. >> So, I don't think it's like a guarantee that if you do a big deal with Trump that you're going to be free sailing, >> but he has made it very much an easy environment for the AI companies to succeed. And that's such a big percentage of the economy. Like it's like 40% of GDP growth last year, you know, 75% of S&P 500's earnings. So like the stock market, it's like driving so much stock market growth. And so I think there is this assumption if you're a technology company and you get along well with the Trump administration, you'll be free from some regulation. And that's why you saw all of the big tech tech leaders um at his inauguration. It's why Jeff Bezos did the Millennia movie for millions and millions of dollars and then turned around and fired 30% of Washington Post staff. Um there there's this idea that yeah, if you get in the correct way and you're a tech company, you'll be relatively safe. And I think that's the only people that they can really promise it to. Like there's been a big push in the Trump administration for manufacturing, but manufacturing has enormously suffered underneath uh Trump because of the tariffs. So, it's really only tech and that's kind of okay in their eyes because tech is such a big part of the economy. >> Is it mostly a big part of the stock market or is it a big part of the economy? >> It's a big part of GDP growth. So, it's a big part of the economy and what the economy is based on. >> Yeah. Yes. And uh it's where a lot of financing is going. So data center bonds are a huge part of uh the bond market currently and AI companies are taken out a ton of debt which is usually a little bit of a red flag. Um and uh yeah so it's a big part of the economy in terms of growth but not a big a part of the economy in terms of jobs. So like most jobs being added are in healthcare and social services which do not get the same sort of investment that AI is getting. Yeah. In part because like all of that's you know relatively relatively low margin um in the long term because you because of the the people because of the jobs and if you have to pay a bunch of people to do the work then uh you know that that costs money and as people's salaries go up that costs more money and that's all stuff that we want but it cuts into the >> cuts into the margin >> whereas the tech industry traditionally even before AI has been >> like tremendously like worldshakingly different in terms of the number of jobs created per the number of dollars created. >> So like far fewer jobs per number of dollars made. But then AI is like a whole another level of that where it's like well maybe the the software can do all of the jobs which is maybe not entirely untrue. I think there's actually a lot of jobs that will be done by AI. >> Yeah, that's a big scare in the market right now. Anthropic, which is one of the top AI labs, released this like legal AI assistant and the stock market had a pretty big sell-off across the software companies because everyone was like, "Oh my gosh, if they can make this legal assistant, they can make any software obsolete." Which I think is a little bit overstated. But what was also interesting about that is all of the major asset managers sold off because private equity and private credit have so much exposure to software. Uh and that really complicates where the stock market has to go and software maintaining it's very high valuation. >> Yeah. Yeah. Yeah. So all these these software as a service companies that you never hear about. You have no idea they exist. Private equity is very exposed to them and they are very big >> and so are regular investors. There's something called business development companies. Private equity has or private credit has rolled up to allow mom and pop investors to get some exposure to junk bonds. Um and that's complicated. Yeah. Yeah, it's it's getting like really spooky. >> I have this sense, and correct me if I'm wrong, that there's a lot of money out there. >> There's a lot of money. >> So like Apple has a lot of money. Warren Buffett is sitting on a big pile of cash. I think that there's a lot of high netw worth folks who who have money and they're not sure what to invest it in. And for a second there, it was like everybody's got to get into the AI. >> But now you're saying AI companies are taking on debt. And that to me indicates that they can't sell their just shares for super expensive and and raise that money that way. >> Their valuations are pretty inflated. Um so they're turned into the debt market. >> They've already gotten about as high as it's gone about as far as it can go as they say. >> Um it's pretty in it's pretty high. Yeah. The question I I keep noodling on and so every time something I'm like anchored to it right now and so every time like something comes along I'm like does this explain my question but the question is just like why is the economy still going hot? It seems like it like seems like things are fine and I don't I don't mean the stock market like I went to the mall this weekend and the mall was full of people shopping and and going to the arcade. Like the arcade where my son loves to go was it was sweaty in there. There was so many people running around. I was like, I gotta leave. I feel like I'm leaving in here. It's very hard to tell when you're on the internet because of course the internet story is always going to be the scariest story. Nobody's going to talk about how they're doing well. That's not going to be, you know, fun to say. Yes. >> For one, because like there's always going to there's always people who are not doing well. >> Um, and so like you we're somewhat dependent on government data. we're somewhat dependent on, you know, lots of analysts doing analyst stuff to figure out if things are going okay. Does it seem like things are going okay? >> I mean, I've been studying this uh phenomenon of the sort of the disconnect between consumer sentiment, so how people are saying that they feel and then broad economic data for a long time because people will say that they're feeling really bad, but they'll go out and spend. Like retail spending is up, you know, consumer credit, people are using their credit cards actively. They're spending money on all sorts of things. We're seeing them spend a lot more on, you know, like food, groceries, uh, rent versus maybe clothes. Right now, the economy is pretty substantially weakening. But the United States has a lot of access to credit and so people have a lot of access to credit. And so I think the theory that a lot of people will float with the strength in the economy is that people are able to use their credit cards, able to use products like CLA which um allow you to pay in installments. But then also um a lot of the spending and a lot of the growth outside of the anecdotes is from higher income consumers. So 10% of Americans, the top 10 top 10% wealthiest drive, you know, over half of of consumer spending. And so that is also keeping the economy afloat and ties into your asset price theory where you know everybody's assets have exploded in value over the past couple of years if you own a home if you own tech stocks. So people are wealthy um because of that and so they're able to go and spend money in that way and so that does provide a floor to the economy right now. Does that answer your question? >> Oh it gives me great context. Yes. I don't think there's an answer to it, but I guess it does feel like the greatest trick the devil ever pulled was was tying absolutely everything to the price of these of of the stock market. You know, this is like let's have everybody's retirements be based on that. Let's let's have everybody's >> let's have the entire economy be based on 10% of wealthy people feeling like they can spend whatever on whatever. Does that feel like the Achilles heel right now? Like if asset prices drop substantially, people suddenly get conservative and that becomes a reinforcing loop. >> I think that's a worry. Yeah, I think that's a big worry is that if the stock market does drop, um, you know, a lot of people's wealth doesn't come from labor income anymore. It comes from owning stocks or owning a home. Um, the Federal Reserve has a pretty good wealth breakdown on their website and they show this like for the top 10% most of their wealth is coming from things that they own or businesses that they own, not from like money that they're making through a job. Um, so the whole like wealth effect is is important to maintaining the economy which comes from these high asset prices. Uh and so if the stock market does go down or experience a correction, there is a a concern that yes, people would stop spending and it would cause a pretty big contraction in the economy. There's something called a K-shaped economy. So in some parts of the economy, this is already happening. So for lower income consumers are having a harder time, you know, living paycheck to paycheck. Their wages have not grown nearly as much as higher income consumers. Um they don't own the same assets. They're not as likely to own a house because we don't build enough housing. They're already kind of in a recession type environment. Whereas wealthier consumers are more insulated because of the hot asset prices. >> What do I know? >> But it just seemed to be like there's there's like a whole lot of there's a lot of weaknesses. Like there's a lot of weak points. It doesn't seem rational to me. Like the the sort of like shape of the economy doesn't in a way that like economies I know that the economists say this. They're like supposed to be rational. Like there's supposed to be this system, this like series of like people acting in their self-interests and and making decisions that make sense. But like I mean if we just like pick micro examples, it's very easy to say that there are not like like super irrational things out there. And this has been the case for I don't know when the sort of meme stock phenomenon began, but it's it seemed like for quite a while where we're just sort of like yeah, the thing that you have to understand about Tesla is that it's not about Tesla. It's about everyone thinking the price of Tesla is going to go up >> because they think that people are going to buy more Tesla. Not about the value, not about the like delivered, not really about optimist or whatever. It's about It's about like the vibes around the stock. And >> yeah, >> and there's like if that can be that way for one of the most valuable companies in the stock market, like we're not talking about GameStop here. There's a huge amount of value tied up in in there. It and it does seem very Ponzi to me. It seems like, well, you have to buy it because it's going to go up and it's going to go up because you have to buy it. >> I mean, you could argue the same thing for crypto and this idea. Have you heard of reflexivity? Have you heard of that word? >> No. >> So that's a concept that George Soros coined in the latter half of the 1900s. And it was essentially that idea that people would believe something is going to happen. So they'd go and buy up whatever they thought was going to happen. So stock going up and then that would cause the stock price to go up. So it's essentially that idea. Yeah. It's the bubble mentality, you know. Um and so it's just it's a very human. >> It's the bubble mentality, but Tesla has been this way for a long time. Bubbles can last a long time. >> I don't like that. >> I mean, they can last as long as as frustrating because I want to I want to buy at the top. Kyla, >> you want to buy at the bottom? Oh, I know. I want to sell at the top. Sorry. >> Want to do the opposite. >> I want to make no money >> cuz I because I want to know when the bubble's going to pop so that I can buy puts or options or whatever the thing is that you make money when things go down. >> Well, well, then you get into Keynes, right? Markets can stay irrational longer than you can stay solvent. Um, that's >> Oh, that's a that's an important John Mayor. I should tattoo that on the inside of my eyelids. Yeah, >> it's a good one. Yeah. Um, so that's the other funny thing is like economists and market analysts have been talking about these ideas forever, but because there is so much access, which is both a good and bad thing, like you can buy whatever you want on Robin Hood, there's much more exposure to bubbles and everybody can participate in one. You know, crypto has proven itself, I think, to be a bubble in some aspects of the products that it offers, like Fartcoin. Um, and yeah, >> Fartcoin. >> Oh, you haven't heard of fartcoin? Are you really? Oh, no. >> I'm sorry. >> Sorry. I I find I find myself watching too many videos about astrophysics. I guess >> that's much better for your brain. Yeah. Bitcoin was this it was actually a top performing asset last year. Um >> is it continued to be this year or has >> no the big selloff the bubble popped. Yeah. >> The fart bubble popped. >> Exactly. Uh but there's a lot of stuff like that. Like these things that'll happen and then everybody will pile into it. Trumpcoin is kind of another example too. Even though that ended up being a way for people to skirt the legal system and to pay him bribes to get out of jail like Justin's son did using Trumpcoin as a way to >> I just Yeah. I mean that also I have a theory that we forgot why corruption is bad because we were too focused on the fact that that corruption is bad. Yeah. >> Um and and I think that this is true of a lot of different things in society where we talk about why like thing bad but we we we've talked about it being bad for so long >> that we that we lost touch with the the why behind it. And corruption is a good example of this where we're kind of just like well yeah you know like ultimately we kind of hired a guy who's you know a a wheeler and a dealer and like corruption is going to be like a little part of that. But like corruption is bad for like a reason which is that it is stealing from everyone else >> and other countries. >> Corruption is like stealing from everyone who's not involved in the corruption. >> Uhhuh. From >> and that of course like leads to an eventual like corrosion of trust in all institutions which of course has has been going on for a while. >> Well, if you think about the thing that's backing the US dollar, it's full faith and credit in the American institution. And a big part of that what the big part of that is >> I don't like I really don't want that to be the Achilles heel. >> Oh sorry the dollar where no the the American institution which of course it is but I want it to be a wellshielded Achilles heel you know that has that isn't weak. >> Should be it should be it was designed to not be weak. >> It seemed impervious until 10 years ago. >> I know. Yeah. I mean, if you >> Now, now it feels like there's like like there's arrows from every direction headed toward this little this little boy and and maybe the shields the shields are not as strong as they as we thought they were. >> Yeah. I mean, they're auxiliary institutions is what James Madison called it. Like this idea that we would have all of these protection points, the Supreme Court, Congress, um as a way to prevent a strong man from coming in. And like the founders knew something like this would happen one day. They knew that there would be a personality that could take over through the power of power of whatever he has and they designed it so that there would be institutions that would hopefully stop it. But um you know objectively the institutions um seem to be quite complacent. now they can just sort of throw insults rather than addressing like real questions that people have about why things are functioning the way that they do and it it creates a very uh toxic media environment where there is incentive >> to lie um everything is yeah run by reality TV show >> the the this is a big thing that I'm trying to make a long video about and it just keeps getting out of hand um the size of the video it may turn into several videos, which is annoying >> because then then they're >> they get put on the back burner and it's important, but um that is something I actually feel qualified to talk on is sort of like the the structure of how information flows because that's my job, you know, like how do I get attention on ideas? How do I get attention on >> fish evolution or you know we the weird economy of the Trump era? I want to since let's let's get back on a little more of your area of expertise to finish up. If you could give me like the three leading reasons because of course we'll never get to the bottom of exactly what's going on. Um maybe in hindsight we'll have some idea, but three leading reasons why the economy appears to be chugging along just fine right now. >> What would you call those three leading reasons? >> I mean I think there's the wealth effect. So you have asset prices that have skyrocketed. Um, so a lot of people have really benefited from the stock market boom. And then I think that also ties into housing. Um, so boomers have an extraordinary amount of wealth. Uh, and they're willing, >> which is why Donald Trump is out here being like, we can't make the house prices go down. >> We can't. >> People worked like not for these people who aren't working very hard. >> No. >> So that people who don't work very hard can have a house. >> Yeah. Yeah. >> It's like you don't think you who's not working very hard right now, buddy. >> Oh my gosh. And then who are they going to sell it to cuz you people won't be able to afford that. Yeah. >> Um so I think that's a big part of it. And then um the AI trade I think is providing like a floor to the market and therefore a floor to the economy. Data center spending um services spending. So that's creating a lot of uh economic power. And then I I think the third thing is uh maybe a part of it is that there is that availability of credit. So people have access to things like CLA. They're able to take out things on their credit cards. Um >> there's just new credit tools. >> There's a lot of Yeah. And so some people are getting a little overextended and we're starting to see that in the data especially with auto loans. Um but yeah, so those are the three things kind of froen things up right now. Yeah, >> those don't seem like particularly solid pillars. >> No, I mean ideally people would be able to, you know, buy a house with their labor income and then ideally the whole 401k business wouldn't be just entirely tied up into like people would have a different way to retire. So it's not inflating the stock market in the way that it is now and we'd have investment diversification outside of AI. I mean, I just worry about how many resources we're funneling toward this one thing. And we don't even know if we'll need data centers. Like it might evolve to the point where the things are so efficient that they don't need these huge structures. >> Things things could get more like that's tends to be how it goes. But yeah, >> these big companies have the money to spend. Like Google's like, "Oh, finally something to spend money on." >> Yeah, >> we have lots of that. If we can win just by having money, that would be a huge that would be huge for us because we could we can have money and we know how to build data centers. Um, and then you know these the startups I think will have a hard time competing in that environment. But you know the opening eyes and the anthropics but um but I think also like the more money that they spend the more >> valuable their companies are like the more the more it's all about money the the more it's all about money. >> Yeah.

But there's some drama going on because of the circular financing. So OpenAI and Nvidia aren't getting along so well right now. Yeah.

Yeah. And suddenly Oracle's like, I didn't promise anything.

That was so funny. My shirt answers the question you're asking type thing. Why would you tweet that? Like what a red flag. They were like, uh, everything's fine.

Did that that come out of nowhere? Was were they not asking?

No, they they essentially like started this whole domino effect and they were like, everything's fine. And then everyone was like, "Surely nothing's fine if Oracle is like saying that."

But it sounds like you wouldn't put like uh everybody feels like Donald Trump will keep the economy rolling whatever the cost as as one of the pillars here.

He'll keep the stock market rolling whatever the cost. Yeah. And that's not always reliant on the economy doing well.

Sure. But you think that that is a thing that that like pe that like some people in the world of finance are relying on Donald Trump uh being like a ruthless will keep the stock market up no matter what kind of kind of

Yes. Yes. Absolutely. Um and I think they're getting sick of it like the taco stuff. Trump always chickens out so he'll like announce these major tariffs. The stock market will sell off. Um I don't know how much more power he'll have in that stance. Um, and

you think you might have burned a lot of that ability,

especially internationally, you know, if the EU doesn't want to buy treasuries, uh, we're in trouble. They own 40% of US treasuries. Uh, so,

and that's treasuries being a way that we fund our national

finance. Yeah. Yeah. Yes. The main way that we fund all of the spending that the US does. So, if the US can't fund all this spending, you know, the government

or has to pay a higher interest rate to fund it,

right? Exactly. Um, and then that's not good either. Uh, so I think everyone's like, "This doesn't really make sense." And I think Ken Griffin from Citadel is the canary in the coal mine there.

This is dumb for me to ask at the end here, but is the are the tax breaks a part of this? Like, are rich people just able to spend more because they have more because the tax breaks?

Yeah. Yeah. And they I mean, they're pretty successful at bending the tax law to their already. Yeah.

But yes. Yeah. Fewer taxes spend.

Well, yeah. I mean, what I'll say is like as a high earnner who also has a high net worth, like the earnings, they get taxed a lot and and like that's fine, but like I what I see is that the money that comes from my investments doesn't get taxed a lot and and so like I don't know. I I've I've asked seemingly progressive billionaires about this and I'm like why why do I pay so much like lower taxes on money I don't work for and they're like they're like the risk and I'm like also labor is a risk. What the are you talking about? Like like choosing what company to work for is a risk. Companies go out of business. They sometimes they treat you terribly. Like you invest a lot in them and then they can just lay you off. Like it's a it's a r like risk everywhere, not just for you rich man.

There's lots of risk. And so like labor is also risk. I don't understand like the idea that capital gains should be taxed at a lower rate. I like may maybe there there's like some argument there that I don't get. But man

man like am I being incentivized to stop creating value and instead just sit there and look at Robin Hood all day?

Yes, you are. There was a a good article in the FT that said that we have become a place of shareholder rights over civic rights. And I think that the taxation system encapsulates that well.

Well, that makes me mad.

Yeah. I mean, it's just it's like by design. Um, and so it's not great. It doesn't incentivize the right things, especially right now with all the financial nihilism and people not trusting that getting a job will do them any good. So they just go and sports gamble and do production markets and stuff. Yeah.

Well, I didn't mean to get in on that sad note.

It's it's kind of like every lane you go down, there's some some sad note these days, but I have a lot of hope. I'm I'm hopeful like

Well, then get me with that. Where where is do you feel your hope comes from?

I just I mean I've been traveling the country for the past year with my book and uh, you know, I meet people in all these cities and I meet people who are working really hard on these problems that we're talking about. like how do you make a better world? And a lot of that does happen at the local level right now. Like we focus a lot on the federal problems in the news because they are so big, but what people are doing in local communities is like very important and very impressive and you just have to believe in in those people right now and that they'll pull us through. what I'll say to people uh and and like I know I'm talking from a place of just a huge amount of privilege here um but the uh I do think that like and maybe this message is more for the rich people than it like so if if you have more money than average hear this like I think that it is much more interesting to be out here making value than out here like moving dollars around so if there's like ways for you to be in in the mix. Be in the mix. And also, if there's ways for your money to be in the mix, instead of just sitting in your accounts, if it's like out there doing good, try and figure out how to get it out there doing good. Pick a number, figure out where that is, and then get the rest of it out there doing good because it's doing nothing sitting in your accounts. It's doing nothing propping up a stock market that's already overvalued. just get it out and like like there's so much good that can be done out there and like figure that out in your local community internationally, nationally, wherever.

There's a lot of lessons to learn from the Robert Barons like Carnegie.

There's a lot of lessons to learn from the robber barons like libraries and they just they spent their money in a much different way because they knew like Henry Ford with all his problems he knew that if he had happy workers he would have a happy company and he'd make a more successful product. Obviously, he had his own complications, but like they just thought about the relationship between uh employer and employee and rich person and community a lot differently and they saw the connections and the ties and what they could do to build that up. Yeah. To have better business in the end. This makes all of us better off.

Yeah. No. Yeah. And I I like I just feel like uh there's a lot of people who have like enough money to start up a little business doing something interesting and that would create value and that would make them a little bit of money, but they can make so much more money investing in a REIT or in private equity. And so that's what they do. They let somebody like outsource all of the of the work of running a company, the stress of running a company, and also the ethics of running a company to somebody who will who will be ruthless and work hard and and they will end up making more money. But boy,

yes. Yeah. I mean, it's interesting. There was a Supreme Court case in 1919, Henry Ford, actually, versus the Dodge brothers, and it ruled that a company's first interest should be to shareholders rather than to customers and to the community. And so, I think that's where everything went wrong. And so, you know, it's it's not I'm not going to get on a soap box about it, but it is important to think beyond the shareholder. Sometimes

there are many stakeholders that are not shareholders. Kyla, you are an economist, you're a writer, you do great work making sense of markets and and vibes and power in our economy. And I appreciate all the work that you do on all of the social medias. Uh and uh you can check out her book. It's called In This Economy, and that you'll can learn more about what you're doing and follow her on all the places. Thank you for spending some time talking through this with me. Thank you.